Getting started8 min read
The order to fix your finances in
Most people start with the investment and work backwards. That is why the plan breaks the first time something goes wrong.
Why order matters more than optimisation
A portfolio returning 14% with no emergency fund is worse than one returning 9% with six months of expenses set aside — because the first one gets liquidated at the worst possible moment, and the second one doesn't.
Sequence is the part of financial planning nobody sells you, because there is no product attached to it. It is also the part that decides whether the products you do buy ever get to work.
The sequence
Work down this list. Do not start a step until the one above it is genuinely done.
- 1 · Emergency fund
- Three to six months of total household outgoings, in a savings account or liquid fund. Not invested, not locked in, not earning much. Its job is to be available on a bad Tuesday.
- 2 · Health cover
- Independent of your employer, sized against private hospital costs in your city. A single admission is the most common reason an otherwise sound plan gets dismantled.
- 3 · Life cover, if anyone depends on you
- Term insurance only, sized against obligations. If nobody depends on your income, skip this step entirely — you do not need it yet.
- 4 · High-cost debt
- Credit card balances and personal loans above roughly 12%. No investment reliably beats a guaranteed 16% saving, and the saving is tax-free.
- 5 · Retirement
- Start before it feels urgent. The gap between beginning at 28 and beginning at 38 is not ten years of contributions — it is the decade of compounding those contributions would have earned.
- 6 · Everything else
- House deposit, education, travel, the second income stream. Each with a date, an amount, and an instrument matched to its horizon.
The one exception worth making
If your employer matches a retirement contribution, take the full match before you clear high-cost debt. A 100% match is an immediate, certain doubling that no interest rate on a credit card can compete with. Then go back to the list.
Then leave it alone
Once the sequence is in place, the highest-value activity is inactivity — punctuated by an annual review and a step-up in contributions when your income rises. Most damage to household wealth is self-inflicted and happens between January and March, or during the week after a market fall.
What to take away
- Sequence beats optimisation: a protected 9% outperforms an unprotected 14%.
- Emergency fund and health cover come before any investment decision.
- Take a full employer retirement match before clearing high-cost debt — then resume the order.
- After the sequence is set, the job is an annual review and an annual step-up.