The plan has eight steps. It is a plan of attack, a plan of action, a plan that will lead you to financial freedom! If you take these steps to financial freedom, you will achieve financial freedom. The key is to do the steps and become committed to doing them. Also, if you are married both of you must become committed to doing the steps.
- The first step is to begin saving. You need to have savings in order to cover any emergency that occurs. Start small by aiming to get $1,000 as quickly as you can. Open a separate savings account and make a habit of transferring a portion of your income into it. This will not only give you the financial cushion you’ll need to weather small emergencies but will also help you develop the habit of saving. Also, start to save for retirement. If your employer matches, save up to the match. Otherwise, open a ROTH IRA and begin saving for retirement.
- Step two is to create a budget. A budget will help you understand where your money is going and make sure that you are in control of your finances. To do this, track your spending and categorize it by fixed and variable expenses. automate your finances. Automating your savings, bills, and investments will help you stay on track and prevent missed payments or penalties.
- Payoff your consumer debt, credit cards, loans, etc. Avoid racking up high-interest credit card debt and pay off any outstanding debts as soon as possible.
- Invest in stock market. Stock market investments can compound over time, leading to significant returns in the long run. Remember to use dollar cost averaging, so you can take advantage of the ebbs and flows of the market. Increase your savings, so that eventually you’ll have eight to twelve months of living expenses in an emergency fund.
- Save for major purchases, such as autos, 20% down payment for a home, etc.
- Payoff your mortgage. or pay cash for an affordable home or begin prepaying your home.
- Fully fund your retirement. Make sure you’re contributing the maximum amount into your 401k or IRA account.
- Save for your children’s college education.