When making a plan for anything in life, choosing a career, getting married, buying a car, we must spend hours going over lists as we determine priority and timing. We must have clarity as we develop our essential plan. In his famous book, Essentialism, Ewen McKeown suggests that while sorting out priorities, we must decide what not to do while we are working on what we must do, and that “When we really have clarity of purpose, it leads to success”. (Ewen has the third-highest following on LinkedIn so he knows something about priorities)
A good financial strategy is multi-faceted. That is why it needs to be developed and governed by a credentialed financial advisor. In his latest best-seller, “The Total Money Makeover”, Dave Ramsey notes: “Build wealth. Invest and enjoy counsel from advisers with a proven track record. ‘Even the Lone Ranger had Tonto'”.
Here are some priorities to achieve financial security – priorities that one must organize well:
- Have emergency funds on hand Save at least $1,000 cash and aim to build this up to $5,000. This can come in handy for any emergency that comes as a surprise.
- Eliminate all your bad debts List your credit cards, smallest to the largest balances–then pay off these debts, from the smallest to the largest, regardless of interest or amounts, one at a time. Make minimum payments on the rest. This will encourage you as you see each card is paid off.
- Save for a home downpayment Save for a down payment or cash purchase of a home. If you have a home, aim to pay down the mortgage, especially now when interest rates are low.
- Pay yourself first Invest 15-20 percent of your before-tax income in retirement. Ramsey from his book The Total Money Makeover, notes “Only people who like dog food don’t save for retirement”.
- Save for your children’s college education. Your child can’t get much of a job these days without an education though it is not necessary if he or she creates a great business. However, not everyone is Bill Gates or Steve Jobs.