To Inform:

“Money is a tool. Used properly it makes something beautiful; used wrong, it makes a mess!” — Bradley Vinson

Making financial decisions can feel like a headache and it’s hard to know how to prioritize. Should I pay off my car loan or keep excess cash for an emergency? When do I start a college savings plan? Should I make extra mortgage payments?

The good news is that many financial institutions have created their versions of a financial checklist to help sort out the timeline for these decisions. You may have heard of Dave Ramsey’s “7 Baby Steps” or the “Financial Order of Operations” from Money Guy.

Whether you are trying to make decisions regarding your financial path or want to pass along a cheat sheet to family or friends, below are 8 tips we’d like to share that might help with prioritization.

Save one month’s living expenses in a checking account. To get started, you need to have some cash ready for the small things in life that can go wrong. A one-month emergency fund is not the end goal, but a springboard!

Pay off all credit card and high interest debt. The average credit card APR is 20%; any running credit card balance (or other high interest debt) is working against you and making it impossible to build wealth. As Albert Einstein once said, “Those who do not understand compound interest pay it; those who do, make it.”

Save an emergency fund of 3 to 6 months of expenses. Now that the bad debt slowing us down is gone, it is time to build up an emergency fund. The emergency fund will be the shield that keeps us from going back into high interest debt in the future!

The next suggestions can and do happen in unison and require balance.

Save for major purchases. Unfortunately, some of the best things in life are not free. Saving for a house (down payment), car, or other big purchases is the next step. Again, the goal is that we do not backtrack on the steps; meaning we don’t go back into high interest debt and ideally, we do not dip into the emergency fund for large purchases.

Accumulate to meet long-term goals, such as retirement. It’s time to make sure we are investing for the future. The main long-term goal that comes into mind is retirement, but that isn’t the only goal that belongs to this step. Maybe business ownership is a dream of yours or that fancy beach house for family vacations!

College or other education funding. Do you have or plan to have children? Would you like to help them pay for their education? College education continues to become more expensive each year, making it more and more important to be intentional when it comes to saving for education.

Consider paying off your mortgage. Owning a home without owing the bank is a dream for many, and if you stay in the same home long enough, eventually you will pay it off. Sometimes, depending on mortgage rates, your overall financial plan, and the feelings you may have towards debt, it may make sense to pay off your mortgage earlier.

Build wealth and legacy. Now that you’ve reached this point, building wealth turns into building legacy. Our great lives are not just about having more money; what do you want to be remembered by or pass on once you are gone?

Where are you in the financial planning process? What is your next step? We would love to talk about your financial plan and help you find a balance that makes sense for your great life, whatever your next step!

Written by Ryan Kuhn, Wealth Advisory Associate