The Financial Order of Operations: 10 Great Money Choices for Every Stage of Life

One of the reasons personal finance can feel so overwhelming—nay, defeating—is that there’s so much pressure to do everything at once. I think it’s why so many people feel lost and incompetent with money. I did too, until I discovered a financial order of operations.

Money decisions are always intimidating. Every financial decision you make compounds over time! That can be good, like when investments grow. But it’s also terrible, because financial mistakes can haunt you for years after you’ve made them. With so much pressure to get it right, every single time, and always on the first try, it’s no wonder people freeze up.

I wish someone had sat me down and compassionately explained that I didn’t have to do everything all at once. If you want to stay motivated and make meaningful progress on a goal, it’s so much better to focus on just one at a time. And just like in eighth grade math, there’s a right order of operations to everything, depending on what stage of life you’re in.

Today I’m going to take you through my financial order of operations. It’s a basic blueprint of ten steps most people could follow to transform their finances for the better.

In my opinion, it’s the best order in which to save, invest, and pay off debt. It also takes into consideration the incredible importance of maintaining motivation and keeping financial decisions centered exactly where they should be: around your personal goals, dreams, and emotional well-being.

Best of all, anyone can follow the first two steps! You don’t need to have money or a job to get started. Woo-hoo! Gates are open—send in the teenaged overachievers!

Obviously, everyone is different. Think of this journey as the Oregon Trail. We all start in the Independence, Missouri of total ineptitude, and we’re all trying to get to the gloriously fruitful Willamette Valley of financial independence. Some of us may choose to raft down the Columbia River Gorge, and others will take the Barlow Toll Road. That’s totally fine! This guide will help you make informed decisions, even if you don’t follow it exactly.

Doing everything at once is a trap

Because I run a financial blog, it probably seems like I’ve always had my shit together. I assure you, this is not the case.

My truth? I spent a decade of my life being torn apart by a ravening pack of competing financial priorities.

My first jobs in life were seasonal. In college I worked weddings and special events, and before that I was a summer camp counselor in high school. (Do not challenge me to Four Square unless your people are there to see it. Cuz you might get embarrassed.)

These jobs left me with a huge surplus of cash at the end of every summer. I sought out personal finance experts and asked them: “What’s the best thing I can do with this money to make my future more stable?”

The answers I got back? Not great!

“You must save that money for college, and pay off all your credit cards, and open a retirement account now, but also keep it in an emergency fund, and give a percentage to charity. You need to start investing immediately, and you should start small and safe because you’re young, but also take huge risks because you’re young! Buy stocks that you believe in, but also don’t trust yourself, because you’re too stupid to pick stocks. And if you don’t do all of that at once, you’ll end up like a grubby Dickensian orphan, pressing your freezing pink nose against a window pane to longingly watch a happy family carving up their Christmas goose as you slowly choke on coal dust.”

This is a terrible way to communicate advice. When everything is critical, every step forward you take already feels like a failure because you didn’t somehow step in seven directions at once!

It took me years to understand how much this financial multi-tasking was hurting me. I eventually devised my own financial order of operations.

And here it is.

Step 1: Understand why you want money by thinking deeply about what you want in life

“Other than paying bills, I have no idea why I want money. Why do I need money just to live? It’s so stupid. I wish I never had to handle it, or even think about it.”

Okay, first of all: same. There’s VERY necessary social criticism here. As our bouncy podcast intro states, we truly do live in a patriarchal capitalist hellscape! There are uncounted things we wish were different about this world we all live in.

Having said that, I’m going to encourage you to set this attitude aside. Compartmentalize it and pull it out when you need to tap into a greater sense of empathy for your fellow humans. Like at the voting booth. But our mission is to help you understand how to thrive in the system that we have now.

So, yes: step one is to actually want money, and understand why you want it.

This is not an easy step! Piggy and I both think it’s weirdly the hardest!

Sitting down and making a list of life goals is the most important thing I have ever done to gain control of my finances. Firstly, because motivation matters. (A 72-year-old man cannot deadlift an SUV—until his son-in-law gets pinned underneath one. Then suddenly, he can!) But also because it’s something I have true control over. I can’t control the economy, or what jobs come my way. But self-knowledge helps me adapt to anything.

I also think it’s important that you like the reasons you want money. Money can remove logistical barriers between you and your best life, but it can’t erase psychological ones. If your big brain doesn’t believe, deep down, that you are a cool person with cool ideas that deserve to see the light of reality, you need to actively work on that while the money stuff cooks.

Suggested reading for this step in the financial order of operations

• The Dollar Bill Game: What You’d Do if Money Were No Object Says a Lot About You
• How to Make Any Financial Decision, No Matter How Tough, with Maximum Swag
• The Most Impactful Financial Decision I’ve Ever Made… and Why I Don’t Recommend It
• Get Busy Living or Get Busy Dying: Finance Philosophy Explained by The Shawshank Redemption

Step 2: Understand how you use money right now by tracking your current spending

“I know what I want in life, but money is a constant barrier. I have no idea how I could make any of my dreams happen when daily life is such a struggle.”

Many gurus leap to “set a budget” or “spend less” here. But Piggy and I are the snorting, stamping, dark horses of the personal finance world! We don’t really agree with that advice. Neighhhhh!

Budgets and frugality are great tools for addressing some financial problems, for sure! But that’s jumping to solutions without verifying the problem. Which is exactly why so many people bristle at traditional financial advice. “Shut up about systemic inequalities and hold still while I berate you for buying avocado toast!”

If you want to effectively change anything for the better, you have to start by fully understanding it first. And you can’t skip this step just because what you’re trying to change is you. That’s when you need objective data the most!

So start by just tracking your own spending. Use Mint, a spreadsheet, an expense journal, whatever works for you.

And do it with complete neutrality. Don’t beat yourself up for the occasional tiny luxury until you’ve seen with your own eyes that it’s a real problem.

If it is, great. Easy problem to solve! But we think material extravagance is a smaller, rarer problem than depressed wages and the skyrocketing costs of education, healthcare, and rent. (That’s why we write a lot more about salary negotiation than why cheap toilet paper rules—although we have, and it does.) Once you have that knowledge, you can confidently devote your energies to pursuing remedies that will actually cure what ails you.

And if you notice little areas of overspending? Easier to change because you want to, not because you were shamed into it.

Suggested reading for this step in the financial order of operations

• Budgets Don’t Work for Everyone—Try the Spending Tracker System Instead
• Don’t Spend Money on Shit You Don’t Like, Fool
• You Need Really Need To Ask for a Raise. Here’s How.
• A Millennial’s Guide to Growing Your Salary
• Salary Range: Are You Asking for Enough?
• Stop Undervaluing Your Freelance Work, You Darling Fool
• Santa Isn’t Coming and Neither Is Your Promotion

Step 3: Make your money usage more predictable by saving a small emergency fund

“I know how much money I make and spend during a usual month. But it seems like every month there’s some unexpected expense, a new crisis, one more thing that needs fixing… It makes it impossible to feel safe or stick to a plan.”

It’s no secret that we Bitches have diamond-hard nipples for emergency funds. Unlike budgets or frugality, we can confidently say they’re a tool that everyone should have, no matter their circumstances. Here’s why.

Surprises are unavoidable. And when they happen, they can strike a real blow to your forward momentum. People will make really foolish financial decisions because they think it’ll protect them from surprise expenses. They’re incorrect.

I can’t tell you how many people tell me they bought a brand new car because they “don’t want to be surprised by a $500 repair bill every year.” So… you… voluntarily pay $500 a month to a dealership instead? I? What??

If you don’t have a plan to mitigate unexpected expenses, the cycle of debt is waiting to catch you. If your finances are like a leaky boat, incurring new debts (especially high-interest debt targeted at emergencies, like credit cards and payday loans) is like drilling fresh holes in the dry parts of the boat. 

For most people, I define a small emergency fund as one normal month’s expenses. If you’re in a position where catastrophes would have really high stakes (such as having children or other dependents, or being the only working partner in a couple), I’d bump that up to two months. Don’t invest it in anything. Just keep it safe and liquid (immediately accessible as cash), preferably in a high-yield savings account.

Suggested reading for this step in the financial order of operations

• You Must Be This Big to Be an Emergency Fund
• Case Study: Held Back by Past Financial Mistakes, Fighting Bad Credit and $90K in Debt
• Ask the Bitches: How Can I Make Myself Financially Secure Before Age 30?
• 3 Times I Was Damn Grateful for My Emergency Fund (and Side Income) 
• On Emergency Fund Remorse… and Bacon 

Step 4: Start investing by making other people do it for you

“I can just barely keep up with monthly expenses, but my budget is way too tight to even think about investing. I know I should be, but I just can’t afford it right now.”

Not everyone works. And not everyone has a job that offers benefits like 401(k) matching, although it’s becoming more common to offer them even to part-time employees.

If you work somewhere that offers company matching, now is the stage to work toward maxing out those benefits. This is the closest thing to free money you’ll ever find.

In fact, this perk is so valuable that you could think about it another way. Starbucks, for example, offers its employees retirement matching between 4-6%. If they didn’t offer that perk, each employee’s base pay would probably have to be 4-6% higher to stay competitive and retain good employees. So if you don’t take advantage of that perk, you’ve kinda voluntarily accepted a 4-6% pay cut, haven’t you?

People often use the phrase “don’t leave money on the table” when they urge you to max out company matches. I want to highlight what that really means. If Starbucks owes you a paycheck of $350 for your work this month, and they slid it across the table to you as a stack of cash, would you ever just leave a $20 bill laying there?

Because you are, if you don’t take the 401(k) match.

And that money’s not even for you—it’s for your future self. Grandma You has stiff joints and can’t work on her feet anymore. But if you’d put $20 a month into her retirement account like a good little past self, she’d have $165,000 by the time she retired. BE NICE TO MEE-MAW AND TAKE THE FREE MENNY, HENNY.

Suggested reading for this step in the financial order of operations

• Do NOT Make This Disastrous Beginner Mistake With Your Retirement Funds
• Procrastinating on Opening a Retirement Account? Here’s 3 Ways That’ll Fuck You Over.
• How to Save for Retirement When You Make Less Than $30,000 a Year 
• Advice I Wish My Parents Gave Me When I Was 16

Step 5: Eliminate your biggest liability by paying off any debts with an interest rate of 8% or higher

“I can pay all my bills, but it feels like I’m treading water. I’m so discouraged when I work hard to earn a little more, or spend a little less, and it feels like the money always goes to bills and debts rather than to me. Why do I even bother? Is it always going to be this way?”

No. It’s not. Trust me. I’ve been there. This is not your forever.

But depending on how much debt you have, this might be a pretty long step. For me, it took six years to erase my high interest debt. And I didn’t start to feel the positive effects of my new financial priorities until about year four. It sucked, little dudes, it sucked!

At the same time, no step has felt so satisfyingly transformative. Remember Helen from our case study on managing multiple student loans? She’s been sending me texts as her monthly payments drop lower and lower. From $750 a month, to $715, to $600… Soon it’ll be just $350. And in a year it will be $0.

That first little $35/month victory probably didn’t feel like much to celebrate. But it’s called the snowball method because it gathers strength and speed over time. Progress feels painfully slow at first, but the end is an avalanche of extra money so shocking you won’t be emotionally prepared for it, even if you’ve been waiting for years.

We consider high interest debts to be anything above 8%. Why that number? It’s a pretty average return for money invested in the stock market. So if you have a few bucks left over to invest every month, you’ll save more money paying off a 17% credit card than you would make by investing it.

We highly recommend following the snowball method of debt reduction, which you can learn more about in the articles listed below.

Suggested reading for this step in the financial order of operations

• The Best Way To Pay off Credit Card Debt: From the Snowball To the Avalanche
• Case Study: Swimming Upstream against Unemployment, Exhaustion, and $2,750 a Month in Unproductive Spending
• Slay Your Financial Vampires
• I Paid off My Student Loans Ahead of Schedule. Here’s How.
• Kill Your Debt Faster with the Death by a Thousand Cuts Technique

Step 6: Improve your stability by growing your small emergency fund into a medium one

“It does feel a lot easier to breathe now that my most crushing debts are gone. I still have bills, but they’re manageable. Should I be saving more?”

As people age, they tend to acquire more financial commitments. Your car is older, your body is older, you may have a partner, dependent parents, children… They’re like barnacles on a whale, you just pick them up somehow! So now that you’ve eliminated your most parasitic debts, now is an excellent time to grow the size of your emergency fund.

For a medium-size emergency fund, three months of average expenses seems nice and healthy. And again, it may be wise for you to double that to six months if you have circumstances that make failure a non-option.

Suggested reading for this step in the financial order of operations

• From HYSAs to CDs, Here’s How to Level Up Your Financial Savings
• Not Every Savings Account Is Created Equal
• Ask the Bitches: How Do I Prepare for a Recession?

Step 7: Make the most of limited investment resources by maxing out your yearly IRA contributions

“Things are easier now, but I’m so far behind. I keep hearing that I should have a full year’s salary saved in my retirement account, or own a home. The fuck! Yes, I feel better, but I’m embarrassed that I’ve worked so hard and have so little to show for it.”

Okay, but here’s the thing: the crowd is around you, not ahead of you! Half of all Americans in their twenties and a quarter of people in their thirties have  z e r o  retirement savings.

Also, time does play a big role in retirement savings. But it’s definitely not a necessity to eventual success!

When I was at my absolute brokest, I held back tears and sacrificed things I shouldn’t have to put $50 a month into my IRA. I did it because I was told that was The Right Thing To Do.

It was honestly one of the dumbest things I’ve ever done. I kept it up until I literally couldn’t afford to buy food. I stopped putting anything into my IRA for about six years, and redirected all my focus to paying off my huge-ass student loans. Getting them paid off liberated several hundred dollars in my monthly budget. When I was ready to dust off the ol’ IRA, I made up for the “lost time” in a blink. More importantly, I could make the investment gladly, because my heart wasn’t troubled by the stress of carrying those loans anymore.

Due to their favorable taxation status, maxing out your IRA is the best way to give a zesty jolt to your retirement savings now that you can (finally) afford to do so.

Suggested reading for this step in the financial order of operations

• Ask the Bitches: Is It Too Late to Get My Financial Shit Together?
• The Dark Magic of Financial Horcruxes: How and Why to Diversify Your Assets
• Investing Deathmatch: Traditional IRA vs. Roth IRA 

Step 8: Feed your motivation by pricing and prioritizing your dreams

“I guess I’m doing it now. But I took so long just to learn the bare minimum of adulting. I can’t believe that all of this work hasn’t gotten me any closer to my dreams.”

Y’all like these “inner critic” monologues? They’re all taken from my own life! I have lived every one of these steps, and I still vividly remember all the negative feelings that finances stirred up in my pessimistic little brain, even as my situation slowly improved.

At this point, you’ve been working hard—probably for years—just to meet your basic commitments. Now’s the time a lot of people lose their way. So here’s an exercise to help you find it again.

Find the list you made in step one. Now that you have a lot more experiencing managing money, ask yourself: how much would these dreams actually cost to pursue?

• Let’s say my dream is to write a novel. Don’t care if it’s published or not, just want to say that I did it!
• Google (and my publishing professional coblogger but what the hell does she know) tells me the average novel is 90,000 words long.
• Google also tells me that every professional novelist is different, but many seem to write around 1,000 words per day.
• Since I’m just starting out, I’d probably go a little slower. If I could write 800 words a day, it would take me 112.5 days to write a first draft. But I’m sure I’d want some days off, so let’s round up and say five months!
• How much money do I have to have saved so I could stop working for five months? Well, my expenses are around $2,000 per month, so…

And there you go. If I saved up about $10,000, I could spend five months as a full-time novelist.

Doing this exercise for every dream on my list was MIND-BLOWING.

A treasured hobby I’d given up because it was “too expensive” was more affordable than I realized. With my partner’s blessing, I picked it back up.

I listed so many travel locations that were far-flung and expensive to fly to—but why had I hesitated to go visit New Orleans, when it’s so close and so affordable? We booked the trip right away, and slid home two weeks before the coronavirus lockdown, warmed by fresh memories of an amazing time.

Basically, I started doing the relatively cheap things immediately, and prioritized the rest to continue to work toward. It put a much-needed wind in my sails. I wasn’t going to work every day just to pay my bills and keep breathing air. I was working toward my next big goal. And that’s so important at this stage, where routine easily becomes apathy.

Another example: What to do with totally unattainable dreams?

Admittedly, some of the things on my list are unrealistic dreams. They would cost, like, infinity money.

For example, my fifteen-point plan to buy this property, renovate it all by hand, and turn it into Kitty’s Safe House for Battered Women, Wayward Queers, and/or Rescued Farm Animals That Is Secretly Also North American Hogwarts, but like Good, with More Artsy Frog Statues.

Frogwarts, for short.

I mean, come on! It would only cost 1.5 million! Plus thousands of hours of hard labor, thirty or forty years of my life, and untold sums in upkeep. It’s reasonable, shut up! (bursts into tears)

Ugh. Reluctantly, I must acknowledge that there are holes in this plan—my dream business plan—that cannot be filled with wood glue and smiles. But it’s still worth thinking about! Even if you can’t realistically pursue every dream, you can think about ways to translate it into something more achievable. I clearly like fixing up old houses, looking at mountains, rescuing animals, rescuing people, throwing the two groups at each other, and stuffing them all full of homemade pizza until they are strong again. I can find other ways to do all of those things.

… Although now that I’ve said it, I’m sure we can make Frogwarts happen if we get enough new Patreon donors. #MakeFrogwartsReal

Suggested reading for this step in the financial order of operations

• Ask the Bitches: I Know How to Struggle and Fight, but I Don’t Know How to Succeed
• Making Decisions Under Stress: The Siren Song of Chocolate Cake
• I Lost My Job and It Might Be the Best Worst Thing That’s Ever Happened to Me

Step 9: Stop investing in things that don’t give you joy by paying off the rest of your debts

“Man, I used to feel so powerless when I opened my bills. Now that I have the money to pay them without it hurting like hell, it’s suddenly empowering. They think they can keep me in debt for another ten years, twenty years? Hmph. I’ll show them.”

This is the stage where I finally started to feel really good about becoming debt free. I wasn’t fighting a dragon with sharpened popsicle sticks anymore. I had a proper sword. There was a lot more debt to go, but it just got easier and easier.

Now, some people (contrarian finance bros who only scan the subheads) will say “nooooo, you should be investing instead!” There’s a certain kind of person who will make that decision. But it isn’t me! And I don’t think it’s our readers either.

Life is just so uncertain. Yes, the market tends to return about 8%, but there’s absolutely no guarantee of that! If I lost my job suddenly, or got sick, which would I rather have: bills, or no bills? And what if I lost my job because the markets took an unprecedented nosedive? It’s happened multiple times in my life! I’m too cautious for that.

Note: you may have heard older finance gurus draw a distinction between mortgage debt and every other kind of debt. That’s because there use to be a tax credit that was super favorable to homeowners still making mortgage payments. But Trump’s 2017 tax reform plan nerfed the shit out of it. So it’s not much of a consideration anymore.

Suggested reading for this step in the financial order of operations

• Investing Deathmatch: Paying off Debt vs. Investing in the Stock Market
• Hurricane Debt Weakens to Tropical Storm Debt, but Experts Warn It’s Still Debt

Step 10: Focus entirely on your dreams by investing all your time and money into making them real

“This feels awesome. I feel like I suddenly have so many options! In fact, the number of options I have is a little paralyzing. Everything I’ve learned about money is about managing debts and tight budgets. I’m not really sure what to do with the opposite problem.”

I’m here.

It’s weird here. Good, but weird!

My debts are long gone. Recently, my mortgage went with it. I still have bills to pay, but they’re only about a quarter of what I used to spend every month. So the rest of my income is pouring, slowly and steadily, into investments.

How to invest is a huge, complicated, ever-evolving topic that we will definitely write more on in the future. But here’s a quick spoiler: the three best beginner investments, in our humble opinions!

• A house is a good investment because you can live inside of it AND FILL IT WITH DOGS!
• Mutual funds and index funds are good investments, because I’m way too busy playing video games to research individual stocks!
• Roboadvisors are good investments because investing robots are inherently cheaper, better, and more trustworthy than my fellow humans. Go figure!

At this point, I think it’s a good idea to have a large emergency fund. It could basically immunize you from all but the very worst catastrophes. But it doesn’t have to all be cash! If you’re debt-free, keep your medium size fund in cash, but put those credit cards in a drawer. They’ll be your safety net for anything your cash can’t cushion.

I attribute my successes to privilege, luck, help from others, inspiration from others, and my own hard work. It’s my dearest wish that all of you will join me, in your own time.

Suggested reading for this step in the financial order of operations

• The Real Story of How I Paid Off My Mortgage Early in 4 Years
• Why I Feel Filthy Fucking Rich
• Investing Deathmatch: Managed Funds vs. Index Funds
• Investing Deathmatch: Traditional IRA vs. Roth IRA
• Investing Deathmatch: Investing in the Stock Market vs. Just… Not
• Why You Might Not Need Your Emergency Fund

What financial order of operations has worked (or not worked) for y’all?

Is this order of financial operations similar to what you’ve followed? Or do you see a better universal option? Have you tried something and it totally fucking failed? We want to hear about that too! Tell us about where YOU are on your journey in the comments below.

And if this article has helped you, please consider throwing us a few bucks via Patreon. Although Piggy and I are pretty dang financially stable now, we run this blog on our own time. Each article takes 10-14 hours to produce, and we churn out a new one every week. It’s a lot of work! And it’s easier to do if we have some support.

You may have noticed that we threw a bit of shade on unnamed personal finance gurus in this article (but come on, you know who we mean). A lot of them make bank by selling advice that personally benefits them or their sponsors. We think that’s LAME AF. That’s why we chose to be donor supported instead.

So if our advice has helped you, you can show us by joining us on Patreon. It’s a really fun community, and you can join for as little as $1.

There is currently no tier for $1.5 million donations BUT MAYBE THERE SHOULD BE. #MakeFrogwartsReal

That’s all, kids! Be kind to yourselves, no matter what steps you’re tackling today. Recognize your wins, take breaks, mess up, reward yourselves often, and don’t forget to allocate your retirement funds!

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