Where to start your financial journey
In the Introduction to “What Would Dad Do? - Volume 1,” I stated that we all start somewhere. That “somewhere” could be young or old, with more or less net worth, and either good or bad financial habits. I wrote the book series to offer valuable insight from my experience and provide a financial education, no matter where anyone starts on their financial journey, as I call it. I assumed you'd jump right in and focus on the topics you think need addressing. But if you’re not at the beginning, young and just starting out, where do you start?
First, let me explain what I mean by a financial journey by comparing it to driving a car. At the beginning, there’s a lot to learn, including vehicle operation, the rules of the road, and safe driving. Once you get your license, you’ll need to drive regularly, or you’ll forget things. Over time, you’ll gain experience in different conditions, such as snow and ice, and learn more about cars, including how to maintain them and recognize when something is not right. But if you’re not paying attention, you increase the risk of an accident or breakdown. A financial journey is similar. You start by learning the basics, keep practicing over time, get better, become more knowledgeable about different situations, and stay out of trouble by paying attention. It’s not a single skill learned in one day; rather, it’s many skills acquired over a lifetime.
Where you start also depends on your journey to date. If you’ve never received guidance on maintaining a checkbook, creating a budget, or managing debt, learn those skills first. The same goes for buying real estate, investing, or retirement planning, which will come later. Acknowledge whether it’s your first time or whether it’s been a long time and you need a refresher. Then tackle topics or tasks one at a time. Don’t start thinking about a retirement plan until you’re good at budgeting, because budgeting is very important in retirement. If you have a 401(k) with default investments, start by spending time on the account provider’s website to learn from their retirement education and get comfortable navigating the menus. As you learn more by reading or researching retirement funds and asset allocation, return to the website and examine your asset allocation. Then find several books and articles that discuss asset allocation and gain an understanding of the topic. Then decide whether the current asset allocation matches your risk tolerance, and adjust the fund balances as necessary. You might also take up the 401(k) provider’s offer of one-on-one meetings to review your account. Like driving, the more you do it, the more comfortable you get.
Today, there are so many financial education resources that it’s harder than ever to sort through them all. Most have some bias or commercial ties, which can steer you toward less optimal answers or options. While the internet is readily available and quick, better financial education can be found in books. Choose the sources that work for you, as long as you stay aware of potential bias and marketing pressure. Another easy way to learn is to search for the definition of a financial term or acronym online whenever you encounter a new one. Do this often, and you’ll understand more when you start reading other articles and books that assume you already have some level of financial knowledge. This doesn’t have to take a lot of time, just regular attention to learning and doing.
You can also approach your journey by focusing on what needs fixing. Too much debt, insufficient savings, or a sense that your investments aren’t right can motivate you to address those areas. A financial journey is ultimately a path to a better outcome. Like a car trip, it will involve many turns, periods of speeding up and slowing down, and the occasional wrong turn that requires you to get back on the right road. There is no shortcut from point A to point B, but rather an optimal route planned in advance. If you’re really lost, that’s the time to stop and ask for help.
Lastly, you will take a financial journey, like it or not. We all do. It will either get better and more enjoyable, or you’ll keep making wrong turns because you don’t have a map or won’t stop to ask for directions. Good drivers are careful, take their time, pay attention, and look a few cars ahead. Good money management is no different. Wherever you start, the most important thing is to recognize that life is a financial journey and that you’re the driver. That’s why Rule #1 in my books says, “Only you are responsible for all of your finances.”
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