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BUILD YOUR FOUNDATION

Every structure needs a solid foundation to hold it together. It is what makes achieving your goals possible. You cannot master your finances without accomplishing the basics.

THE SIMULTANEOUS, TWO-GOAL, PROCESS

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Tackle high interest debt. Organize your credit cards and loans in order of highest interest rate to lowest interest rate, with the corresponding balances alongside. 

Now that you have a list of all of your debt, we will touch upon two different methods that you can use to knock it out:

THE SNOWBALL METHOD

Pay down your debt starting with the smallest balances first. This is best for people who need to feel like they are progressing in order to stay consistent. 

Here 's the 3-step process to this method:

 

  • Pay the minimum on all of your balances.

  • Make additional payments to the debt with the smallest balance until you have paid it off.

  • Add the minimum payment from the "eliminated debt" (plus more if you can) to your next smallest balance.

Repeat until debt free!

THE AVALANCHE METHOD

This method involves you paying your debt in the order of highest interest rate to lowest interest rate.

 

Why?

 

This way you eliminate your most expensive debts first and earn yourself bigger savings overall.

Here is your step-by-step guide:

 

  • Pay the minimum on all your balances.

  • Apply extra payments toward the debt with the highest interest rate until you have eliminated it.

  • Add the minimum payment from the "eliminated debt" (again, pay more if you can) to your next highest interest balance. 

Repeat until debt free!

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Build your emergency fund. How many month's of savings would bring your comfort in periods of job loss or uncertainly? Many recommend a cushion of 3-6 months but this can be adjusted to fit your needs.

 

Once you come up with a time frame, multiply your total monthly expenses by your cushion timeline (i.e. 3-6 months). This gives you your "optimal comfort" emergency fund goal.

 

You can also set a less aggressive "basic necessities" emergency fund goal instead. Multiply only your necessary monthly expenses by your cushion timeline. 

Keep in mind that your emergency fund is not solely created for the purpose of covering you during job loss. It can also be there to cover unanticipated large expenses, and ideally prevent you from going into debt as a result.

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BUILD YOUR FOUNDATION

Every structure needs a solid foundation to hold it together. This foundation is what makes achieving your goals possible. You cannot master your finances without accomplishing the basics.

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