Stage 2: Creating a Solid Plan to Control Spending and Create a Path Towards Creating Wealth
You’ve changed your mindset; now it’s time to change your behaviors and build the foundation of your Financial Freedom. To give you an idea of where we’re going, here’s an overview of the process.
The Basics of Getting Out of Debt & Building Wealth:
- Spend less than you make
- Cut up the credit cards
- Start a Small Emergency Fund (Fund It As Fast as Possible!) $1K to $2.5K
- Pay off all of your debts (Excluding Your Home)
- Create Your Emergency Fund
- Increase Your Income
- Focus Your Extra Income on Wealth Building (investing)
- Pay Off Your Home for Total Financial Freedom
That’s your road map to Financial Freedom. But it’s a big elephant, so we’ll take our first big bite now. These are the habits that you create to start crossing off your “steps to financial freedom”, very similar to Dave Ramsey’s 7 Baby Steps to Financial Freedom here.
Step 1 is to STOP THE SPENDING. Before you can begin to think about paying off your debts, you must stop spending yourself into an ever-deepening hole.
(Remember, if you’re in a hole, the easiest way to get out of the hole is to first stop digging.)
So here’s what we’ll do in Stage 2. We’ll:
· Determine your true income
· Determine your current net worth
· Determine exactly how you spend your money
· Decrease your spending — immediately (it’s easier than you think)
· Build a monthly spending plan (again, it’s easier than you think)
· Create a system to help you stay on track
Each step builds on the previous step, so don’t skip ahead!
Then, in later Stages, we’ll build on all the success you’ll have in this Stage. This stage can be easy — if you’re willing to confront a few of your personal financial demons. By the end you’ll realize it was fun — and definitely worth it, both financially and emotionally. So off we go!