Sort out all your finances in eight steps

Sorting out your finances really doesn't need to be difficult. In fact you can learn everything you need to know by the end of this blog post.

Scott Adams' famously (in the US) devised a nine-point plan for sorting out your money (he of the Dilbert cartoon fame pictured). In his 'Unified Theory of Everything Financial', a play on Einstein's Unified Theory of Everything, he uses just 129 words to say everything that needs to be said. It was originally published in 'Dilbert and the Way of the Weasels' in 2002 but you can read the nine-point plan on this Marketwatch blog.

For us Brits, it needs a tweak and it becomes an eight-point plan...

Step 1. Make a will (A guide to will writing - 10 tips for a perfect will)

Step 2. Pay off your credit cards (Guides and tips for clearing card debt)

Step 3. Get term life insurance if you have a family to support (Calculate the life insurance you need - Get a quote)

Step 4. Fund your company pension to the maximum (A guide to company pensions)

Step 5. Buy a house if you want to live in a house and can afford it (Mortgage/house-buying guides - Compare mortgage deals)

Step 6. Put six months worth of outgoings in a tax-free Isa savings account. You can put up to £3,000 into an account each year. (See the web's best savings tables)

Step 7. Take whatever money is left over and invest 70% in a stock index tracking fund and 30% in a bond fund through any discount broker/fund supermarket and never touch it until retirement

Step 8. If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio

There you have it. I'm sure your family and friends who share a phobia of finance would be grateful to receive the Unified Theory of Everything Financial' so please pass it on.

- Andrew Oxlade, Editor, This is Money

Comments

[Mark]

The information above is very useful indeed but would like to say something about your question 7 - investing money does seem like a good idea but is invest a long term risk investments do not seem to be as good anymore as they used to.

[judd]

Just saw this movie that helped me understand the debt industry for what it is!

check it out: www.indebtwetrust.com

[Admin note: This post may come from those connected with the film]

[Credit Card Debt Help]

I agree that paying credit card debt needs to be right up there at the top of the list. With having to put out hundreds if not thousands of dollars a month to credit card debt creating wealth or even a comfortable lifestyle will be very hard.

[Debt Settlement Lawyer]

If credit card debt does not get paid off first then your financial situation will suffer pretty badly.

[Card Service Sales]

Be weary of not paying your minimum balances. If your financial institution sends your debt to a collection agency your credit rating will more or less fall apart. You will owe the full balance up front on all collectible accounts.

Instead of your $50/month it will be $1200 now!

Pay your minimums!

[Stephen B]

The post from "Debt Settlement Lawyer" must have no idea what it's like for someone who can't pay his or her minimums! To make such a cold hearted statement like just pay your minimums. This person should have never been allowed to make such a blanket statement when so many people are suffering. I know I've talked to thousands of people who can’t and it's not a pretty picture in this country. People such as the elderly people who all their life do the right thing and have a house paid for and a good credit score but a limited cash flow. These people are solicited to use credit cards to buy medicine and are entrapped by ruthless Banks so they can get their HARD ASSETS! It’s criminal! How about the wife who’s husband runs up $50,000 on their joint credit cards and just runs off leaving her with kids and a house to pay for! How is she just going to pay for the minimums? Life is just not so simple, people have to have options and they need to know all their options and the truth about them not just a BS line, “get a job.” That line only plays out in a pop song! Have a heart!