At this point in The Total Money Makeover we would only be at step four of seven.
I'm going to condense the last of the steps into one post for one very good reason.
If you have made it this far then the world is yours! You should only have one monthly repayment - being your mortgage - you are otherwise COMPLETELY debt free and you've built up an emergency fund that will sustain you and your family for a few months in an emergency situation.
At this stage I think you've become money savvy enough to decide where to go next and to do so without going backwards and digging yourself into a huge debt crater again.
However if you love the idea of early retirement or fully self funded retirement then keep on reading.
The last step was building our emergency fund and for renters it included saving a house deposit.
Step four is invest! I'm really looking forward to this step. As an adult child who is supporting a parent who lives on a government pension I know what I DON'T want for my future, or my children's future.
Investing early on in life will set you up for a beautiful retirement where the only thing you will need to worry about is your health. You will not need to worry about paying rent, electricity bills, living on beans, taking the bus. Investing now will take care of you financially once you finish working.
Take the time and spend the money to talk to someone who comes recommended, someone who knows and lives investments. This is really the only advice I can offer on the topic as I'm a newbie to it myself. Later on I'll write a post sharing links to useful information but for now the only thing I know is you want to find someone who knows what they're doing.
A good investment will let you travel the world, eat at fancy restaurants, pay for your children's wedding none of which can be done on a government pension. And don't think your superannuation will do the job either, that may last you twenty four months if you're lucky.
Step five is to save a college fund for your kids. This step comes with some personal opinions from me.
I will be saving money for my children BUT I will be teaching them to save too. In fact we have already started. They don't get a lot of pocket money at the moment after all they're only four and two and don't do much in the way of chores. They get silver coins for random actions. Helping each other or mum and dad, taking their daily vitamin, Miss four often asks to help dry the dishes - I'm hoping that trait sticks around - and Master Two 'helps' pick up after the dog - he tells me where it all is :)
Packing away toys, using manners and cleaning their rooms are not actions they get pocket money for. Each month they count their money and they get half to spend and half goes back into savings.
Also I'm not necessarily saving for college. If they choose to go to university then that's where it will go if not it can go towards a car or even a house deposit once they are working.
I'm calling ours the 'kid fund' not the college fund.
Step six is to pay off your mortgage. At this point in your life it should be a piece of cake. NO debt, a fully loaded emergency fund that will cover you for approximately 3-6 months and a couple of amazing investments doing their thing to make your retirement wonderful. There is nothing stopping you from throwing all you have at your mortgage and saying goodbye to it ALOT sooner than you ever thought possible.
And last but not least, step seven.
Step seven is to give. Back at steps one and two where we were living on beans on toast, never going out and taking the bus to save on petrol I mentioned I was of the belief that you only give if you can truly afford it. For some families it's hard to find enough money to support themselves let alone worrying about giving to help others. It's not being selfish or careless it's about self preservation and not perpetuating the cycle.
Step seven is great because once here you can help out every one you want. Support every charity that means something to you and not worry about going without yourself.
I'm so excited about this plan. It's basic common sense but it's the kind of common sense that when you're drowning in debt you need someone to shout it at you. The Husband and I have only been at it a few months. We've got our $1000 emergency fund, we've paid off one credit card, half way through the next and have big plans for our retirement.
We are also discussing what we are doing with the kids, they may not fully understand but Miss four at least is making plans for our 'own' home. She's got a list of what it needs once we've saved enough money.
We talk to them and explain it so they learn that having the newest things isn't the most important part of life. By teaching them now they'll hopefully grow up to never have any debt, other than a house, of their own.
Thank you to everyone that has read along and asked questions I hope you all see a happy step seven somewhere near in your futures.
Skye
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