1. $1,000 in an Emergency Fund ~ (as fast as you can) Money magazine says that 78 percent of us will have a major negative event in
a given 10-year period of time. Life happens, so be ready. Stop everything and focus. Twist and wring out the budget, work extra hours,
sell something, or have a garage sale, but quickly get your $1,000.
2. Pay Off All Debt (except the house) Utilizing the
“Debt Snowball” ~ List all your debts (except the house) in order of smallest payoff balance to largest. Then pay the minimum payment
to stay current on all the debts except the smallest. Every dollar you can find from anywhere in your budget goes toward the smallest
debt until it is paid. Once the smallest is paid, the payment from that debt is added to the next smallest debt. When debt number
two is paid off, you attack three, and so on.
3. 3 to 6 Months Expenses in Savings for Emergencies ~ A fully funded emergency fund
covers three to six months of expenses. When the big stuff happens, like the job layoff or the blown car engine, you can't depend
on credit cards. If you use debt to cover emergencies, you have backtracked. A strong foundation in your financial house includes
the big savings account, which will be used just for emergencies.
4. Fully Fund 15% Into Pre-Tax Retirement Plans and ROTH IRA, If
Eligible ~ The rule is simple: Invest 15 percent of before-tax gross income annually toward retirement. Make the most of your 401K
at work especially if your company matches. Invest in a diverse portfolio of mutual funds with a good track record. And put the rest
of the 15 percent into a Roth IRA.
5. College Funding ~ When you save for your child's college tuition, you must make at least
seven percent per year on your investment to keep up with inflation increases. I suggest funding college with an Educational Savings
Account funded in a growth stock mutual fund. The ESA grows tax free when used for higher education.
6. Pay Off Home Early ~ Put all
of the intensity and financial power you put toward your debt snowball to pay your house off as quickly as possible. Imagine how good
the grass will feel under your feet when it's paid for. Without a house payment you have control of your greatest wealth-building
tool—your income.
7. Build Wealth! (Mutual Funds/Real Estate) ~ Here's the payoff. After all your hard work you have finally gained control of your most powerful wealth-building tool and it is yours to do with as you will. You have all this financial muscle, so now you should do something intentional with it. Have fun, invest and give.
