When it comes to building wealth, it’s all about having a plan. I have found that many people are all over the map when it comes to this topic. Perhaps, they are in deep debt and they are trying to invest at the same time. This plan will not get you very far at all.
I know what it’s like to be in debt. I know what it is like to have financial struggles because of poor financial planning and the way that I was living. Unfortunately most people, especially when they make a higher income, live like they are rich and the reality is they become broke at a higher level. I call this “all flash and no cash”. In Texas it is also referred to as “Big hat and no cattle.”
Today, I’d like to talk about the first three steps which are vital for those who want to build wealth. Perhaps, you may be in a situation where your income is good but you are throwing away money. This behavior may have gotten you to a point where you have a big amount of debt. If that is you, at this point, I would like for you to forget about investing and it’s time to start cleaning up the mess. This is all about a behavior change. Starting today, it’s important that you set a goal to live like no one else so eventually you can truly live like no one else.
Let’s get serious about this and start today. Here are your first three steps.
1) Put $1000 into an emergency fund.
If you have not done this already, this is your first step and it is your most important step right now. Make a commitment to save $1000 and open up a separate account at your local bank.
It is vital that you understand this is only an EMERGENCY fund. For example: the car breaks down, something at the house needs fixing, etc., etc.
Going out to eat or needing new clothes is not an emergency.
2) Make a commitment to become debt-free.
I would like for you to get excited about having freedom. Remember this, a borrower is a slave to the lender. It’s time for you to make a plan and change the behavior.
While you are on this plan, your whole lifestyle and way of thinking needs to be overhauled. That means tightening up your belt and the only time you should see the inside of a restaurant is if you are working there on the weekends as your second job.
Besides your home mortgage, if you are currently a homeowner, list all of your debts from the biggest to the smallest. This is anything that you currently owe money on.
You are going to make minimum payments on every debt and you are making a commitment to attack your smallest debt and throw as much money as you can to get rid of that one debt. Once you have done that, you are going to repeat the process and attack the next one. Why is this plan important? It is important because it’s allowing you to see some progress. Once you start seeing the progress, it motivates you even more. This is all going to be about your discipline. Repeat this process until you have paid off your first one on the list. Once you have done this, now you and your family can have a celebration party. And you can all scream at the top of your lungs… WE ARE DEBT FREE!!!
3) Bump your emergency fund up to 3 to 6 months of living expenses.
You are now debt-free. What an amazing feeling! You have freedom. Your next step is to figure out what your expenses are for 3 to 6 months and build your emergency fund up to that level. For example if your monthly expenses are $5000, you need to build your emergency fund up to $15,000 minimum. I think it’s important to get it to six months which means $30,000. You can do this. This is your number one financial goal at this level.
You never know what happens in life. It is important that you have something in place where are you are covered financially for at least 3 to 6 months.
These beginning steps for our family completely changed our lives. If they sound familiar to you, perhaps you have heard about the steps from Dave Ramsey. There is a wonderful book out there called “The Total Money Makeover“. If you are serious about building wealth, I recommend that you get this book, read it, and apply it.
Once you have completed these first three steps, you can now start investing and giving and you can truly live like no one else because you lived like no one else.
You could do this. I’m rooting for you. I wish you great success!
Regional Sales Manager RMSNPC