One of the hardest parts of the personal finance journey is not only knowing where to start, but also knowing where you’re going. Having a clear roadmap can help you wrap your head around your financial situation so you can start making a plan and mapping your future. The “financial order of operations” is an easy way to visualize what steps to take along the journey. I found the chart pictured below on Reddit. I’ve seen various lists and versions of this, so don’t take it as the perfect model, but I think if you followed it you’d be doing pretty awesome. Just for fun, here’s my personal order of operations (for the moment):
- Employer 401k/403b match
- Initial emergency fund ($1k + deductibles)
- Max HSA (if a high deductible health plan works for you)
- Pay off high interest debt*
- 3-6/mo emergency fund
- Roth IRA**
- Spouse Roth IRA
- Taxable Brokerage Account (ETFs) for early retirement or big goals
- Funzies – Bitcoin, Tesla, Enron, etc.
- More in 401k/403b***
*Anything over 6-8% interest.
**Roth contributions (not earnings) can be used as backup/last resort emergency fund.
***Move up if you have higher retirement income needs
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