Financial Order of Operations: Prioritizing Your Wealth-Building Journey

Start by addressing high consumer debt before increasing 401k contributions to maximize financial stability and long-term investment potential.

### Managing Financial Priorities and Debt with the Financial Order of Operations
* 💸 " If you're paying **20% or greater**, you need to **knock that out after you get your employer match**.
* 📈  The Financial Order of Operations provides a structured approach to guide individuals on how to **allocate their money effectively**.
* 🔄  The steps in the Financial Order of Operations are not always sequential, as **financial goals and circumstances can change over time**.
* 🎯  By following the Financial Order of Operations, individuals can prioritize actions like **paying off high-interest debt and building emergency funds** before **investing for retirement**.
* 💰  Accumulating cash reserves and paying off high-interest debt can help reduce financial stress and provide a **solid foundation for future investments**.
* 🎉  Starting to invest early, even if it means temporarily **pausing contributions to focus on debt repayment**, can leverage the **power of compounding over time**.
* 🔗  Exploring tools like the "**wealth multiplier tool**" can help individuals visualize the **long-term impact of their financial decisions** and stay motivated to **achieve their goals**.

[Music] We're going to move on to Hampton's question next. He says, Hey guys, I'm 28 and I currently have about 18K in my 401k and was contributing 15%. Love it, but I constantly feel like we don't have enough cash. I dropped my 401k contributions down to the match to pay off consumer debt and build up more cash, and now I have remorse that I'm missing the golden years of investing. Is that the right move? PS, we are also raising a seven-month-old, so squarely in the messy middle. So what advice or what words of encouragement do you have for Hampton? Well, here's what we found in our experience. A lot of times people start on our financial journey and we don't know what to do, so we just do something like, and I'm going to Hampton, I don't know if this is your case. We said, Hey, I've heard I need to save. I'm going to go start doing 15% in

my 401k and that's awesome. We love that you did that, but what that means is you probably jumped into the story somewhere in the middle, and you didn't start the story at the beginning. And what we said is, man, what if we could provide a tool? What if we could provide something for folks where they know exactly where they should start and how they should progress? How valuable might that be if this thing could only play like a tone, a tune, you know, the financial order of operations? Because what Hampton really laid out is that do an employer match, he's got that, but he also let it loose that he's saving 15%, but then he said he had some higher consumer debt. I don't know if that's credit cards or what it is, but this is why we have structured the financial order of operations so you'll actually know what to do with your next dollar. And look, and here's the other part, Hampton, just to give you the rest of the story on this is I think a

lot of people think that these steps through Foo is going to go step one two all way through step nine, and it's not going to change. That is not right. You're going to have all kind of things that happen in life, like you having a seven-month-old where all of a sudden your priorities and other financial goals will change. So it's not uncommon that you might get to like step six and then you have to go back to step four because you used a lot of your emergency reserves for maybe for that house, that first house down payment and so forth, or maybe you get laid off somewhere, or you have a job change because you just want to move to a different place and go into a different industry. You never know where you're going, so that's why the financial order of operations really is your kind of instruction manual on knowing what to do with your next dollar. So the question I have for you: you say you have high in Consumer Debt, but yet you're doing 15%, and you feel like

you're still leaving something on the table. I'm going to challenge you to go look at what you're paying on those credit cards or the Consumer Debt. If you're paying 20% or greater, you need to knock that out after you get your employer match. So then you can have even more dollars to attack, maybe even Beyond that 5% after you fill up your emergency reserves. You can start hitting the Roth, the HSAs, as well as maxing out those 401ks. It's all here for you. It's also if you really want to get a jump start. I have a book millionaire mission that will lighten this load and also give you the origin story of how all these steps of food came about too. Yeah, it's really interesting. The language you used, I think you said is, I feel cash strapped. One of the beautiful things about the financial order of operations, if you do knock out step three, get rid of that high interest debt, and if you then do have an appropriate emergency fund, it's going to prevent you from

feeling that tension from feeling that anxiety of oh man. I just I don't have enough cash because you know you've got your cash chiseled off and then you can put your dollars to work. And at 28 years old, your money is still so powerful. So if it takes you 6 months, 8 months, 10 months, even a year to get all the way back up to step six to where then you are probably putting 15% into your 401k, that's okay because you are still young and you have time and your future self will thank you when those unknown unknowns happen and that emergency fund has to be tapped into. I don't want Hampton to leave though without some positive um. Hampton, I want you to go to money.com resources, play with our wealth multiplier tool on there, and you're going to see at age 28 and you already have an $188,000 saved up lots of opportunity. And that's why it's also going to let you reprogram your mind on

how all those dollars that are going towards that Consumer Debt, and the interest maybe needs to be coming and thought of differently.

I Feel Like I Never Have Enough Cash!

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The Money Guy Show

Reevaluating 401k Contributions and Financial Priorities

Hampton, 28, is reconsidering his 401k contributions to pay off debt and build up more cash, feeling he may be missing out on prime investing years.

The advice suggests following a "financial order of operations" to know how to allocate funds effectively, especially when dealing with debt.

It's important to assess financial priorities and have a clear plan for saving and investing, taking into account individual circumstances and goals.

The Importance of Flexibility in Financial Planning

Financial planning is not always a linear path and may require revisiting previous steps due to life changes.

High-interest debt should be prioritized, especially if it is at 20% or greater, after getting an employer match.

Building an emergency fund is crucial before focusing on other investment opportunities like Roth, HSAs, and 401ks.

Saving money in your 20s is extremely powerful for future financial security.

Even if it takes time to build up savings, the long-term benefits, including a strong 401k and emergency fund, are significant.

Using resources like the wealth multiplier tool can help reprogram your mindset and see the opportunities that come with saving from a young age.

Consumer debt and interest payments may require a new perspective for better management.

Understanding how the dollars are allocated towards debt and interest is crucial for financial planning.

Exploring alternative approaches to handling consumer debt could help individuals achieve greater financial stability.