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When one does not define goals for their finances, it’s very hard to make any traction. Here are five steps you can and should take take to find financial freedom.

Step One: Standing Up. Before we can walk, we first need to stand up. In the financial world, this means that before we can begin the plan, we have to be doing some smart things with money, otherwise the plan won’t work. In order to “stand up” financially, you will need to do some things to prepare your self to do well with money. You will need to do a written budget every month and follow it. If you have any out of control expenses such as an automobile you cannot afford, you will have to get rid of them because they will prevent you from succeeding financially. If you are behind on any debts, you will need to make them current first. If you are not making any money, you will need to find a source of income. If you are a Christian like I am, you should be tithing. By taking these actions you are preparing your self to have some very positive forward momentum when it comes to money.

Step Two: Saving for Emergencies. If there’s one thing that is certain in life, not everything will go according to plan. Unforeseen medical expenses, automobile accidents, and the like will happen. You should start out by saving about 4 months worth of living expenses, so that if something were to happen, you would not have to borrow money and have some wiggle room to get your self back up again.

Step Three: Pay off all debt except your home. Best selling author and Financial Counselor, Dave Ramsey, teaches his listeners that they should pay off their debt smallest to largest. He suggests that you pay minimum payments on all of your debts, attack the smallest one first, and then move up the list. Even though his advice is mathematically incorrect, personal finance is also very much about behavior modification. Paying off small debt first will give you some easy wins and some momentum to move forward.

Step Four: Start Investing. Once you are debt free with the exception of your house, it is a good time to start investing for retirement and your children’s college fund. You should save about 15% of your income into tax advantageous accounts such as a 401k or an IRA for retirement, and be saving enough so that your children can afford to go to a reasonable state school.

Step Five: Pay Off Your Home and Build Wealth! Once you are investing 15% of your income for retirement and saving money for your kids college, you should use your extra money to attack your mortgage, and pay it off. When you finally pay off your home, have money saved for emergencies, are done with debt, and are saving for the future, you have gotten ahead of 99% of the rest of the world financially. Now all you have left to do is build wealth and give a whole bunch of it to charity.



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