In this video, we'll walk you through the 10-step process that each of us uses to
build wealth. So let's start with step number one, which is to get organized.
We both firmly believe that you can't make good financial decisions without good data.
That's why the first step is to create an income statement and net worth statement for yourself
there are lots of ways that you could do this today you could use Microsoft Excel,
Google Sheets or automated services like mint.com or personal Capital. It doesn't
matter which way you choose what matters is that you get accurate data moving on to step two which
is to get proper insurance coverage now there's a lot of different types of insurance out there,
but a few that we think are absolutely essential, are health insurance home slash renters insurance
and auto insurance if you have dependents like children or anyone else counting on you for
Income Life Insurance is a must, and we also believe that you should consider things like
umbrella identity theft and disability insurance why are we so heavily focus on insurance right
now? That's because insurance is a wonderful way to cap your downside exposure financially speaking
while it may seem silly to worry about something terrible happening to you it's important to know
that over a long enough time frame and we hope that you live for a very long time you're almost
guaranteed to have something happen that will require you to have insurance now just because
we want you to have insurance doesn't mean that we want you to overpay for it thankfully there
are tools available today that make shopping for insurance very easy one such tool is policygenius
but there's a number of wonderful tools out there that make it easy for you to save money
on insurance. Step number three is to align your spending with your own personal values this is why
step one which is to get organized is so important once we have useful data we can look back at our
spending to see how our money is being allocated then we can ask ourselves a very important
question is the way that I'm spending my money bringing fulfillment to my life if the answer
is yes that's good if the answer is no in any way that gives you room to cut cut and notice that we
said a line spending not just cut spending because we believe it's worth spending money on the things
that do bring us joy now it's time to get into the meat of it which is step four to create a
starter emergency fund so what does a starter emergency fund mean that means that you should
have enough cash set aside to pay all of your expenses for one month with absolutely no income
by setting aside one month of expenses in cash you are creating some Financial wiggle room in
your life so you can handle a small emergency that comes your way next let's move to step five which
is paying off high interest debt now what is high interest debt mean for us that means any interest
where you're paying over seven percent that's not your mortgage now both Brian and I are huge
fans of investing so it might surprise you that we're suggesting you pay off your high interest
debt first but we think that's the right thing to do there's a reason Albert Einstein famously said
that the compounding was one of the most powerful force sources in the world but with high interest
debt compounding works against you you have to take care of that before you start investing and
making it work for you so what's the best way to pay off your debt well there's two popular schools
of thought the first is called the snowball method the idea here is you start by paying off your
smallest balance debt first eliminate it and then move on to your next smallest debt compounding
your way up until all your debt is paid off an alternative approach is the Avalanche method
here you focus on the balance as the highest interest rate you pay that off first and then
work your way down to the balance with the lowest interest rate now there are pros and cons to each
method and we don't have a strong preference with which way you should go but we do think that you
should make paying off debt a priority step six is to take full advantage of your employer match
this is as close to free money as you will find in the world today a lot of employers in the United
States incentivize their workers to save for retirement by offering to match match a portion
of their funds that they invest into their 401k or 403b this is an akin to your employer giving you
free money to pay for your retirement and we think you should take full advantage of it step number
seven has us returning to the emergency fund only this time we're building out a full emergency fund
how much does that mean for you well most pundits will say you need three to six months expenses but
we've devised a different way of looking at it everyone's life situation is differently some
people can get by with a small emergency fine if they have no dependents they could easily get a
new job and they have multiple sources of income on the other hand if you have a single source of
income you have many dependents your industry is troubled or dying and you only have one source of
income we think you should have at least a six month emergency fund if not long step number
eight focuses on one of the most underappreciated accounts in America and that is the health savings
account or HSA please note this is not the same as a flex spending account (FSA) HSAs are the only
triple tax-free account that exists in America here's how it works when you put money into an
HSA you get an immediate tax deduction as your money grows because it's invested you pay no taxes
on capital gains and when you take the money out as long as you use it to pay for qualified Metro
expenses there's no taxes on distribution at all not everyone will qualify for an HSA to do so you
need to have a high deductible Health Plan not be claimed as a dependent by anyone else or eligible
for Medicaid or Medicare that said if you pass these hurdles considering an HSA is a no-brainer
it's time to contribute to an IRA either a Roth IRA or a traditional IRA without getting too much
into the weeds each one of these accounts has tax benefits now in 2023 you can contribute sixty five
hundred dollars to a combination of traditional and Roth IRAs a little bit more if you're close
to retirement age in a Roth IRA you pay taxes on the money you put in it grows tax-free and
once you hit 59 and a half you can pull money out and never pay taxes on it again by contrast when
you contribute to a traditional IRA you score an immediate tax benefit and the money grows
tax-free however you will have to pay taxes on any distributions later in life we don't think there's
one right way to go about it but we will say that contributing to a Roth makes a lot of sense
earlier in your career because your tax rates are usually lower on the flip side traditional IRAs
tend to be smart choices for people that are in a high tax bracket now and expect to be in a lower
tax bracket in the future all right let's move on to step number nine which is putting money
away for your children's education now you should skip this step if you don't have any
dependence in your life but if you do and you plan on sending them to college down the road
it's time to start prepaying for those expenses now in general there are three different types of
accounts that are worth researching they are ugma accounts 529 plans and Coverdale education savings
accounts they all have different requirements different pros and different cons in their
worth investigating okay now it's time for the last step which is Step 10 and we break this
up into three major parts step 10A is to go back and eliminate any low interest debt that you have
including paying off your house now on paper this might not make a whole lot of sense because your
house might have a much lower interest rate than the rate of return in the stock market but there
are other more important emotional benefits to consider one of the biggest Pros in the favor
of paying off your mortgage early is that you can truly become debt free and this also permanently
eliminates one of your largest fixed expenses that you have let's say that step 10A isn't for
you or you already completed it then you can move on to step 10B which is investing in a taxable
investment account where you can do the picking of your own stocks or you could go with step
10c which is to go back and max out your 401K why don't we talk about maxing out your 401K earlier
well some people have high fees and terrible investment choices in their 401 1K so maxing it
out earlier isn't necessarily a no-brainer maxing out your 401K will also tie up money and not allow
you to pull it out until you reach a certain age without penalty and the same cannot be said for a
non-taxed Advantage regular old brokerage account so there you have it those are the 10 steps that
both Brian and I have followed to build wealth in our own lives now knowing what to do is one thing
but actually doing it is quite another and we want to help you get there that's why we've created an
email based course to help you secure Financial Wellness if you're interested in that simply
click the link in the video description below we hope you enjoyed this video Brian's out [Music]