Build Wealth Like a Video Game and Start Leveling Up

I borrowed that title and that idea from this Lifehacker article – Approach Fitness Like a Video Game and Start Leveling Up. The article suggests that if you decide it’s time to get in shape and you’re a bit intimidated by the whole process, you’ve got to start small and work your way up to the tough tasks, much like in a video game.

“The beginning step is one that should come naturally to gamers. Think back to the quests you’re given as a level 1 peasant in RPGs. Remember having to complete menial tasks just to learn the game and get started on your quest? The more complicated tasks and enemies usually don’t come until later on, because the player needs some time to get a grasp on how the game works in the first place.”

The truth is, getting on the right financial path and building your wealth starts small. When you graduate there is a lot to learn about your personal finances – choosing the right bank, setting up a budget, renting an apartment. So, start with the easy stuff:

1. Live Within Your Means.

   This “one thing” is the foundation of good money skills and your future financial stability. It means exactly what it sounds like – spending less than you make – and LOVING it. It does not have to be hard and it does not need to be all-encompassing, planned down to the last cent. What you need is to have a good handle on what’s coming in and going out. (Read more at Deciding What’s Affordable from the Wall Street Journal.)There are lots of tools that can help you get a closer look at your cash flow. Online, there are several programs like Mint.com or your bank’s website. Or, you can use good old pencil and paper or Excel, if you’d like. The point is to be brutally honest – find out where you stand and then use this information to your advantage.

2. Choose the Right Bank.

   Your bank will be your financial partner, so it’s best to find and work with one that really meets your needs and fits your lifestyle. Your bank should have lots of ATMs near where you live, work, and play, and should have low to NO fees.

3. Get $3,000 to $5,000 into a Freedom Fund.

   Everyone needs a Freedom Fund – it’s where you’ll eventually stash 3 – 9 months worth of income (you’re starting small now, and will level-up later). This is where you’ll go when your refrigerator dies or your car breaks down and you need a quick cash infusion. Always remember to back-fill this so that it’s there when you need it. Put this cash in a savings account attached to your checking account so that the money is not right at your fingertips, but, you can get to it when you need it.

4. Debt.

   There’s good debt and bad debt. Good debt is low cost and helps you move forward in life – a mortgage or a loan for a reasonably priced car to get to work (see You Should Probably Wait, Bro). Bad debt, like credit card debt, means that you can’t really afford this lifestyle – see #1 & #3, above.

5. Get into your employer’s retirement plan.

   If your employer offers a retirement plan with a company match you can’t afford not to get into it. That is free money that will put you on the path to a solid financial future. If you need to, start small and participate at the amount that will get you the greatest company match – you can always “level-up” later!

Whether you think of your finances as a video game or a step-by-step plan, it doesn’t matter as long as you learn as much as you can about your options and continue to monitor your progress. Always know where your money is, where it’s going and how it’s growing.