Roxanne Langley ~ Money Coach

July 15, 2022

4 more steps to build a strong financial foundation (Part 2)


In part 1 we talked about pouring the foundation to manage your monthly money decisions. When a home builder is hired, they are given a set of plans carefully laid out by an architect. Within the plans are all the locations for electrical, plumbing, walls, and so much more. Without the plans, the builder is at loss as to where to begin or what goes where. The same is true for your money and a monthly spending plan.

The steps for you this week revolve around getting out of debt. Do you pay off using the lowest to highest balance method or tackle the highest interest first?

5. Clear away high-interest debt (higher than 12%)

To be burdened with any kind of debt — credit cards, student loans, personal loans, etc – not great. But paying it off? Now that feels good. The key is to pay more than the minimum required payment amounts when you can. The longer you take to pay debt off, the more interest you’ll pay. On average credit card debt is costing you in excess of 20% to 29% every month. Ouch!!

There are two popular debt payoff strategies, both of which involve paying more than the minimum. Getting these ~heavier~ debts off the board ASAP can save money quickly.

Your foundation is poured and now it’s time to begin building walls. Up to this point, the first 5 steps come in an exact recommended order. From this point, things are a little less rigid. The remainder of these steps I loosely recommend; but if you prefer to tackle them together, that works also. Remember, the resources you have and your comfort level is what’s important.

6. Finish your emergency fund

Next up: round out the rainy day fund! I typically recommend saving three to six months’ worth of your take-home pay. How much you specifically save depends on your situation. Let’s dive into this deeper. Are you self-employed or a W-2 employee? Are you single or married? Children or no children? Each of these carries different responsibilities and commitments. We look at this carefully and come up with “your” target amount.

Half of a year’s salary sounds like a lot — and it is! But this is a marathon, not a sprint. It’s a process, not an event. Build the savings up gradually, at your own pace. The key is to just keep going. One month you may save $300 and the next it could be higher or lower. That’s ok.

7. Attack medium-interest debt (under 12%)

Congratulations, you have paid off your high-interest debt! Feels so good, doesn’t it? Now it’s time to take the same strategy and apply it to the moderately rude debt — aka any debt with an interest rate lower than 10%. Those aren’t hurting your bottom line quite as much, but it’s still worth knocking them out sooner rather than later.

For any balances with interest rates less than 5% or special promos with 0%, I usually recommend continuing to pay the minimums and watch out for deadlines on the promotions. Then use the extra funds you have now to add to retirement or investments. Historically over the long term, you would have earned more than 5%.

8. Start investing toward your long-term goals

If you’ve reached this point, please take a second and celebrate your hard work so far. Then keep the momentum going by starting to prioritize and invest toward your goals.

First, get on track for retirement, if you aren’t yet — increase your 401(k) contributions, and/or open an IRA (especially a ROTH IRA).  Next, look at your list of goals and focus on things like putting a down payment on a house, taking a long-awaited trip, starting your own business, and so much more. What are your long-term goals? Where do you want to be in 10, 15, or 20 years?

Start small, but start now

No matter how much you know about money (or how much you have), don’t wait until some distant date to feel confident about your finances. I’ll start saving when I make more money. No, you won’t!! I said those exact words many times and I didn’t. Think of it this way: the sooner you take your first steps, the more time you have to work toward your goals. The sooner you start, the faster you’ll get there.

Building a home and then furnishing it takes time, a plan, and consistency with follow-through. It’s time to start thinking carpet or hardwoods, shutters or draperies, sectional or sofa. Each is a decision that pulls your home together. When it comes to your money the same is true.

In the next installment, we’ll talk more about saving money while you’re paying off debt.

Your coach,


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