Today I will talk about the Nine Steps To Financial Success. This plan help you get from where you are, to where you need to be financially.

Here are the steps:

You should at least have a game plan to conquer each step before you move on to the next. Let us begin.

I. Vision

I’m sure that you have heard “where there is no vision, the people will parish”. In order to reach a goal, you have to KNOW WHAT THE DESTINATION IS! So before you begin, ask yourself these two questions.

1. What do you plan to do when you finish working? Do you plan to travel the world, buy a dream home, move to a special place, or… do you plan on just getting by at retirement? Also, how much do you plan on leaving your children? At this point, you can figure out how much money you need to have, to do what you want to do.

2. When do you want to retire? Do you want to retire in 10 years, 20 years, age 65, tomorrow, or never? You have to know this. Now, you can figure out how much time you have to accumulate the amount of money that you need.

II. Wealth Plan

This is the bloodline of YOUR LIFE! You can get into as many self improvement resources as you like, and you can read as many personal finance articles as you like, but if you don’t have a spending plan, you have NOTHING.

You need a spending plan that is written down in advance (not something just out in space). Write down how much money you take home every month and then decide what you want to spend on everything. Once you write down everything, you will then know how much money you will have left over each month.

III. Proper Asset Protection(Life Insurance)

Now that you know how much money you have per month, it is time to start taking that money and working toward your destination. The first thing you want to do to bulletproof yourself is to get the proper life insurance. There is a reason that this is so high on the list. Your most valuable financial asset in life is your ability to make money. This is very important IF you have someone who depends on your income.

There are basically two types of insurance. One is whole life (or cash value) insurance, and the other is term insurance (basic insurance that last for a period of time). Consumer reports have, and still do, recommend term insurance as the most economic choice of insurance.

How much do you need? Generally, I would recommend 8-10 times your yearly income as a good face amount for your insurance. WOW! Why so high? Well, here is the reason. Let’s say that you make $40,000 per year. If you were to pass away, you could take $400,000 (10 times $40,000) and put it into a fund that pays 10 percent (which will give you $40,000 per year) and not touch the principle. So what you have done is replaced your income.

That is the purpose of insurance. Now once you accumulate the $400,000 yourself, then YOU NO LONGER NEED the insurance policy. You see, insurance is not to be had your ENTIRE LIFE. It is only needed until you can accumulate the money you need to replace your income. It is much better to be underinsured than it is to have no insurance, so purchase what you can afford.

IV. Emergency Fund

Here is where things get kind of tricky. Most people get #IV and #V confused. The first thing that most people do when they get extra money, is to pay extra on their debt. There is a problem with that. You keep paying money down on your debt, and just when you THINK that you are about to pay it off, an emergency comes up. Now you have to go right back into debt. An emergency fund will allow you to get out of debt and STAY out of debt. A complete emergency fund is three to six months of your monthly expenses set aside in a savings or money market account. A good amount to start off with is $1000 dollars.

V. Get Rid of Debt

The best three ways to get rid of debt are to accelerate, consolidate and negotiate.

Acceleration is in reference to Debt Snowballing or Debt Avalanching. Debt Snowballing is when someone has many different debts and they pay them off from the smallest to the largest OR you can pay them off from the highest interest rate to the lowest (which is a debt avalanche). By the numbers, doing a debt avalanche will get you out of debt faster than a debt snowball.

The next technique is Consolidation. We’ve ALL heard about this. If you reach a point were you are up to your head in debt, sometimes the best solution is to consolidate by doing a refinance or a consolidation loan. The problem is that without discipline, you will be right back in the same situation again.

One of the more interesting techniques is to Negotiate your debt with your creditors. A lot of people pay lawyers tons of cash to do this, but those companies can’t do anything that YOU can’t do! You can negotiate your debt by yourself.

VI. Retirement Planning

Once you get your debt under control, you can then start focusing on retirement. Now here is another important point. A lot of people get retirement and college education planning (money for your child’s schooling) mixed up. If you are not on track to retire comfortably then you have no business putting ANYTHING away for your children. There is a reason for this. If you have a child and he or she reaches age 18 and have no money, there are options (student loans, scholarships, grants, part time work… etc.)! If you get to retirement and you have no money, you just can’t retire!

VII. Children’s College Planning

After your retirement plan is set up, it is now time to move to children’s college planning. This is basically another extension to your retirement planning. You can do straight investments, or tax free savings accounts (like 529’s or different education funds etc…).

VIII. Advanced Retirement Planning

This is the point where everyone wants to be. This is the place where you have “throw away” money. Once you get to this point you can get into many different types of investing, like stocks, which are more dangerous than mutual funds, and variable annuities, which are very secure but have higher fees than mutual funds.

IX. Mortgage & Student Loan Acceleration

Once you get done with all of this, you might then make the decision to pay off your house or student loans early. Now at this point, one may be trying to figure out why this is not #V above. Isn’t Mortgage Acceleration a debt? In most cases, you can maximize your money by paying the minimum on these debts and investing the rest.

I hope this has been helpful.

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