Section 3: Building Your Wealth
Foundation Set. It’s Time to Build Wealth.
Now that you understand your goals and have built a solid financial foundation, it’s time to focus on building your financial wealth and truly become independent.
Everyone’s journey is unique, shaped by their own life, specific goals, and varying risk tolerance levels. There is no universal order for the steps in this section. What matters is ensuring consistent progress.
Below is a suggested investing hierarchy chart that may help you prioritize investments to maximize potential returns. This should not replace advice from a professional financial advisor, but it may help guide you as you begin your financial wealth-building journey.
*This chart was created using multiple resources and is intended to serve as a guide only, providing a starting point for your journey toward financial independence. It should not be used as a substitute for advice from a professional financial advisor. Consulting a professional financial advisor is the best way to create a personalized investment strategy tailored to your specific needs.
*Some recommend beginning investing goals of 15%-25% of your gross income, increasing it as you reach other financial milestones. If this target exceeds your employer match, that’s okay. Aim to contribute enough to capture the full match, then continue progressing through the Investing Hierarchy Chart above until you reach your full investing percentage target.
Suggestions that may help you determine your wealth-building priorities.
Dave Ramsey’s Baby Steps
If you are following a Dave Ramsey plan, then this is where you will begin with Baby Step 4, as Baby Steps 1-3 should already be complete.
Baby Step 1 - $1,000 Emergency Fund
Baby Step 2 - Pay off Debt (Pay off everything except the mortgage using the debt snowball method.)
Baby Step 3 - Fully Funded Emergency Savings – Save 3-6 months of living expenses.
Baby Step 4 – Investing 15% of your household income. Dave suggests no more than 15% at this stage, as you will need the extra money for the next steps.
Baby Step 5 – Saving for Future Expenses
Baby Step 6 – Paying Off Your Mortgage.
If you choose this method, invest 15% of your gross income, potentially following the Investing Hierarchy Chart above. Once you have reached your 15%, then move to the next two questions, which he says can be worked on simultaneously:
Step 5-Saving for Future Expenses and Step 6-Paying Off Low-Interest Debts (such as a mortgage).
After you have saved for future expenses and paid off your mortgage, go back and increase your investment percentage.
The Money Guy’s Financial Order of Operations (FOO)
If you are more of a financial mutant and working to get the most out of every dollar, then here is what The Money Guy suggests.
(By this point, FOO Steps 1–4 should already be complete, including maximizing your Employer Match as covered in Section 2. Here, you'll begin with FOO Step 5.)
FOO Step 1 - Deductibles covered – Have enough saved to cover co-pays and deductibles (e.g., Health, Auto, & Home).
FOO Step 2 - Employer Match (Free money) – DO NOT miss out on the free money. *This should already be maxed from Section 2.
FOO Step 3 - High-Interest Debt-Credit cards (Expensive money) – DO NOT carry any high-interest debts, as that will cost you a lot of your future.
FOO Step 4 - Emergency reserve (Important money) – Have 3-6 months saved, or 18-36 months if nearing retirement.
FOO Step 5 – Max out Roth and HSA contributions
FOO Step 6 – Max out other retirement options
FOO Step 7 – Look for Other Tax-Advantage Investment Opportunities
FOO Step 8 – Save for Future Expenses
FOO Step 9 – Pay Off Low-Interest Debts (such as a mortgage)
If you choose to prioritize maxing out investments first (Foo Steps 5-7), potentially follow the Investing Hierarchy Chart above before moving to the next two questions:
Saving for Future Expenses and Paying Off Low-Interest Debts (such as a mortgage).
Let’s get started on building your financial future!
Below are the resources for Section 3. Individual resources will also be available under the corresponding lesson.
Downloadable Worksheets
Section 3 Annual Financial Checkup Bundle
This includes all the worksheets for Section 3, including the Chapter Title page, in a single, easy-to-use PDF download.
Section 3 Chapter Title Page
Keep your workbook neatly organized and easy to navigate with this Section Title Page. This is also included in the Annual Financial Worksheets bundle.