Today we are going to continue listing the 30 steps anyone can take to have great finances.
If you are new to this series, please read through the steps we've already covered, starting with 30 Steps to Great Finances: Steps 1 through 3 before reading this post.
Today we'll be talking about saving, debt reduction, and giving. Interesting combination, huh? :)
Let's get started.
Step 19: Begin Saving for Larger Events and Purchases
Once your surplus increases and your debt is paid down, keep working to increase your income and decrease (or at least hold steady) your expenses. By doing this you will be churning out more and more positive cash flow every month -- even after you save for retirement. This is the perfect time to start saving money for life's bigger purchases: a home, cars, and even college for your kids.
Of course you may or may not want any of these (some prefer to rent, many city dwellers don't need cars, and some parents leave college expenses in their kids' hands.) That is up to you. However, if you do want to save for any, here's some advice on them from me:
If you don't already have a home, start saving so you can make the largest possible downpayment. 20% is a minimum IMO. I'd prefer to see you begin with 30% or more down.
At this point you should NOT be buying a car with a loan. From here on out, it's cash only for vehicles, whether they are used or new.
As for college, the same principles that work for retirement saving work for college saving -- save early and often, and you will have enough when the time comes.
Step 20: Pay Off Your Mortgage
Can you imagine a life with no debt? No credit card payments, no car payments, no mortgage payments? What would you do with all of that extra money that is currently servicing your debt?
If you've made it this far in the process, you're now ready to go where few have gone before and become COMPLETELY debt free. Yes, this means paying off your mortgage.
There is no magic to paying off your mortgage. Simply grow your gap and put much of the difference on your mortgage. (That's how we did it -- and we've been mortgage free for almost 15 years now.) When it is paid off, your surplus will be even larger, and you can move on to our next step.
Step 21: Give to Charity
Personally, I put this into practice well before step #21 in my own life. But for those who do not want to give from the get-go, at this point there's no reason not to. You are covering all your money bases and are doing quite well financially. Now is time to think about others -- those who are less fortunate than you and need some help.
Pick a charity (or a few) to give to. Volunteer to help out as well if you can. It won't be too long before you'll find out that even though you're giving money, you are wealthier because of your giving. Yes, when you bless others, you are the one who REALLY gets blessed.
When you are working on growing your finances, there is a time when you finally reach solid financial footing. If you've taken my advice through step 21, you will be there. In the next steps we will talk about how to protect the financial security that you have worked so hard to achieve.
Update: Click here to read steps 22 to 24.