{"id":498,"date":"2020-11-18T12:00:00","date_gmt":"2020-11-18T12:00:00","guid":{"rendered":"https:\/\/moneywithkatie.com\/the-top-5-basics-beginners-start-here\/"},"modified":"2025-09-05T19:42:04","modified_gmt":"2025-09-05T19:42:04","slug":"the-top-5-basics-beginners-start-here","status":"publish","type":"post","link":"https:\/\/moneywithkatie.com\/the-top-5-basics-beginners-start-here\/","title":{"rendered":"The Top 5 Basics: Beginners, Start Here"},"content":{"rendered":"
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I love (love<\/em>) the Instagram DMs I get on my Money with Katie Instagram<\/a> because they provide such wonderful insight about what the people who frequent this site give a shit about. One DM I received recently made me laugh out loud:<\/p>\n

I\u2019m 22 and none of what you talk about makes any sense to me, and I\u2019m intrigued. I feel like I need to know more.<\/em><\/p>\n

And in that moment, I wanted nothing more than to be able to fire off a quick post that laid it all out. Where do I even start?<\/em><\/p>\n

Realizing that there is no one-stop shop on this blog for someone to use as a \u201cstarting point,\u201d so to speak, I decided it was time to create one. Below you\u2019ll find some of my hottest personal finance takes wrapped up succinctly in the dreaded listicle format that Buzzfeed has fallen back on for years\u2014#virality, here I come.<\/p>\n

Mostly, I hope you use this as a jumping-off point and open these linked posts in new tabs to read more, but I\u2019m trying to distill the 5 most important things you need to know about personal finance (if you buy into my philosophy, that is) so that even if you never read another article, your priorities would have at least a little<\/em> bit of strategy baked in.<\/p>\n

If you\u2019re just starting out and don\u2019t want to dive in with both feet, I recommend bookmarking this article and working through it piece by piece\u2014it\u2019ll be fun. I promise. And you\u2019ll get rich! Bonus!<\/p>\n

#1. Pay off any debt<\/strong> you have strategically<\/strong> (and give yourself more credit than the \u201csnowball method\u201d). <\/h4>\n

One of the biggest mistakes (I use \u201cmistake\u201d non-judgmentally\u2014unless anyone tells you this, there\u2019s no way to know\u2014so don\u2019t be hard on yourself) I see when it comes to debt is that people prioritize the wrong<\/strong> debt. Always use the interest rate to determine whether you\u2019re better off paying off your debt more quickly or investing aggressively instead. <\/p>\n

The \u201csnowball method\u201d is a popular debt payoff strategy that tells you to focus on the debt with the lowest balance owed because it feels like a bigger psychological win, but this totally ignores the interest rate\u2014and ultimately, interest rates determine how expensive your debt actually is. <\/p>\n

The magic number here is about 7%<\/strong>. If you have a debt with an interest rate <6%, make the minimum payments. Invest anything extra that comes your way, rather than putting more money toward the debt (obviously, just spending that extra income isn\u2019t the same thing\u2014I\u2019m not giving you permission to make minimum payments then blow the rest, all right?!). If your interest rate exceeds 7%, make as many extra payments as you can, as often as you can. <\/p>\n

More on this topic (everything you need to know about debt payoff strategies) here<\/a>.<\/p>\n

#2. Your first priority beyond debt should be saving an emergency fund<\/strong>.<\/h4>\n

An emergency fund is what I affectionately refer to as the \u201coh, shit.\u201d fund. If money makes you feel uncomfortable and is a source of low self-esteem for you, creating this fund for yourself will change that. <\/p>\n

Your emergency fund is what you fall back on when things hit the fan so you don\u2019t have to move back in with your parents and work at your dad\u2019s law firm (unless, of course, you want to). It provides freedom<\/strong> and autonomy, even when things don\u2019t go your way\u2014maybe we should start calling it a Freedom Fund? If you don\u2019t know where to start building an emergency fund, this is the account I recommend<\/a>, as it\u2019s actually invested in roughly 80% bonds and 20% stocks (read: it\u2019s risky enough to make money on its own, but not risky enough to keep you up at night).<\/p>\n

When I first started my personal finance journey, \u201cHow much should I be saving?<\/em>\u201d was my most intensely burning question. Turns out what I should\u2019ve<\/em> been asking was, \u201cHow much should I aim to save?\u201d Knowing when to stop, pivot, and focus on more aggressive investing is key. More about what to do once your emergency fund is fully funded here<\/a>.<\/p>\n

I recommend shooting for between $12,000 and $15,000, but you can read more about how to determine exactly what you should be shooting for here<\/a> or pick up a Wealth Planner<\/a> and get super<\/strong> specific recommendations. Once you\u2019ve mastered your cash flow (an article about that lives here<\/a>), you can keep less in an \u201cemergency\u201d fund and invest more of it aggressively.<\/p>\n

Trust me, I get it\u2014it\u2019s hard to save money. It\u2019s especially hard when you aren\u2019t saving for any particular reason. But let me tell you, this is the most difficult\u2014yet most impactful\u2013hurdle in your entire journey. Once you can prove (to yourself) that you\u2019re able to save an emergency fund, you\u2019re going to get hooked<\/em> on investing. <\/p>\n

#3. You can shave decades of working years off your retirement timeline by investing often and early<\/strong>. <\/h4>\n

And in 2022, there\u2019s no excuse not to\u2014with services like Betterment<\/a>, you can make contributions to an investment account as if it\u2019s a savings account and the robo-manager (read: algorithm) will invest your money for you. If there\u2019s only one thing you take away from this website, it\u2019s this: Invest. <\/p>\n

Investing is how I saved more than $100,000<\/a> in a little over two years by the age of 25 and am already on track to hit $250,000 in the next few months. Compound interest is your best friend. <\/p>\n

There are two different types of investment accounts (broadly) that we talk about on this site: tax-advantaged retirement accounts and \u201cregular\u201d taxable investing accounts. When it comes to retirement accounts, I do a mix of Traditional and Roth for diversification, but almost always recommend using the Traditional 401(k) instead of the Roth for everyone in the 22% tax bracket and above. Here\u2019s why<\/a>.<\/p>\n

And for those of you who are like, But Katie, I can\u2019t touch that money until I\u2019m old! I don\u2019t want to tie it up there! <\/em>Not so, my friend. Check out this post<\/a> about how to use your 401(k) before age 59.5 without the 10% penalty by using something called a Roth IRA conversion ladder. And if you think you\u2019re out of luck because you\u2019re self-employed and don\u2019t have an employer 401(k), check this out<\/a>. <\/p>\n

I\u2019m passionate about early retirement<\/a>, but you don\u2019t have to want to retire early to benefit from tax optimization. I made a video called \u201cNever Pay Taxes Again<\/a>,\u201d and it basically leverages all the tax loopholes I\u2019m aware of based on current tax law to show you how you could structure your investments such that you and your spouse could withdraw $80,000 per year to live on, tax-free. It\u2019s got true mad scientist vibes. <\/p>\n

Here are some other good resources:<\/p>\n