Image Source: Pixabay

Lately, I’ve been working closely with younger clients to strengthen their financial foundation—particularly around budgeting and navigating questions about debt. I wanted to share a short, straightforward article that outlines some of the key principles every young investor should focus on in the early stages of building a nest egg.

When your investable assets make up less than 20% of your net worth—often due to high living costs and debt obligations—it’s important to implement the right strategies to take control of your finances and start shifting the balance in your favor.

Smart financial planning starts with building a strong foundation. Whether you’re navigating daily expenses, preparing for future goals, or simply trying to gain control of your money, four pillars play a central role: budgeting, managing debt, understanding your credit score, and making informed decisions about large purchases—like buying or leasing a vehicle.

Let’s break each down with practical strategies and supporting facts that can help guide everyday decisions and long-term outcomes.

Budgeting: A Plan with Purpose

A budget isn’t just about limiting spending—it’s a decision-making tool that directs your money toward what matters most. Whether you're aiming to pay down debt, save for a home, or plan for retirement, budgeting brings clarity and accountability.

Budgets are especially helpful in situations where income fluctuates (like with seasonal or commission-based work), or where multiple people are spending from the same household account. They also serve as communication tools, helping families understand shared financial priorities—like cutting back on dining out in order to save for a vacation or pay off a credit card.

How to build a practical budget:

1. Identify financial goals. Short-term goals (like building an emergency fund) and long-term goals (like saving for a home downpayment or buying a car) provide direction.
2. Estimate income. Include wages, side gigs, rental income, and consistent support payments.
3. Track expenses. Separate fixed costs (mortgage, insurance) from variable ones (groceries, gas, entertainment).
4. Compare income to expenses. If expenses exceed income, it’s time to reduce spending or identify ways to generate additional income.
5. Express each category as a percentage of total income. For instance, if groceries make up 18% of your spending, is that aligned with your goals?
6. Review monthly. Budgeting is not “set it and forget it”—adjust based on actual results and seasonal changes.

Rarely have I found individuals measure their budget monthly. One of the consultant influencers I like to watch on YouTube is Dan Martell. One of his sayings for mastering your finances is to “Measure daily,” and in this case I would say at least monthly.

He states, “If you want your money to grow, you need to focus on it, track everything. This gives visibility to the things that are important to you…write it down…gamify your growth…beat your best score…what you focus on will expand”.

I agree with Dan and can tell when my clients are “locked-in” to their finances, and it’s usually the engineers and individuals with a “driver” personality typically found in business managers/owners who know the importance of focus.

I encourage all my readers to build your annual budget and break it down into monthly increments. Categorize your expenses into fixed and variable expenses. Know which ones you can cut down on if you need to slim your budget under the variable category. Here are some lifestyle changes you could make to increase your savings:

• Use credit and debit cards wisely: Only charge what you can pay off in full each month. Avoid using overdraft protection on debit cards, which can lead to spending money you don’t have.
• Pay down credit card debt gradually: Even small extra payments can reduce interest costs. For example, paying off a $3,000 balance at 24% interest saves over $700 a year.
• Raise insurance deductibles: Increasing deductibles on auto or homeowners insurance can lower your monthly premiums, saving money over the long run.
• Review your cell phone plan: Cell phone costs are one of the biggest household expenses. Make sure your plan matches your usage and avoid overpaying for unused data or features.
• Cut the cable cord/reduce streaming apps: Switching to streaming services if using cable for only the content you consume. If you’re watching Netflix, do you need a 1 terabyte internet connection? Probably not. Reduce it at your internet provider.

So, how much should one keep in savings?

A good rule of thumb is to maintain an emergency fund equal to three to six months of essential living expenses. This serves as a financial cushion for job loss, major repairs, or medical emergencies. Without it, credit cards and loans often become the fallback, which leads directly into the next concern: debt.

Debt Management: Small Wins Lead to Big Gains

Carrying debt isn’t always a problem—but carrying too much, or the wrong kind, can limit financial freedom and delay long-term goals.

For example, credit card interest rates averaged 21.16% according to Lending Tree, which means even a small balance can grow quickly. Paying just the minimum on a $5,000 balance at 20% could take over 20 years to repay—and cost more than $10,000 in interest.

There are two well-known strategies for debt repayment:

1. Snowball Method: Focus on paying off the smallest debt first. This method delivers quick psychological wins and encourages momentum.
2. Avalanche Method: Focus on debts with the highest interest rates first, which saves more money over time—though it may take longer to see early results.

Regardless of the method you use, successful debt reduction relies on intentionally redirecting freed-up cash toward your payoff strategy and being consistent. When cost-cutting efforts are combined with consistent extra payments—even as little as $200 per month—it’s possible to eliminate a credit card or personal loan years ahead of schedule.

I apply this same principle to my own finances by making additional payments on my mortgage. It’s helping me accelerate the payoff timeline and significantly reduce long-term interest costs. One client family I work with has taken this even further. Living in a low-cost state and maximizing their dual income, they maintained a sharp focus on their budget—and managed to pay off their mortgage entirely, all before turning 50, freeing up cashflow for investment versus debt service.

Credit Scores: The Silent Gatekeeper

Your credit score is more than just a number—it’s a key factor in your financial identity. It influences whether you’re approved for loans, how much interest you’ll pay, and even whether you qualify for certain jobs or rental properties.

Here’s how credit scores are calculated:

A strong credit score typically means a FICO® score above 740. If you're below that, you can still take steps to improve:

• Make on-time payments every month—automate if possible.
• Keep your credit utilization below 30% of available limits.
• Maintain older credit accounts—even unused ones—for their history benefit.
• Limit new credit inquiries unless you're actively shopping for a mortgage or auto loan (which are usually count as a single inquiry in credit scoring models).

Good credit not only helps you qualify for loans, but it also saves money. For instance, someone with excellent credit may receive a mortgage rate 1% lower than someone with fair credit—potentially saving over $100,000 over a 30-year loan.

Buying vs. Leasing a Car: Which Makes More Sense?

Cars are a big part of most people’s budgets. According to Kelley Blue Blook, the average price of a new car (MSRP) hit $51,124 last month and the most readily available used cars price between $15,000 and $30,000.

Deciding whether to buy or lease has been incredibly difficult given these price changes, while some parents are even turning to Uber and Lyft budgets for their teens. Deciding what to do will depend on your lifestyle, driving habits, and financial flexibility.

Source: Kelley Blue Book

Buying a car is often more cost-effective over time. If you drive more than 15,000 miles per year, want to own your vehicle outright, or plan to keep your car for many years, buying makes sense. The payments may be higher upfront, but once the loan is paid off, the car is yours with no monthly obligation.

Leasing is more attractive for those who prefer driving new cars every few years or don’t want to commit a large down payment. Typical leases come with 12,000 to 15,000 annual mileage limits and lower monthly payments, which can be appealing. Leasing can also offer tax advantages if the car is used for business purposes.

That said, leasing comes with trade-offs. Exceeding mileage limits or early termination can result in costly fees. And unlike buying, you don’t build equity in the vehicle. Here’s a quick comparison:

If long-term savings and ownership matter most, buying is usually the better route. If flexibility, convenience, and short-term cost are more important, leasing can be a better fit—just be aware of the terms. Financially-speaking, buying a used vehicle with cash is the best option to keep debt low and not be hit with huge depreciation in the first few years.

Putting It All Together

Financial success is rarely about a single decision. It’s the result of many small, intentional actions repeated consistently over time. A thoughtful budget helps you align your spending with your values. Managing debt with a strategic mindset frees up future cash flow. Maintaining a strong credit profile opens doors and lowers borrowing costs. And making smart choices—like how you finance your next car—helps you stay on track, both short- and long-term.

You don’t have to tackle everything at once. But if you make progress in just one of these areas this month—whether it’s reviewing your spending, paying extra toward a credit card, or checking your credit report—you’ll be one step closer to financial confidence and peace of mind.

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