What Phase Are You On? 7 Phases Of Building Wealth

Your processes of money management are imperative to successful wealth building.

Create Your Mission Statement by Internalizing What You Want

Write down your goals, and internalize daily how you’ll get there.

Create a mission statement to help keep you on track. Come back to this often to be sure your behavior stays aligned with your mission.

For example, a mission statement might look like this: “Our family's goal is to be debt-free by 2021 to provide maximum opportunity for our children's future.”

“Whenever you want to achieve something, keep your eyes open, concentrate and make sure you know exactly what it is you want. No one can hit their target with their eyes closed.” ―Paulo Coelho

Adjust Your Environment Accordingly

Once your goals are set, you now must create an environment around you where your financial habits are forced to line up with your future vision.

This heavily involves the type of people you spend your time with. It will be difficult to change if the people directly affecting you are not on-board or at least willing to understand and be mindful of your goals.

It is painful to burn off those bad people and habits (and when I say bad, I don’t mean they are evil, but rather, they do not align with you or care enough for your goals).

Shedding these things is freeing and necessary for your growth.

Dave Ramsey's 7 Steps

Before reading the 7 steps there are a few important things to note.

1. These steps are used because they are an easy and logical way for anyone to get financially secure.

2. This is a great way to start your money management, but keep in mind none of this advice is specialized to your specific scenario and I am not providing any recommendations.

3. Once you've achieved steps 1-3 it may be time to invite a trusted financial professional in to help. Dave agrees and on his website it says to, “Find Your Investing Pro” when clicking under the step.

4. I have added more detail to each step where necessary.

First: As stated above, create goals to internalize why going through these steps are imperative to your success.

Step 1: $1,000 in an emergency fund - You can start by creating a savings account and having auto withdraws into the savings account on your payday.

The main goal in step one is to create a small amount of liquidity to ensure you don't move backward while working on step 2.

Step 2: Pay off all debt except home - Easier said than done! Dave talks about creating a mindset around the debt snowball. This is effectively paying off the smallest balances first to give yourself boosts of confidence that things are moving forward. If this works for you then great!

On the other hand, if you are analytic and patient then you understand the highest interest-bearing debts are hurting the most, and those should be targeted first.

This is also referred to as the debt avalanche. This method is will pay off your debt quicker if you stay diligent.

Debt Reduction Best Practices are a key part of our planning with clients. See Financial Planning for Young Professionals under the “About” tab.

Step 3: Save 3-6 months of living expenses for a fully-funded emergency fund - As stated in step one, liquidity is imperative to success because emergencies happen. You don’t want to kill your momentum or worst go back every time an emergency arises.

• You can choose to include discretionary income in your emergency fund calculation. This is income remaining after deduction of taxes, other mandatory charges, and expenditure on necessary items) or

• Or include only your fixed bills. FWI Hulu, Disney+, and your CrossFit membership are not fixed expenses. I’ve had a few clients try and get away with this!

Typically 3 months of expenses saved is acceptable for 2 income streams (both household members work) vs. 6 months for a single income stream.

**If you’re a risk-averse person then having savings for discretionary expenses as well as fixed expenses that cover 6 months may be your most comfortable spot.

Step 4: Invest 15% of household income into retirement - I don’t 100% agree with this rule. The percentage to invest and which investment account to use (retirement or non-retirement) is heavily dependent on your individual goals. Like I stated above, this may be the time to find a trusted financial professional to work with.

A financial professional may ask many questions to determine how to invest your money and what percentage of your income needs to be used.

Some of these questions may include:

• What retirement vehicle should you fund and how much?

• What's your age and when would you like to be financially independent of your employer?

• What percentage of your income do you want in retirement?

• What’s your expected rate of return?

• How much income do you want to be guaranteed?

• How much income do you want tax-free, what about taxable?

• What if you are disabled or have premature death?

• What is your SS or pension benefits?

• Are you wanting to leave money to your heirs? How much?

• What are your projected health care costs? The list goes on...

The point I'm trying to make here is that financial professionals have a job for a reason.

When working with a fiduciary they have an obligation to guide you down the best path and keep your interest primary.

After all, the information is gathered and calculations are complete, you will be provided with more accurate information about what percentage to invest. As well as an explanation of how and where to invest each to align with your goals.

Step 5: Save for your children's college fund - College may not be a concern of yours, but in any case, you'll want to have a plan for saving for pre-retirement goals.

Keep in mind retirement vehicles have age restrictions of 59.5 years old. If you are planning to make purchases before 59.5 (or wish to retire before then) it's imperative you review pre-retirement investing options with your advisor.

Step 6: Pay off Home - This may or may not be the right decision. Interest rates are at an all-time low, and the market has been performing for a very long bull run (knock on wood).

Once again if you are the analytical and patient type you’ll want to compare stock/bond returns with the costs of your mortgage.

Step 7: Build and Give Wealth - I couldn't agree more! The reason we are all here is to make connections with fellow human beings and help everyone move forward together.

The more you build the more ability you'll have to make an impact on future generations!

Keep in mind, as wealth is built it is important to protect it. Massive amounts of wealth are lost each year by inefficient estate and tax planning. Don't work so hard to your build wealth, but lose it so easily to the state and IRS upon your passing.

Have Your Planning Specialized For You

In whatever you do, having a specialized plan to attain the specific goals you have for your life is the most important!

If you need assistance in your planning or have any questions don’t hesitate to reach out! schedule a complimentary introduction review here:

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The views depicted in this material are for information purposes only and are not necessarily those of Cetera Investment Services LLC. They should not be considered specific advice or recommendations for any individual. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.

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