Too many of us are just getting by.
Many of us are stuck in credit card debt (The average American has $6,000).
Almost two-thirds of us are living paycheck-to-paycheck.
When you’re in a tough financial situation, you can feel like there’s no way out. I know, I’ve been there. For most of my 20s, I neglected my finances. I didn’t keep a budget, never paid attention to my cash flow, and waited till the last minute to pay my bills. Believe it or not, this wasn’t a recipe for financial prospering.
Fortunately, I got my act together and came out the other side. Today, I’m financially successful by most every metric. Between my personal experiences, and my experience helping others become financially successful over my 20+ years as a financial advisor, I’m confident I can help you start financially prospering as well.
My goal is to provide you with an easy to understand and implement 7 step guide. Should you follow these steps, I can’t see how you won’t find financial success.
Here’s what we’ll cover:
- Plant the seed of your emergency fund
- Know your facts
- Pay yourself first
- Build your emergency fund
- Eliminate credit card debt
- Complete your emergency fund
- Saving and investing
- Becoming CEO
Let’s get started.
Plant the seed of your emergency fund
I want everyone to meet and exceed all their financial goals and objectives. If you want to get rich, that’s what I want for you. If you just want to stop stressing about money, I can help.
And I know the only way you’ll ever be able to begin pursuing your most important goals is to first have financial security. You find that by having the appropriate emergency fund.
The first step in having a fully-funded emergency fund is to get $1,000 saved. Almost half of Americans have less than $500 in savings- that’s a big problem. $1,000 is enough to cover the cost of most minor emergencies like car trouble.
Your emergency fund should be in a checking, savings, or money market account that’s separate from your everyday checking account. If you’re living paycheck-to-paycheck, it won’t be easy to get this saved, but we’ll talk about how to make it happen in the next section.
Know your facts
When talking about your financial “facts,” we’re talking about your cash flow, budget, and goals.
Cash flow
We all follow predictable patterns and have habits for doing things. Some of these are positive and benefit us, others do not. When we find ourselves stuck in a negative cycle, we’ve got to figure out how to disrupt it so we can get out.
Successfully managing our cash flow is simple, but it’s not easy. It requires paying attention to the money we have coming in, and the money that’s going out. At least once a month, check all of your financial accounts. If you haven’t been doing this, look closely for transactions you forgot about, or that you no longer value. I bet you’ll find expenses you can easily cut out. It’s these cuts that will help free up money to build your $1,000 emergency fund.
Budget
A budget is simply a plan for your money. When you keep a budget, you know if you’re spending too much, or too little. It helps you know if you’re on track to meet your goals and objectives.
When I was getting started budgeting, I felt like it was restrictive. Don’t be surprised if you feel the same way. As I did it consistently, it began to recognize the power and importance of it.
A budget helps you know if you afford to do things. It will tell you if you can afford to go on vacation, or if you can buy Bitcoin. It becomes a practical tool to help you on your journey to financial prospering.
Goals
I’m sure you intellectually know the importance of setting goals. I know I did. And I also know I didn’t do it for years. It took until I was 35 to finally get serious and write down my personal goals. And like everyone else who does it, I’ve greatly benefited from doing it.
To help you get clear on your goals, you can access our Goals course for free.
Pay yourself first
The golden rule of personal finance is, “Pay yourself first.” It’s rule #1 because if you do the opposite (pay everyone else first), you get to the end of the month and there’s never any money left for you. This has to change.
Paying yourself first means putting yourself and your family first, which is where you belong. You do this several ways:
- You can enroll in your company’s 401(k) and begin making contributions
- You can open an IRA and set up automatic contributions at the beginning of the month
- You can set up automatic transfers to savings accounts at your bank
- You can open a taxable brokerage account and set up automatic contributions
One of the keys is the “automatic” part. If you have to do it manually, you reduce your odds of success.
How much should you start with? Start with 1% of your compensation. It’s not a lot, but it will help you get in the habit.
Build your emergency fund
$1,000 is a good start. Getting one month’s worth of expenses saved is the next step. When you start paying attention to your cash flow and budget, you’ll know how much you need to get saved. Do nothing else until you get one month saved up.
Eliminate credit card debt
I hate credit card debt.
When I was in my 20s, there were times when it felt like I’d never get out from underneath it. I struggled to make minimum monthly payments, and the balances kept growing and growing. It was terrible.
From my perspective, the silver rule of personal finance is “Get out of debt.” Eventually, I’d love for you to be completely debt-free, but the starting point is credit card debt. Your first step is to set your intention. Get a piece of paper (or create a document) and write at the top, “I will be debt-free.” From there, get an accurate accounting of all of your credit card debts. Write down the balances, interest rates, minimum monthly payments, and companies.
From there, go back to your budget and cash flow and look for additional ways to cut or reduce expenses. I’m not saying it will be easy to get out of debt, but it will most certainly be worth it.
To help you do this, you can access our Get Out of Debt course for free.
Complete your emergency fund
Once you’ve paid off your credit card debt, it’s time to complete your emergency fund. A fully-funded emergency fund is six month’s worth of expenses.
Like paying off your credit card debt, saving up this much money won’t be easy. Earlier, I mentioned you need to find security before you can pursue prosperity. Having a fully-funded emergency fund gives you that security and peace of mind.
While there are no guarantees in life, having this cushion will position you for success regardless of what life throws at you.
Saving and investing
You’ve got your financial foundation set, and you’ll feel incredible. After completing the previous five steps, you’re ready to start aggressively pursuing your saving and investing goals.
After completing the Goals course, you’ll have clarity around what your top financial priorities are. You’ll know what you need to be doing on a monthly basis in order to bring them to life.
To help you put concrete numbers behind your goals, our Certified Partner OnTrajectory offers a free trial. Their software will help you plan for the future you want.
Becoming CEO
The last step on your path to financial prospering is to become the CEO of your financial life. Hopefully, you’ve got people in your life who want to see you do well. Even if that’s the case, there will never be anyone (nor should there be) who is more interested in your financial success than you are.
Becoming CEO means you take an active interest in every aspect of your financial affairs. This doesn’t mean you need to do everything, just that you be involved. For example, you may never prepare and file your own taxes, but you need to be in communication with your accountant and have an understanding of what’s happening. This can be true for many aspects of your financial life.
Once you take complete ownership of your success (and failures), you’ll be well on your way to prospering and prosperity.
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
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