Personal Finance Mastery

Complete personal finance system covering budgeting, debt elimination, investing, tax optimization, insurance, estate planning, and financial independence. Works for any income level, any country.

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Quick Financial Health Check

Run /finance-check to score current financial health:

Signal	Healthy	Warning	Critical
Emergency fund	3-6 months expenses	1-3 months	< 1 month
Savings rate	> 20%	10-20%	< 10%
Debt-to-income	< 36%	36-50%	> 50%
Housing cost	< 28% of gross	28-35%	> 35%
Net worth trend	Growing quarterly	Flat	Declining
Insurance coverage	All critical covered	Gaps exist	Major gaps
Investment allocation	Age-appropriate	Slightly off	Way off
Tax optimization	Using all vehicles	Some unused	None used

Score: /16. Below 10 = immediate action needed.

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Phase 1: Financial Snapshot

Net Worth Statement

net_worth:
  date: "YYYY-MM-DD"
  assets:
    liquid:
      checking: 0
      savings: 0
      money_market: 0
    investments:
      retirement_401k: 0
      retirement_ira: 0
      brokerage: 0
      hsa: 0
      crypto: 0
    property:
      home_value: 0
      vehicles: 0
      other: 0
  liabilities:
    mortgage: 0
    student_loans: 0
    auto_loans: 0
    credit_cards: 0
    personal_loans: 0
    other_debt: 0
  net_worth: 0  # assets - liabilities
  monthly_income_gross: 0
  monthly_income_net: 0
  monthly_expenses: 0
  savings_rate: 0  # (income_net - expenses) / income_net
  debt_to_income: 0  # total_debt_payments / gross_income

Income Inventory

Document ALL income sources:

Source	Type	Monthly Amount	Stability	Growth Potential
Primary job	W-2/salary		High	Moderate
Side business	1099/self-emp		Variable	High
Investments	Dividends/interest		Moderate	Moderate
Rental income	Passive		Moderate	Moderate
Other

Monthly Cash Flow Map

INCOME (net take-home)
├── Fixed Expenses (needs) — target: ≤50%
│   ├── Housing (rent/mortgage + insurance + tax)
│   ├── Utilities (electric, water, gas, internet, phone)
│   ├── Transportation (car payment, insurance, fuel, transit)
│   ├── Insurance (health, life, disability)
│   ├── Minimum debt payments
│   └── Groceries (baseline)
├── Financial Goals (savings/investing) — target: ≥20%
│   ├── Emergency fund
│   ├── Retirement contributions
│   ├── Investment contributions
│   ├── Debt extra payments
│   └── Specific savings goals
└── Lifestyle (wants) — target: ≤30%
    ├── Dining out
    ├── Entertainment/subscriptions
    ├── Shopping/clothing
    ├── Travel
    ├── Hobbies
    └── Personal care

This is the 50/30/20 framework — adjust ratios to your situation but track against these benchmarks.

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Phase 2: Emergency Fund

Priority #1 — Before Investing

Stage	Target	Timeline	Where to Keep
Starter	$1,000 (or 1 month)	1-3 months	High-yield savings
Basic	3 months expenses	3-6 months	High-yield savings
Full	6 months expenses	6-12 months	HYSA + money market
Enhanced	12 months expenses	Optional	HYSA + I-bonds + money market

When to Use Emergency Fund

YES — True emergencies:

• Job loss
• Medical emergency
• Essential home/car repair
• Urgent family situation

NO — Not emergencies:

• Vacations
• Sales/deals
• Predictable expenses (insurance premiums, taxes)
• Lifestyle upgrades

Replenishment Rules

• After any withdrawal, replenish becomes priority #1
• Redirect all non-essential spending until restored
• Set automatic transfer to rebuild over 3-6 months

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Phase 3: Debt Elimination

Debt Inventory

debt_inventory:
  - name: "Credit Card A"
    balance: 0
    interest_rate: 0
    minimum_payment: 0
    type: "revolving"
    tax_deductible: false
  - name: "Student Loan"
    balance: 0
    interest_rate: 0
    minimum_payment: 0
    type: "installment"
    tax_deductible: true

Strategy Selection

Method	How It Works	Best For	Psychology
Avalanche	Pay highest interest first	Mathematically optimal, saves most money	Disciplined people
Snowball	Pay smallest balance first	Fastest "wins", builds momentum	Need motivation
Hybrid	Pay any debt < $500 first, then avalanche	Quick wins + math optimization	Most people

Debt Priority Order

1. Payday loans / title loans (300%+ APR) — eliminate immediately, even if it means selling things
2. Credit cards (15-30% APR) — aggressive payoff
3. Personal loans (8-15% APR) — steady payoff
4. Auto loans (4-8% APR) — pay minimum unless rate > 6%
5. Student loans (3-7% APR) — pay minimum, invest the difference if rate < 5%
6. Mortgage (3-7% APR) — usually don't accelerate, invest instead

The Crossover Rule

If debt interest rate > expected investment return (historically ~7-10% stocks): → Pay off debt first

If debt interest rate < expected investment return: → Pay minimum on debt, invest the difference

Grey zone (4-7%): → Split extra money 50/50 between debt payoff and investing

Debt Payoff Accelerators

1. Balance transfer — 0% APR cards (watch transfer fees, 3-5%)
2. Refinance — lower rate on student loans, mortgage, auto
3. Consolidation — single payment, potentially lower rate
4. Income boost — side income dedicated 100% to debt
5. Expense audit — cancel subscriptions, negotiate bills
6. Sell assets — unused items → debt payoff

Credit Score Management

Factor	Weight	How to Optimize
Payment history	35%	Never miss a payment — automate minimums
Credit utilization	30%	Keep below 30%, ideally below 10%
Length of history	15%	Don't close old cards
Credit mix	10%	Installment + revolving is good
New credit	10%	Limit hard inquiries

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Phase 4: Budgeting System

Budget Template

monthly_budget:
  month: "YYYY-MM"
  income:
    salary_net: 0
    side_income: 0
    other: 0
    total: 0
  
  fixed_expenses:  # ≤50% of income
    housing: 0
    utilities: 0
    transportation: 0
    insurance: 0
    debt_minimums: 0
    groceries: 0
    childcare: 0
    subscriptions_essential: 0
    subtotal: 0
    percent_of_income: 0
  
  financial_goals:  # ≥20% of income
    emergency_fund: 0
    retirement: 0
    investments: 0
    debt_extra: 0
    savings_goals: 0
    subtotal: 0
    percent_of_income: 0
  
  lifestyle:  # ≤30% of income
    dining_out: 0
    entertainment: 0
    shopping: 0
    travel_fund: 0
    hobbies: 0
    personal_care: 0
    gifts: 0
    subscriptions_fun: 0
    subtotal: 0
    percent_of_income: 0
  
  variance: 0  # income - all expenses (should be ≥ 0)

Expense Tracking Methods

Method	Effort	Best For
Envelope system	High	Cash-heavy, needs discipline
App tracking (YNAB, Mint)	Low	Tech-savvy, automated
Spreadsheet	Medium	Control-oriented, custom
Agent-tracked	Low	Let AI categorize + alert
Reverse budgeting	Lowest	Auto-transfer savings first, spend rest

Reverse Budgeting (Recommended)

The simplest effective system:

1. Day 1 of month: Auto-transfer savings/investment target to separate accounts
2. Day 1 of month: Auto-pay all fixed bills
3. Remaining: Spend freely — guilt-free because goals are already funded
4. Monthly: Review if remaining amount felt tight or generous → adjust

Subscription Audit

Run quarterly:

• List every recurring charge
• Score each 1-5 (value received)
• Cancel anything scoring ≤ 2
• Downgrade anything scoring 3
• Keep 4-5s
• Common waste: streaming services (how many do you actually watch?), gym memberships (do you go?), software trials, news subscriptions

Annual Expenses Calendar

Don't let irregular expenses surprise you:

Month	Expense	Amount	Funded?
Jan	Insurance renewal
Mar	Tax preparation
Apr	Tax payment (if owed)
Jun	Car registration
Aug	Back to school
Nov	Holiday gifts
Dec	Annual subscriptions

Sinking fund: Divide annual expenses by 12, save monthly. No surprises.

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Phase 5: Investing

Investment Priority Order

Follow this exact sequence:

1. Employer 401(k) match — FREE money, always max this first (typically 3-6% match)
2. High-interest debt payoff — anything > 7% APR
3. Emergency fund — 3-6 months
4. HSA (if eligible) — triple tax advantage ($4,150 individual / $8,300 family, 2024)
5. Roth IRA — $7,000/year ($8,000 if 50+), tax-free growth
6. 401(k) beyond match — up to $23,000/year ($30,500 if 50+)
7. Taxable brokerage — no limits, more flexibility
8. 529 plan (if kids) — tax-free education growth
9. Real estate / alternatives — only after 1-8 are solid

Asset Allocation by Age

Simple rule: Age in bonds, rest in stocks (adjust for risk tolerance)

Age Range	Stocks	Bonds	Alternatives	Risk Level
20-35	90%	10%	0%	Aggressive
35-45	80%	15%	5%	Growth
45-55	70%	25%	5%	Moderate
55-65	60%	35%	5%	Conservative
65+	40-50%	40-50%	0-10%	Preservation

Simple Portfolio Models

3-Fund Portfolio (Bogleheads recommended):

• US Total Stock Market (VTI/VTSAX) — 60%
• International Stock Market (VXUS/VTIAX) — 30%
• US Total Bond Market (BND/VBTLX) — 10%

2-Fund Portfolio (even simpler):

• Target Date Fund (e.g., Vanguard 2055) — 100%
• Adjust nothing until retirement

Income Portfolio (retirees):

• Dividend stocks (VYM/SCHD) — 30%
• Bonds (BND/AGG) — 40%
• REITs (VNQ) — 15%
• Cash/money market — 15%

Investment Rules

1. Never invest money you need within 5 years — use HYSA/CDs for short-term
2. Dollar-cost average — invest consistently regardless of market conditions
3. Don't time the market — time IN the market beats timing THE market
4. Keep fees below 0.2% — index funds, not active management
5. Rebalance annually — sell winners, buy losers (back to target allocation)
6. Ignore daily market news — check portfolio quarterly at most
7. Tax-loss harvest in taxable accounts — offset gains with losses
8. Never panic sell — downturns are buying opportunities

Compound Growth Reference

$500/month invested at 7% average return:

Years	Contributed	Portfolio Value	Growth
5	$30,000	$35,800	$5,800
10	$60,000	$86,500	$26,500
20	$120,000	$260,500	$140,500
30	$180,000	$607,000	$427,000
40	$240,000	$1,320,000	$1,080,000

The message: Start early. Time is the biggest factor.

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Phase 6: Tax Optimization

Tax-Advantaged Account Summary

Account	Contribution Limit (2024)	Tax Treatment	Best For
Traditional 401(k)	$23,000 ($30,500 50+)	Pre-tax in, taxed out	High earners now
Roth 401(k)	$23,000 ($30,500 50+)	After-tax in, tax-free out	Expect higher tax later
Traditional IRA	$7,000 ($8,000 50+)	Pre-tax in, taxed out	No employer plan
Roth IRA	$7,000 ($8,000 50+)	After-tax in, tax-free out	Under income limits
HSA	$4,150/$8,300	Pre-tax in, tax-free out	Triple tax advantage
529 Plan	Varies by state	After-tax in, tax-free for education	Kids' college
Mega Backdoor Roth	Up to $69,000 total	After-tax → Roth conversion	High earners

Tax Reduction Strategies

For employees:

1. Max 401(k) contributions — reduces taxable income
2. Use FSA/HSA for medical expenses
3. Itemize deductions if > standard deduction ($14,600 single / $29,200 married, 2024)
4. Charitable donations — donor-advised fund for bunching
5. State/local tax (SALT) deduction — up to $10,000

For self-employed:

1. SEP IRA or Solo 401(k) — up to $69,000/year
2. Qualified Business Income deduction — 20% of QBI
3. Home office deduction — dedicated space required
4. Business expenses — equipment, software, travel, meals (50%)
5. Health insurance premium deduction
6. Retirement plan contributions
7. Vehicle expenses — mileage or actual costs

For investors:

1. Hold investments > 1 year — long-term capital gains rate (0/15/20% vs ordinary income)
2. Tax-loss harvesting — sell losers to offset gains
3. Asset location — bonds in tax-advantaged, stocks in taxable
4. Qualified dividends — taxed at capital gains rate
5. Roth conversion ladder — convert in low-income years
6. Donate appreciated stock — avoid capital gains + get deduction
7. Opportunity Zones — defer and reduce capital gains

Tax Planning Calendar

Month	Action
January	Gather W-2s, 1099s, receipts
February	Estimate tax liability
March	File or extend (April 15 deadline)
April	Q1 estimated tax payment (if self-employed)
June	Q2 estimated tax payment
September	Q3 estimated tax payment
October	Extended filing deadline
November	Tax-loss harvesting review
December	Max retirement contributions, charitable donations, Roth conversions
January	Q4 estimated tax payment

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Phase 7: Insurance & Protection

Essential Coverage Checklist

Insurance	Need Level	Notes
Health insurance	Critical	ACA marketplace if no employer plan
Auto insurance	Critical (if driving)	Liability + collision/comprehensive
Renters/homeowners	Critical	Covers belongings + liability
Life insurance	Critical (if dependents)	Term life = 10-12x annual income
Disability insurance	Important	60-70% income replacement
Umbrella liability	Important (high net worth)	$1M+ coverage, cheap
Long-term care	Consider (age 50+)	Protect retirement assets

Life Insurance Decision Tree

Do you have dependents who rely on your income?
├── YES → Buy term life insurance
│   ├── Coverage: 10-12x annual income
│   ├── Term: until youngest child is 25 or mortgage is paid
│   └── Type: TERM (not whole life — invest the difference)
└── NO → Skip for now, reassess when situation changes

Rule: Never buy whole life insurance as an investment. Buy term, invest the difference.

Insurance Optimization

1. Bundle policies — same insurer for home + auto = 10-25% discount
2. Raise deductibles — $500 → $1,000 deductible saves 15-30% on premiums
3. Shop annually — rates vary wildly between insurers
4. Review coverage yearly — life changes mean coverage changes
5. Don't over-insure — match coverage to actual risk and assets

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Phase 8: Major Purchase Planning

Home Buying Readiness

Factor	Ready	Not Ready
Emergency fund	3-6 months AFTER down payment	Drained by purchase
Down payment	20% (avoids PMI)	< 10%
Debt-to-income	< 36% with mortgage	> 43%
Credit score	740+ (best rates)	< 680
Job stability	2+ years steady income	Recent job change
Plan to stay	5+ years	< 3 years (rent instead)
Monthly cost	< 28% of gross income	> 35%

Rent vs Buy Decision

Monthly cost comparison:

• Renting: rent + renters insurance
• Buying: mortgage + property tax + insurance + HOA + maintenance (1-3% of value/year) + opportunity cost of down payment

Buy if: staying 5+ years AND total ownership cost < rent AND you want the stability. Rent if: < 5 years OR high mobility OR local market is overpriced (price-to-rent > 20x).

Car Buying Rules

1. Total vehicle cost < 35% of annual income (purchase price)
2. Buy used (2-4 years old) — avoid 30-40% depreciation
3. Pay cash if possible — if financing, keep loan < 48 months
4. Total transportation < 15% of take-home (payment + insurance + fuel + maintenance)
5. Never lease unless business write-off justifies it

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Phase 9: Financial Independence (FI)

FI Number Calculation

FI Number = Annual Expenses × 25

Based on the 4% rule (Trinity Study — 4% withdrawal rate has historically survived 30-year retirements).

Annual Expenses	FI Number	Monthly Savings Needed (25 years at 7%)
$30,000	$750,000	$940/month
$50,000	$1,250,000	$1,567/month
$75,000	$1,875,000	$2,350/month
$100,000	$2,500,000	$3,134/month

FI Stages

Stage	Description	What Changes
Coast FI	Enough invested that compound growth alone will fund retirement by 65	Can take lower-paying fulfilling work
Barista FI	Investments cover most expenses, need small income	Part-time work for insurance/extras
Lean FI	25x minimal expenses saved	Can stop working, frugal lifestyle
FI	25x comfortable expenses saved	Full financial independence
Fat FI	25x generous expenses saved	Independence with luxury

FI Tracking Dashboard

fi_tracker:
  date: "YYYY-MM-DD"
  annual_expenses: 0
  fi_number: 0  # expenses × 25
  current_invested: 0
  fi_percentage: 0  # invested / fi_number × 100
  monthly_savings: 0
  savings_rate: 0
  years_to_fi: 0  # calculated from savings rate
  coast_fi_number: 0  # what you need now to coast to 65
  coast_fi_reached: false

Savings Rate → Years to FI

Savings Rate	Years to FI
10%	51 years
20%	37 years
30%	28 years
40%	22 years
50%	17 years
60%	12.5 years
70%	8.5 years
80%	5.5 years

The lever: Cutting expenses is 2x as powerful as earning more (reduces FI number AND increases savings).

Safe Withdrawal Strategies

Strategy	Rate	Best For
Fixed 4%	4% of initial portfolio, adjusted for inflation	Simple, traditional
Variable %	3-5% based on market conditions	Adapts to market
Guardrails	4% base, increase/decrease if portfolio deviates 20%	Balanced
Bucket strategy	2 years cash + 5 years bonds + rest stocks	Sequence risk protection

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Phase 10: Estate Planning Essentials

Documents Everyone Needs

Document	What It Does	Priority
Will	Distributes assets, names guardian for children	Critical
Power of Attorney	Someone manages finances if incapacitated	Critical
Healthcare Directive	Medical wishes if you can't communicate	Critical
Beneficiary designations	Override will for 401k, IRA, life insurance	Critical
Trust (optional)	Avoids probate, privacy, control	Important if assets > $500K

Digital Estate Checklist

• Password manager shared with trusted person
• List of all financial accounts and institutions
• Crypto wallet recovery phrases stored securely
• Social media legacy contacts set
• Email account recovery instructions
• Insurance policies documented and locatable
• Safe deposit box key location documented

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Phase 11: Financial Review Cadence

Weekly (5 minutes)

• Check bank/credit card for unauthorized charges
• Log any large or unusual expenses
• Verify automated transfers went through

Monthly (30 minutes)

monthly_review:
  month: "YYYY-MM"
  income_actual: 0
  expenses_actual: 0
  savings_actual: 0
  savings_rate_actual: 0
  budget_variances:
    over_budget: []
    under_budget: []
  net_worth_change: 0
  debt_paid_this_month: 0
  investments_contributed: 0
  action_items: []

Quarterly (1 hour)

• Update net worth statement
• Review investment allocation (rebalance if > 5% drift)
• Subscription audit
• Insurance coverage check
• Update financial goals progress

Annually (half day)

• Full financial plan review
• Tax planning for next year
• Insurance shopping/comparison
• Beneficiary designation review
• Will/estate document review
• Set next year's financial goals
• Negotiate bills (insurance, phone, internet, subscriptions)

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Financial Scoring Rubric (0-100)

Dimension	Weight	0-25	50	75	100
Emergency fund	15%	< 1 month	1-3 months	3-6 months	6+ months
Debt management	15%	High-interest debt, no plan	Plan exists	Only low-interest	Debt-free
Savings rate	15%	< 5%	10-15%	15-25%	> 25%
Investment strategy	15%	Not investing	Investing but no plan	Diversified + tax-optimized	Full optimization
Insurance coverage	10%	Major gaps	Basic coverage	Solid coverage	Fully optimized
Tax optimization	10%	No tax planning	Using some accounts	Maxing accounts	Full strategy
Net worth growth	10%	Declining	Flat	Growing	Accelerating
Estate planning	10%	Nothing	Basic will	Will + POA + directive	Complete plan

Scoring Guide

• 90-100: Financial mastery — maintain and optimize
• 70-89: Strong foundation — optimize tax and estate
• 50-69: Building — focus on savings rate and debt
• 30-49: Getting started — emergency fund + debt payoff
• 0-29: Crisis mode — stabilize cash flow, minimum debt payments

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Common Mistakes

Mistake	Why It Hurts	Fix
No emergency fund	One crisis = debt spiral	Build $1K starter, then 3 months
Lifestyle inflation	Raises never turn into wealth	Save 50%+ of every raise
Paying minimums on high-interest debt	Interest compounds against you	Avalanche or snowball method
Not investing early	Missing compound growth	Start with $50/month today
Timing the market	Miss best days = miss most gains	Dollar-cost average, always
Whole life insurance	Expensive, bad returns	Buy term, invest the difference
No tax planning	Leaving thousands on the table	Max tax-advantaged accounts
Ignoring insurance	One event = financial ruin	Cover the catastrophic risks
Emotional spending	Budget-busting	48-hour rule for purchases > $100
Keeping up with others	Comparison drives overspending	Track YOUR net worth, ignore others

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Edge Cases

Irregular Income (Freelance / Commission)

• Budget based on lowest 3-month average from past year
• In good months, build buffer to 3 months ahead
• Separate business and personal accounts
• Set aside 25-30% for taxes immediately (estimated payments quarterly)
• Variable expenses flex, fixed expenses stay locked

Dual Income / Couples

• Decide: fully joint, fully separate, or hybrid (joint for shared + separate for personal)
• Hybrid recommended: joint account for bills/goals + personal "fun money" accounts
• Monthly money meeting — review budget, goals, upcoming expenses together
• Life insurance on BOTH incomes
• Estate planning is critical — both wills, beneficiaries aligned

High Income ($200K+)

• Max ALL tax-advantaged accounts (401k, backdoor Roth, HSA, mega backdoor if available)
• Donor-advised fund for charitable giving
• Umbrella liability insurance ($1-2M)
• Estate planning with trusts
• Consider tax diversification: pre-tax + Roth + taxable + real estate
• Beware lifestyle creep — savings rate matters more than income

Fresh Start (Post-Bankruptcy / Major Setback)

• Secured credit card to rebuild credit
• Budget with zero-based budgeting (every dollar assigned)
• Emergency fund is priority #1 (even $500 helps)
• No new debt until existing is managed
• Focus on income growth — skills, certifications, side income

International / Multi-Currency

• Track in primary currency, note exchange rates for foreign accounts
• Understand tax obligations in BOTH countries (US citizens taxed on worldwide income)
• FBAR filing if foreign accounts > $10K aggregate
• FATCA reporting for foreign financial assets
• Currency hedging for large foreign holdings

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Agent Automation

Daily

• Categorize new transactions
• Flag unusual spending (> 2x category average)
• Check account balances

Weekly

• Generate spending summary by category
• Compare actual vs budget
• Alert if any category > 90% of monthly budget

Monthly

• Generate full budget report with variances
• Update net worth tracking
• Calculate savings rate
• Debt payoff progress update
• Investment contribution tracking

Quarterly

• Net worth trend chart
• FI percentage update
• Insurance review reminder
• Rebalancing check (portfolio drift > 5%)

Annually

• Full financial health score (0-100)
• Year-over-year net worth comparison
• Tax optimization review
• Estate document review reminder
• Goal setting for next year

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File Structure

finance/
├── net-worth-YYYY-MM.yaml      # Monthly net worth snapshots
├── budget-YYYY-MM.yaml         # Monthly budgets
├── debt-tracker.yaml           # Debt inventory and payoff progress
├── investment-allocation.yaml  # Current portfolio allocation
├── fi-tracker.yaml             # Financial independence progress
├── annual-expenses.yaml        # Sinking fund calendar
├── insurance-coverage.yaml     # All policies
├── estate-checklist.yaml       # Documents and beneficiaries
└── reviews/
    ├── monthly-YYYY-MM.md      # Monthly review notes
    └── annual-YYYY.md          # Annual review

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Natural Language Commands

• "What's my net worth?" → Calculate from latest snapshot
• "How's my budget this month?" → Compare actual vs plan
• "When will I be debt-free?" → Calculate based on current payoff rate
• "Am I on track for FI?" → Show FI percentage and years remaining
• "Score my finances" → Run 0-100 scoring rubric
• "What should I do with an extra $500?" → Apply to priority order
• "Review my subscriptions" → List all recurring charges with value scores
• "Tax optimization check" → Review which accounts are maxed
• "How much house can I afford?" → Calculate based on income and debts
• "Compare my spending this month vs last" → Category-by-category comparison
• "Rebalance check" → Compare current allocation to target
• "Set a savings goal" → Create goal with timeline and monthly amount