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  • Writer's pictureDavid Greenfield

8 Steps to Financial Success

Updated: Jan 30, 2023

There are many different methods to reach financial success ranging from Dave Ramsey's Baby Steps to Grant Cardone's 10X process. At Money Done Simple, we lean closer to the Dave Ramsey approach. However, we are a bit less conservative, with more of a focus on prioritizing returns.

Below is a breakdown of the 8 Simple Steps to Financial Success:

1. Emergency Reserves of $1,000:

The first step to financial success is to save $1,000 in an emergency fund as soon as possible. These funds can be in a checking account, a high-yield savings account, or any account where it is quickly accessible.

These funds aim to give you and your family a safety net to cover unexpected expenses such as medical bills, car repairs, or losing your job.

2. 401(k) Match:

Many employers will offer a match on your 401(k) contributions. I cannot stress enough that it is straight-up free money. You should always take advantage of this benefit as soon as possible.

You should always prioritize the next step before contributing more than the minimum to match.

3. Pay Off High-Interest Debt:

High-interest debt is any debt over 6% interest. We pick this number because the average return in the market after inflation is roughly 6-7%. The best way to think about this is that it is a guaranteed return on your investment. In other words, you ensure that your net worth will not decrease by 6%+ each year, increasing your wealth.

This includes credit cards, personal loans, payday loans, and, most commonly, student loans.

There are two primary methods for paying off debt. The first is the Snowball method, where you prioritize paying off the debt from smallest to largest, regardless of interest rate. The second is the Avalanche method, where you pay off the highest interest rate first. People have their preferences. We tend to be agnostic towards these methods and feel they both work for different people.

This step is where most people fail to reach financial success. 80% of Americans are in debt, and the average consumer debt in America is $38,000, not including mortgage debt. Paying off your high-interest debt is the most challenging step in this process.

4. Emergency Reserves Increase:

Now that the high-interest debt is gone, the next step is to increase your emergency fund to 3-6 months of expenses. This will give you enough runway to protect yourself if you lose your job, get injured, the water heater goes out, etc.

5. Roth IRA or Traditional IRA:

The next step is to open an individual retirement account and contribute the maximum a year to retirement ($6,500 in 2023). We lean towards a Roth IRA, but a Traditional is also a good option. Check out here if you want tips for deciding what's best.

Remember that these are just the type of accounts; you will still need to pick your investments. The best option for most people is low-fee ETFs.

6. Health Savings Account (HSA):

After funding your IRA, it's time to save for medical issues. The best way to do this is through a Health Savings Account (HSA), a type of savings account that allows individuals to set aside pre-tax money for medical expenses. An HSA can pay for qualifying out-of-pocket medical expenses, such as deductibles, copays, prescriptions, and over-the-counter medicine.

One of the main benefits of an HSA is that the money in the account can be invested, allowing it to grow tax-free over time. How much you contribute is up to you, but it offers another tax-free way to invest in the market.

Note: HSAs are often paired with high-deductible health plans (HDHPs), which typically have lower monthly premiums but higher deductibles. This means that an HSA+HDHP might not be for everyone, especially people with chronic medical issues who may benefit from a lower deductible.

7. Max 401(k) and other investments

Now it's time to start aggressively investing. Max out your 401(k), invest in ETFs in a taxable brokerage, buy an investment property, or even invest a small portion of this in something riskier like cryptocurrency.

Always consider risks, but this is a great time to start investing in the market.

8. Low-Interest Debt, Prepaid Expenses, and College Savings:

The final step is where you pay off your mortgage and start funding a 529 plan for your kids' college. This step aims to close up all liabilities on your balance sheet and set your kids up for financial success.

After this step, you can return to step 7 and invest more in whatever you like!


Remember, everyone's path is different, and these steps may not apply to all, but it provides an excellent framework of priorities to start leading you down the path to winning with money.

By following these 8 steps, you will set yourself up for financial success and be able to achieve your financial goals, whether it be saving for retirement, paying off debt, or planning for future expenses. It's important to remember that these steps are not meant to be completed in one day but rather to be tackled strategically and systematically. By prioritizing your financial goals and staying disciplined, you can take control of your finances and secure a stable financial future for yourself and your family.


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