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  1. I hope this is the year a lot of people wake up and take control of their finances. If the economy gets better this year, I have a feeling people will become more lax as the year goes on. Here’s to a year of paying off debt and saving as much as we can! :)

  2. Super list, need to work on #3, its been a while since I called around for discounts.

    Also need to prepare our 2010 annual spending plan (#2 on the list).

  3. Awesome steps! Perhaps a hidden step is – Just Do Something! I think a lot of people get overwhelmed and get stuck in some sort of analysis paralysis and don’t know where to start. Grab a step and get working, then move on the the others.

  4. Wow – what a great list J.D. Once we had paid our debt off and automated a lot of our bill-paying, our financial life became a bit ho hum boring. But you’ve shown me that there’s plenty more we could do to MAKE things happen. Thanks for the reading list and site suggestions.

  5. Wow. Really great advice. One thing I would add is to find ways of sticking to the new plans. Everyone makes New Year resolutions, but by February 95% of people have abandoned them. So we need to find ways of staying motivated and continuing to work on them.

    The other big point I would add is to start your own business. Personally, I focus my mental energy into making the business succeed. Because once that happens, it makes all the above financial points much easier faster. They are still critical, but they are much easier to achieve once the business consistently makes money.

    It is so easy to just focus on the spending and saving part of finances, but I think finding ways to increase our income is just as important.

  6. I have been doing these steps in some form or fashion so here’s towards a more financially fit 2010 for me.

    One of my goals now is to try to earn more by selling but so far I have not been very successful with that.

  7. Excellent post, J.D. – I bookmarked it, it will certainly be a reference guide throughout the year. I have spent the better part of this past weekend and this morning on #1, tracking spending for 2009. I even put together a pie chart to get a visual of where our dollars go. I have 22 sub-categories. This was incredibly labor itensive but quite worth it. In married households, one person is typically the Money Manager, that’s my role and I know from personal experience that it can often seem to the other spouse that some of the financial guidelines are overly restrictive. When you have hard numbers, it sets the stage for cooperation. My husband voluntairly skipped ordering dinner out last night, and took both his breakfast and lunch this morning to work. It is important to me that we leverage every dollar, this honors the hard work and sacrifice that it took to earn each one. Best wishes for a prosperous New Year to everyone!

  8. JD, I think if you’re going to use the word ‘budget’ like that you need to define it more fully. I don’t know many people who think of the Balanced Money Formula as a budget. It is more of a sanity check than an actual budget. You might call it a budgeting TOOL that you would use to evaluate your spending.

    But if you are going to call it your actual budget you need to do so once you have a lot more knowledge and control of your money, which someone going through these steps likely wouldn’t have.

  9. I like this list! I have been tracking every penny of spending for a few years now – now that I have a system that I like, it really isn’t that hard. (DH likes the “state of the union” report that I give every month, too!)

    Tracking every penny is like keeping a diet journal – after a while, you realize “gee, I’m spending a LOT on dinner out/groceries/something else that can be cut.” And then you start spending less in that category. We were able to save in a few categories because we realized we were spending a LOT.

  10. “Automate your finances” is the step I haven’t done. I’ve even turned down offers like “$1.00 less each month if you sign up for automatic payment. I want to see each bill, and I want to be sure there aren’t mistakes etc — before the money leaves my account!

  11. This is not only a great list for personal finance newbies but also as a reminder to the rest of us who have been working at it for awhile.

    I just wanted to say that I’ve been reading Get Rich Slowly for 2 years now and it’s really helped me turn my financial life around. Thanks to J.D., the folks who have contributed articles and the commentators who share their experiences and advice. Here’s to a prosperous year for us all!

  12. In most cases, banks charge when overdraft protection is used, so you can set up a $100 cushion by subtracting the amount off your register. That way if you accidentally dip over, you aren’t charged for using your own money. Sadly, some bank’s overdraft protection fees are becoming more excessive, but they justify it by charging even more for overdraft fees. If you dip into your own money (the $100), charge yourself and expand your own overdraft protection without every paying the bank.

    If your bank doesn’t charge you, then by all means, use overdraft protection.

  13. make sure to read anything you get in the mail from your credit card company. all they have to do is send a letter to alter your account.

  14. #5 Start and Emergency Fund.

    This should really be #3, because an emergency fund is so important. People that live paycheck-to-paycheck are playing Russian roulette with their finances. If you live paycheck-to-paycheck, a true financial emergency would leave you homeless in a matter of weeks. What would you do if faced with a $5,000.00 car repair, or a month without pay?

    -Dan Malone-

  15. Great list. For me tracking my spending started my financial turnaround. It’s funny how just making one small change can snowball into an entirely new way of life.

  16. I’m working on the emergency fund this year. I set up an automatic transfer to put a little in there every month, and any extra money this year will go there as well. :) My first goal for the account is $6000; I may get halfway this year, if things go really well.

  17. Such a great post! I love budgeting, so that’s never been a problem for me to sit down and create a budget. I enjoy looking at my graphs and pie charts in Quickbooks and figuring out where I can save money.

    The more intimidating task I always put off is reconciling my checkbook register. I enter the majority of debits and deposits, but reconciling at the end of the month is such a pain. I wait until months have piled up. Any suggestions? I haven’t been able to figure out a way to auto-reconcile between my online banking and Quickbooks. Does anyone know how to do this?

  18. I must say that my family has read the Dave Ramsey books and doing what he says has worked wonders for us. We were able to pay off every single bill, including our mortgage and now we are freely able to build wealth. If you haven’t read his books, I urge you to do so!

  19. Tyler’s Two Step Version of This List:

    1) Spend Less Money

    2) Make More Money

    All the rest is just “tips” to help with these things. For any given person, 95% of “tips” in any field will be worthless, but occasionally you’ll find one that’s useful. A bit of an aside, but this is why (I think) sites like lifehacker do more harm than good. For every 20 “tips” you read, only one might be helpful, and the utility you get from it will almost never make up for the time you spend reading useless tips.

    I hardly follow J.D.’s list at all. Half these things just seem like a waste of time to me (better record the cost of the donut I ate for breakfast in my financial ledger… yeah, that’s useful), and many of the rest I follow in an unconventional way.

    That’s not to say J.D.’s list isn’t useful, just that not every item on the list will be useful to every person reading it. Don’t feel like a failure if you only do one or two of these things, especially if your finances are improving or in good shape — you’re obviously doing something right. The goal is financial security, not bullet-list parity with internet tips.

    Oh, and I don’t think I’ve ever balanced a checkbook in my life — trying to see why reality disagrees with my view of how reality should be has never seemed useful to me. Actually, maybe I did it once, and that’s where this viewpoint cam from: “But it looks like I should have $13 more than I do!” Oh well. I don’t.

  20. About a year ago, I finally started to take responsibilities for my finances. It has been a great to see the improvement I have made since 2008. This is a great article because I have actually utilized many of the things on the list. I am putting 10% in my 401k and my employer will match up to a certain point. I put a set amount into a savings account with a credit union every month and while I have had some set back and had to use the money – I had it there to use instead of credit cards. Also, I am currently in a 6 month intro offer for my cable, at the end of the 6 months I will be calling to see if I can’t get the current promotion. Not to mention that I am a HUGE fan of the public library!

  21. Re this comment on spending less than you earn: It’s common sense, yet many people never learn to do it.

    It’s a complex skill that includes a bunch of little ones:
    1) Planning, either mentally on or paper/computer. Many plan mentally and don’t quite remember everything…
    2) Follow through. Keeping to the plan. Again, mental planning can trip you up.
    3) Accounting for the unexpected/non-monthly expenses. This is a biggie. I don’t necessarily mean emergencies, either; this can be things like birthday gifts or a chance to buy a side of beef for the freezer at a cheap price. If you’ve already allocated all your money, you can’t afford this – yet often people will do it anyway.

    I know for me one of the biggies was just getting used to NOT planning on spending all of my money every month. :)

  22. All of these steps working in conjunction can produce a successful 2010. I’m focusing on my investment this year, but I have review my budget and sources of income to bring all of them in line with my 2010 financial goals.

  23. Great list! I have a tip for the renters – if your rent is automatically increased every year, and if you live in an area with rent control, take a minute to see if the increase was in line with the rules. My apartment owners accidentally bumped me up by the previous year’s allowable amount – they raised my rent by 3% instead of .7%, and I didn’t notice. Fortunately they figured it out and it’s being resolved in my favor, by refunding all of the increase, and then starting me with the new amount this month, instead of trying to backdate the raised rent.

    Also, I highly recommend using credit unions. I feel smug every time I read about the evil activity of the big-name banks & credit cards.

  24. I can’t even begin to tell you how excellent it is that you mentioned getting books at the library. In addition to the financial advice books, there’s a wealth (pardon the pun) of information and entertainment to be had there for the low, low price of FREE. Books, CDs, DVDs, books ON CD, digital downloads, access to research databases, programming for adults and children…the list goes on and on. :)

    Here’s to everybody meeting their financial goals in 2010!

  25. @Tyler

    You have a point. I am an obsessive budgeter but the couple times I have tried to record every single transaction my brain has quickly gone numb, and in fact I have found myself in more trouble with larger purchases with no breakdown. Some people have the latte factor, but for others it’s easy to throw $50 in steak in the cart every trip to the grocery store and not understand how their spending is out of control.

    Therefore I think the idea of recording every transaction can be a huge hurdle because of the effort involved and potential for little return on that time investment.

    With that being said I also understand the point. Tyler, you have things under control, but what if you didn’t? Where would you start to GET it under control? How would you spend less if you had no idea what you were spending on?

    JD, this is where the “do what works for you” mantra breaks down. You just gave people a set of steps in the traditional “do it like this” voice (even with your caveats) but some people need that, especially when they get started because paralysis of choice, or the dreaded ‘I don’t know enough to know where to start’ kicks in. It’s the plethora of suggestions and tips that get people thinking down the right track.

    Personally I think a good idea is to reword that step to “know where your money is going”. A ledger is fine. But there are a few other ideas that will help people get a handle on their spending.

  26. I sometimes wonder how rich I’d be at 45 if I had the information I’ve learned on your website when I was 25. I’d be a millionaire, 2 times over. Alas, all this info is 20 years too late to be a millionaire (for me). But I still read it faithfully and abide by the many thoughts and ideas you have.

    My sister is doing the $5 savings route this year. For every $5 she gets, she’s going to put it in a savings account and see how much she has at the end of the year.

    I am doing the allocating route this year. 50% needs, 20% savings, 30% wants. However, I am at 56% needs so my wants are at 24%.

    I am going to try to make more money this year. At my job it will be impossible (work for a non-profit). So I will have to think of some other way to make more money.

    I am so excited for your book to come out! I can’t get enough of personal finance books. Ugh…to be 20 again!

  27. Thank you for #4. I’m planning to renew a CD, and I went to check my credit union for their rates, and they’re just as good as anything I found on bankrate.com!

  28. @Tyler,

    We found the whole keep track of all spending very helpful when we were beginning to change our spending/debt habits and trying to find more money to put towards debt. Keeping track of spending doesn’t have to be that difficult, we only use debit and we can download our spending directly from our bank into Quicken and then Quicken gives us these great or scary charts that show us just how much we were spending, to use your example, on donuts.

    Tracking spending is a great way to get day to day spending under control and to figure out how, where, and why one spends money. We still use Quicken to track our spending but once we got our debt paid off and our habits changed, our spending was controlled by other forces.

  29. We found the tracking what we spent more than invaluable when our apartment flooded in October. We were able to show our normal living expenses going six months back which made it much easier for our personal property insurance company to pay our out of pocket living expenses that went over our normal amounts.

  30. What a great way to start off 2010 with! There’s no better way than truly tackling your finances! Best of luck to everyone and budgeting money this year and for years to come.

  31. I would add item #11: Get a better paying job or start your own business.

    Fudging with costs will help a little here and there, but improving your salary or top-line will have a much more dramatic impact on your savings and quality of life.

  32. @Tyler Karaszewski

    Well, one doesn’t necessarily have to balance the bank statement but it is important to check deposits and checks, not necessarily every month.
    This is how we found someone who had stolen our checking account number from a break-in (not us, a vendor of ours) and proceeded to print their own checks using software and passing very small checks, like $80 here and $60 there. Those are very small numbers which would have been ignored by me if I didn’t do a quick check against my own ledger.
    Turns out they were running a large check printing scam and got away with hundreds of thousands because they used such small amounts…

  33. This is a great list! I am at the point where I actually enjoy tracking ever penny and budgeting. I think of it as a hobby, a numbers game. If I didn’t enjoy it, it would be very hard (as it was in the past) for me to stick with it.

  34. I just installed GNUCash to track every penny, and I think it will work for me. Previously I had been tracking everything in a confusing spreadsheet. Nothing really added up, and it was hard to see how much I actually had.

    Before I installed GNUCash, I read the concepts/getting started guide on their website. It explains the basics of accounting and how to use the program.

    I set up the program with the most common accounts, and added some accounts relevant to me. Most notably, I added a Accounts Receivable account for money people owe me, because that always got lost in some corner of my spreadsheet.

    The program is a bit buggy on my Mac, but it is open source and actively being developed, so there is a good chance any bugs will be fixed in the next update. GNUCash is free and runs on Windows, Mac, and Linux. It might not be the best money management software out there, but it is completely free, and it’s definitely better than nothing.


  35. I like your simple and prescriptive advice. The little things add up over time and getting smart is the way to go.

    My Aunt always taught me, save your pennies and the dollars will take care of themselves.

  36. “Track every penny” sounds over-reaching on its face, but its true.

    To get your financial life in order, you need to do this, at least until you realize where all of your money is going.

    Great post

  37. Great reminder to get back on track!
    I just set my 2010 financial goals for the year, which is another step of accountability for me.

  38. I held my own “personal money day” last year and it was a very useful day, so it’s now a yearly tradition. One task I would add to JD’s list is really important: get your credit reports! For whatever reason I tend to put this off, but when I sit down to request them it doesn’t take long, and every year I’ve discovered (and corrected) mistakes.

  39. I managed to “track every penny” for one month, but it was seriously annoying and provided very little benefit. Instead I use my debit card for most purchases, and keep very little cash; cash runs like water through my hands.
    I also am terrible at budgeting; I just don’t have the patience. I think I finally have a system down for that though. At the beginning of the month, when my paycheck is (direct) deposited, I subtract out savings, retirement, and all my bills, including a small amount for once a year things like insurance. Whatever’s left is all I have to spend. It seems to be working ok for the moment.
    I do keep my checkbook balanced, at least a couple of times a month. I check my accounts online several times a week. I have caught fraud this way before, as well as math errors (mine), so I will continue to do that.

  40. @E:

    That’s called a Zero Based Budget! It’s pretty well known and it’s a great way to figure out what you’re spending your money on (apart from the ‘spends’ part, which you might not care much about anyway).

    In fact, I do exactly the same thing :)

  41. This year, thanks to GRS (and Google Reader, for that matter) I’m going to switch from Quicken to YNAB 3. I LOVE the idea of allocating money to next month’s income instead of the big “slush fund” that is my current financial state.

    I have to go out of town for work this week, which is disrupting my financial plans, but the first financial move(s) of the year for me will be this:

    Took $120 out of an online savings account I practically forgot about.
    Sold 2 things gathering dust in the closet on eBay for ~$250.
    Received overdue reimbursement check from work for ~$95.

    Taking that $465 on my trip, out of which almost all will be reimbursed.

    When I get back I’m putting anything left over back into the online savings and allocating to “Next Month’s Income” in YNAB. When I get the reimbursement check for the remainder it’s also going into savings and “Next Month’s Income”. Just like that I’ll have about $500 towards my 1 month’s “buffer”!

    Very exciting when you consider that only a month ago I sold over $1500 worth of “stuff” on eBay and all it bought us was Christmas presents, food, and the rest just disappeared…

    Thanks GRS! Have a great 2010, all!

  42. Great post GRS!
    One more thing that get people back where they started is lack of emmergency fund. No matter what life will still happen! Tires will blow, transmissions will quit, pipes will block or roofs will leak. Emmergency fund is your life jacket.


  43. Wow, I feel so guilty upon reading this article. I think I should consider tip#6 and #9, get out of debt & earn extra money respectively. I’m now on my journey to my financial freedom. Whoa!

  44. I know I’m way behind commenting on this down as I clear out my finance reading que, but this post was incredibly encouraging! I could optimize my accounts a bit more or tweak my budget, but I’m doing everything on this list! I’m psyched!!

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