The Flowchart

Step 1: Budget ๐Ÿงฎ

Budgeting just means keeping track of where your money is going, and where you want it to go. It’s fundamental to a sound financial footing. Have a look at our budgeting page to learn how to set up a budget that works for you.

Step 2: Build a small emergency fund โ˜”

Even if you have expensive short-term debts, we recommend that you build up an emergency fund of 1 month of expenses to fall back on. This is a “small win” and will help build resilience and reduce the chance of relapsing into increasing debt to deal with emergencies.

Step 3: Invest in some reading material ๐Ÿ“š

It cannot be stressed enough how much benefit you could reap from reading/watching/listening to the recommended resources.

Pound for pound this is probably the best investment you could make, at outset. The page also includes online resources, podcasts and video series, which are free.

Step 4: Maximise employer contributions to your pension scheme ๐Ÿ–

Once you have a small emergency fund you should make sure you are enrolled in your employer’s automatic enrolment pension scheme. At minimum, they have to contribute 3% of your qualifying earnings, and you will contribute 4%.

Your employer may offer more generous pension contributions which you should take advantage of (e.g. you contribute 5% and they contribute 10%) – take advantage of the full employer’s pension matching available to you.

It is slightly controversial to recommend this ahead of repaying credit cards and personal loans, but as long as you are not reliant on debt to make ends meet (if you are, speak to StepChange) it is the best return you’re likely to get anywhere.

Step 5: Pay off expensive short-term debts ๐Ÿ’ณ

Before focusing on long-term savings and investments, pay off any expensive debts. Use the avalanche or snowball method (discussed in the debt repayment page) and get those debts paid off!

Step 6: Build a full emergency fund ๐Ÿšจ

Set aside 3-6 months’ expenses as an emergency fund.

Step 7: Short-term (< 5 year) goals ๐Ÿš—

Getting on to the fun stuff here by planning for your goals! Short term goals could be big ticket items like saving for a house deposit or wedding. They can also be smaller goals such as a holiday, upcoming phone or laptop purchase, etc.

Step 8: Longer term (>5 year) goals ๐Ÿ“ˆ

With your short term goals on track, you can look further into the future and invest money for long term goals.

Step 9: Frivolity? ๐Ÿฅณ

Leave a little aside from all of the above serious life-planning exercise and consider treating yourself. There is some great stuff out there for you to enjoy! Build it right into the budget.