10 Wise Financial Steps
Financial planning should not be difficult or confusing. Building a new future with money is a lot like building a home. You don’t add the roof until you’ve finished framing, and you don’t frame until the foundation is secure. We’re all in different places with money. Start right where you are and get where you want to be.
Step 1: Set Financial Goals
Step 2 : Develop a Cash Flow (Budget)
Step 3: Create a $1,000 Empowerment Fund
Step 4: Pay Down All Debt
Step 5: Save Months of Income
Step 6: Invest 15% of Retirement Savings
Step 7: Create College Savings Fund
Step 8: Pay Off Your House
Step 9: Build Wealth
Step 10:Give Give Give
Step 1: Set Financial Goals
The road to wealth is paved with goals. If you don’t know why you’re doing this — WHY you’re making sacrifices, why you’re working so hard — it’s too easy to fail. But if you set goals, they can help guide you even when things get tough. When you have to make decision, your goals can help you stay focused on what’s important.
Step 2 : Develop a Cash Flow ( Budget)
A budget, or spending plan, is the single most powerful, practical tool for wise money management and is the foundation for the 10 Steps to Financial Freedom. Money that comes in with each paycheck and does not have a written purpose will mysteriously vanish! Using a budget is not the goal. A budget is a means to the goal.
Step 3: Create a $1,000 Empowerment Fund
You’ll never make headway in your mission to get out of debt if you don’t have some savings — at least a little something to fall back on while you are getting started. This is usually $500 – $1000 to use in case an emergency comes up while you are beginning your steps to financial freedom.
Step 4: Pay Down All Debt
This step will make a huge difference in your everyday life. When you start knocking off the easier debts, you’ll see results and stay motivated to dump your debt. As each debt is paid off, your cash flow will increase and the bigger debts will be gone sooner than you think. Before you know it, you’re debt-free!
Step 5: Save Months of Income
Once you’ve paid off all your consumer debt it’s time to save 3 to 6 months of income. The very thought of that might seem impossible, but if you no longer have debt payments to make, you can apply the money towards your savings account. Sure, it might take a good six months to a year to fully fund your extended emergency fund, but it’s a critical step.
Step 6: Invest 15% of Retirement Savings
Saving 15% of your income for retirement may seem impossible. But remember, the whole point behind these steps is to get you to the point where you have the cash flow to achieve every next step. Investing in a Roth IRA or a pre-tax retirement account.
Step 7: Create College Savings Fund
College tuition inflation averages around 5 to 7 percent per year (much higher than standard inflation, which averages around 2 to 4 percent per year). Because college costs are going up quickly, you will want to be sure to use tax-advantaged accounts (such as 529 plans or Education Savings Accounts) to their fullest extent.
Step 8: Pay Off Your House
Your home is most likely your biggest debt. Not having a mortgage payment can be really freeing. Imagine how your monthly. Any extra money you can put toward the mortgage will result in tens of thousands of dollars of interest saved and months (or even years) of not having a payment hanging over your head.
Step 9: Build Wealth
Your debts are zero, your savings are full, your retirement is funded and your children are financially ready for school and now you live in a paid for home. Quickly your money is going to be earning more than you are. Invest all the money you made in various payments (debts, mortagage,etc.) to increase your wealth.
Step 10: Give Give Give
But wait, building wealth should not be your only goal. You now have the financial abundance and BLESS others through your resources! God has blessed you to make it to this step; your task is to cheerfully pass on these blessings. 2 Corinthians 9:7 says, “God loves a cheerful giver” so go bless others!
