Part 1 - Elevate Your Giving
Your commitment to give at least 10% to support God’s kingdom should be at the very core of your financial plan. Make giving 10% your highest financial priority. Without your commitment to give, you will never be able to live fully in God’s economy. Give even when you are in debt. Give even if you have to sacrifice new clothes or eating out. Give even if you have to cut off cable TV or internet service.
Part 2 - Establish Your Emergency Fund
After you are faithfully giving at least 10% of your income to God’s kingdom, your next goal will be to work on creating your emergency fund equivalent to at least one month’s salary. Work on this as quickly as possible. Keep up with payments on your current debt obligations and other expenses but look for ways to cut all unnecessary spending. Be aggressive in building your one month’s emergency fund -- Do it as quickly as possible, hopefully in 5 months or less.
Part 3 - Eliminate Your Consumer and Car Debt
Once you are faithfully giving 10%, have your emergency fund built up, your next goal will be to attack and permanently eliminate your consumer debt. You will not be saving anything at this time but putting all your available funds toward wiping out your consumer debt, like credit cards. The only time you will save will be to replenish any funds you have been forced to spend out of your emergency fund.
Pay off the smaller credit card balances first. In other words, if you have five credit card balances ($100, $250, $1500, $1659, $3,100), go after the smallest amounts first! Get them out of the way. Then, put all your available resources toward paying off the larger balances.
Once credit cards are paid in full, aggressively begin paying off your car debt.
Once your car debt is paid off, begin saving (monthly) the equivalent of a car payment in a car purchase account -- so you can buy your next car for cash in three or four years.
Part 4 - Expand Your Emergency Reserve Fund
Once you are giving 10%, have one month’s salary in reserve, paid off all your consumer debts, paid off your car and have begun paying yourself a car payment (to buy your next car for cash), your next goal is to expand your emergency fund to equal 3 months salary. This expanded emergency fund will give you more financial resources to handle any major financial expense that might come your way. At this time you won’t be tempted to go back to living on credit.
Part 5 - Execute Your Long Term Plan (The Big Three)
Once you are giving 10%, paid off all your consumer debts, paid off your car and have begun paying yourself a car payment (to buy your next car for cash), expanded your emergency fund to equal 3 months salary, your next goal is to work on "the big three" long term goals that most families need to consider.
It is only at this time that you have earned the right to begin developing your "big three" long term goals: (1) Pay off your mortgage and become 100% debt free, (2) Save for your children’s education, and (3) Save for retirement. You will need to determine the timing, priority and proper amount of resources to allocate to each area.
© copyright - 2001, Ethan Pope