Friday Finance Series (Steps 4-7)

Hey guys! I’m back with the final post in this series. I decided to just combine the last 4 steps into one post for now. My reasoning, I’m not there yet! I can explain them but I certainly am not expert enough to type out a full post for each of them!

Step 4 is all about retirement and when you reach this point you should be investing 15% of your income into a retirement fund of some sort. Now it’s very possible that you are already investing and if so great! Now others would say stop all investing until you pay off that debt. I understand that philosophy but I don’t share it. As someone who is over 40 and does not have nearly enough money in my retirement funds, I fully believe that even if you are only putting in 1% it is better than 0%! So that being said, step 4 is the point where you should be upping that percentage to at least 15% because after all, if you are at this step you have NO debt!

Step 5 is all about college for those of you who have little ones. Again this may be something you are already doing but if not now is the time. Obviously this is in a perfect world where you’ve paid off the debt at an age when you either don’t have children yet or they are very small and so you have many years to save. Well we all know this world ain’t perfect! For example both of my children are adults so I will be slipping this step all together! As with all of my other advice I want you to follow these steps but I believe in tweaking them to your situation. So for this step, if your children aren’t college age yet, then start saving! Even if they are in high school every little bit you can put back will help.

Step 6 is mortgage, finally right?! If you remember from step 2, when we talk about paying off all of your debt we don’t include the mortgage. For most that will be the biggest debt you have so in order to not mess up your momentum we just leave that out. But man, once you’ve paid off your debt, built up a good emergency fund, starting investing in retirement and saving for your kids college; well now we can tackle that mortgage!

Here is what is great about steps 4-6, they can and should be done at the same time. You’ve knocked out your debt (except that mortgage), you’ve built up a good emergency fund, and now you have a good chunk of extra money each month. We don’t want to lose steam here. Increase that retirement percentage and then see where you are at with your budget. Set a goal amount for your child’s college savings based on their age and years left until college.  It’s important here to be realistic, if you only have a year to save, well you may not be able to save enough and that’s fine! Like I said something is better than nothing. So set a goal and just start saving. Now take whatever amount you have left as extra money and start throwing it at that mortgage, you are going to tackle this step just like 1-3, anything you can put towards it, do!

Finally step 7, build your wealth while giving! If you have made it this step then you are a champion already! This step means you are saving for retirement, you have a great emergency fund in place, you’ve contributed to your children’s college AND best of all you have absolutely ZERO DEBT! Way to go! Now what should you do with all that money you are making each month, it’s really quite simple. You obviously want to continue building your wealth, nobody ever said the savings had to stop at 6 months worth of expenses, keep going! Also, now you are in a position to give, to what doesn’t matter. This is all about your cares and interests, give to whatever and whoever you choose and do it with joy, you have earned it!

I hope you guys have enjoyed this series I hope to add to it in the future as my personal experiences with each step change and grow. All of the posts will remain in my archives so you can go back and review the steps and what they are all about whenever you want to. As always you can also reach out to me with any and all questions whenever you need to. Have a great weekend guys!

~Carla~