A couple of years ago I made a video called the rules of finance and I think it's time for me to revisit it. These steps were created by the knowledge I gained from finance books, gurus, and some of my mentors. Before we go any further I am not a financial coach so take my advice with a grain of salt.

There are twelve steps in total and the first step is Budgeting. I've spoken about budgeting a bunch on this site and yet I can't stress enough how powerful and necessary it is. I was invited to play the game Among Us with some friends last week but I wasn't able to because I spent over an hour helping someone with a budget. A budget is important because by listing your expenses you know where your money is going and at the same time, you are telling your money what to do. I remember when I did my first budget, I found out I was spending over five hundred dollars a month on a phone game. I was claiming broke during this time and didn't know why but with a budget I was able to find out why I was broke.

After you set up a budget what's the next step? You need to trim the fat. That's the name of the second step and this is especially important after making a budget. You need to cut expenses especially when you are spending over five hundred on a phone game. For some friends of mine, their fat was coffee, they were spending close to eight dollars a day on coffee. Since I'm personally working from home I buy my coffee on Amazon and it's $32 for a five-pound bag and it lasts me two months. Since I drink my coffee black I essentially am spending fifty-five cents a day on coffee. To put that in perspective my normal order at Starbucks is $2.70 for a large black coffee as opposed to fifty-five cents for a pot of coffee.

After you trim the fat you need to manage your money AKA tell your money where to go. You need to govern your money because unless you tell it where to go it disappears. The best example of this is Dave Ramsey's envelope system where you designate a certain amount into each envelope aka eating out, entertainment, groceries, etc. If you spend all the funds in one envelope then you must take some funds away from another category. In my case, I set aside forty dollars for mobile games and moved the rest of that money to the next step.

Murphy, this step is named after Murphy's Law (what can go wrong will go wrong). Dave Ramsey is big on setting aside a thousand dollars that is easily accessible as a temporary emergency fund and I completely agree to a certain extent. I think in today's day in age with the Rona we should have anywhere between a thousand to fifth-teen hundred dollars for any short term emergency. Sure I can go and site a couple of CNBC or some other sites that have written about the average American can't cover an unexpected expense of a thousand dollars. Unless you have this fund stop reading, I don't want you to proceed until you set this fund up. Back in 2012 when I was living paycheck to paycheck, I went to get a haircut. My barber asked me to move his car and while doing so I was side-swiped and had to pay for the repairs. I had to come up with nearly eight hundred dollars by end of that day. I didn't have a Murphy fund and it wasn't pay-day but I went out and hustled to earn that money but I never wanted to be pushed to the ropes like that again.

So now that we have a Murphy fund set up let's kill the troll. What is the troll, consumer debt. If you read the bible you know the borrower is a slave to the lender, but for everyone who is like me let me break it down. The banks pay you .01% in interest yet your credit card is charging you between 17-24%. Sure you are getting miles or points but at what cost. After limiting my mobile gaming budget I was able to pay off a credit card debt of six thousand that I had for over five years in less than a year. Consumer debt covers your car payments, credit card, and student loans, basically everything but your mortgage. The pandemic showed us that having debt hurts us because even if you aren't working you still have to pay the bills and debt makes that hard.

After you pay off your car, student loans, and credit card what do you do? You need to make a rainy day fund! The name of this step comes from the old saying of saving for a rainy day that our elders always spoke about. Just like in Game Of Thrones, winter is coming and we need to save for it. For many, this pandemic was the "winter" and many weren't prepared for it. In The Total Money Makeover, Dave Ramsey says we need to set aside three to six months' worth of expenses in our emergency fund. After this pandemic, I feel like we need six to nine months because we don't know where the world is heading it's been nearly a year with no solution in sight. My job is constantly letting people go but at the same time, we aren't hiring anyone. Times are hard and now more than ever you need to have this rainy day fund.

The next step is important and is the sole reason why I can make a post like this. The next step of finance is Knowledge. You need to educate yourself on money and investing because if you don't understand the way money works or grows how can you leverage your money? Just yesterday I lent out four books from my home library and three of them were financial books. You need to educate yourself in finance and learn how to invest especially after you are out of debt and have your rainy-day fund setup. The books and educational materials that I like might not be for you, I personally read up on index funds and REIT (real estate investment trust funds). Whereas some of my friends like real estate or single stocks. I personally don't like investing in that so my sources are different. I personally have two Jack Bogle books coming in tomorrow and if you are like me just follow the Oracle from Omaha (Warren Buffet).

After you gain your knowledge put your money where your mouth is and go and plant some seeds. The next step is to plant the seeds aka start investing. How much do you invest you ask, well it all depends, because if you don't have a house payment then you can do what Dave Ramsey recommends which is 15% of your income. If you are like most individuals and still owe on your mortgage then invest up to your company's match in your 401k or IRA. If your company doesn't match and you make over 60k, I personally think you should max out your Roth IRA (which is $6000 as of 01/21). If you make less than 60k a year then lower it accordantly to keep it within your budget and take note of the next step.

If you have a mortgage then the next step of finance is breaking the chains. Pay off your mortgage because debt is bad. One of my mentors constantly tells me that there is a difference between good debt and bad debt, but to me all types of debt are bad. Sure if you have a rental property that is making you some money you can say you are using debt to make an income stream but this pandemic has hit the real estate market hard. Tenants can't pay their rent and you can't kick them out but guess what you still have to pay the bills. If you owned the investment property then your expenses will be lower because you have no mortgage payments. Let's say your current mortgage payment is twelve hundred a month do you know what you can do if you no longer had that payment. If you saved that amount for five months you could max out your Roth IRA or you could go on a nice vacation. The sky is the limit but as long as you have that last chain then you can't fly.

Now that you are fully out of debt we need to nurture it. You need to water your seeds and play some music to them to help them grow. Now that you have zero debt you can save up to a year in your rainy-day fund and then invest more. The purpose of this step is to get serious about investing. I'm not telling you to go and start doing options trading or day trading because you have more capital no stick to safe investments. Invest safe and don't sell because we are building wealth and not making you rich. I often get texts from friends who are up a couple of hundred dollars for the day while I'm only up a couple of dollars. Sure they are making money right now but they are constantly buying and selling whereas I have DRIP (dividend reinvestment program) and I'm investing for the long term.

The final step of finance that is needed during this pandemic is leaving a legacy. If you watched my video on the step then you thought this step is to send your money but nope it's changed. You need to leave a legacy, thousands are passing away because of the virus and I personally caught it in March of 2020. No one knows when we will pass but we need to be prepared for it. If you have dependents and reading this then you need a will but if you completed all the other steps then you won't need life insurance. Life insurance is used to supplement our income if we are unable to leave money behind for our family. A prime example of this is my job offers about three times my annual income at no cost which is nice and by the end of this year my investment and savings will pass that so technically I would no longer need life insurance. I don't want to start a discussion about whole life vs term life but only use life insurance to supplement your income until you can save/ invest your money so that is is more than your insurance payout. The main thing to do in this step is to figure out how you want to be remembered and work towards that. Make your dreams come true and set a new path for your family linage.

I honestly didn't think I would deviate so much from my original steps but during this pandemic, I feel these are the most important steps. Like I stated in the first paragraph I am not a financial advisor, I am just a guy with a blog. You don't have to follow these steps, but from my years of research, these steps work. I read many financial books and will continue to read more because knowledge is power and unless we can take control of our money we will remain broke. We can wait for the government to maybe forgive some student loans or we can become self-sufficient and take life into our own hands. I was born in 1989 and there might not be social security by the time I retire but that doesn't matter to me because I am personally investing for my future. It's your life so take control of it.