The Millionaire Blog

Becoming a millionaire requires planning, it’s not going to happen by accident. You’re going to need a plan that will put you on the road to becoming a millionaire. In this post I’ll go over what Dave Ramsey recommends are the major components of a healthy financial plan.

A plan without action is useless, so as you go over each item set a date for completion. Make your plan a priority and move forward.

Written Cash Flow Plan: This is simply your monthly budget. What income comes in and how it goes out. Your cash flow plan is you telling your money where to go rather than wondering where it went.

Will and/or Estate Plan: Think for a moment what will happen to your loved one if you were to suddenly die. Without a plan it will be up to the courts to decide how your wealth will be divided, who will take care of your children, your pet etc. Put together a will and/or an estate plan now, it will prevent pain and suffering of your loved ones.

Debt Reduction Plan: This is where I am at right now. Reducing and ultimately eliminating debt should be an extremely high priority in your plan. Imagine for a moment the choices you can make if you didn’t have debt to worry about. You could choose a job based on how meaningful it is to you rather than how much you need to make to cover debt. You could also apply more of your income to savings, investing, and giving.

Tax Reduction Plan: This is not for the do-it-yourselfer. Hire the service of a competent tax adviser who will show you how to reduce your tax burden. There are investments that are more tax friendly than others, certain real estate transaction will help you reduce tax cost. We all have to pay taxes, but there are ways to reduce it or defer it until you are in a position to pay less.

Emergency Funding: We have over a $1000 in a money market account that is used strictly as an emergency fund. No matter how well you plan, emergencies will happen. This fund softens the blow and helps you stay on track. Keep in mind you need to wisely determine what is an emergency. A vacation, clothes, school supplies are not emergencies, these things should be planned for in your cash flow plan.

Retirement Funding: We are all going to get old and at some point we want to relax and not have to work. We do have to come to terms with the fact that the government will not take care of us as we get older. Social Security may be non-existent. We plan for retirement by investing now so we can generate income from our investments. later. The income you will need is all dependent on the lifestyle you want to have.

College Funding: If you have children or will have children you need to plan for their education. Invest in education IRA’s and any state sponsored investment specifically for college costs. Consider where your children will go to college. In-state colleges offer excellent programs at very affordable costs as compared to the high cost of Ivy League universities.

Charitable Giving: Plan for tithing, we tithe 10% right off the top. In other words, we tithe before we pay debt, invest, etc. Helping others is all part and parcel of becoming a good christian. People will remember you not by how much money you had but by how much you gave.

Teach My Children: My goal is to leave a legacy. I want my children to live better than me and to be smarter than me in all facets of life including finances. Teaching them to give, save, and invest early is very important and will help them develop good habits.

Life Insurance: Get life insurance as quickly as you can. Get enough to replace your salary. For example if your salary is $50,000 per year get a $500,000 policy. Your spouse will then invest the payout and live of the dividend. This assumes a 10% return on investment.

Health Insurance: Usually you have this at work, but if you are self-employed like myself it’s critical that you have health coverage. I used to take this for granted when I was in the corporate world. I don’t anymore.

Disability Insurance: This is another type of insurance that you should not be without. You never know when you may become disabled without the ability to provide for your family. Plan for this and get enough insurance to maintain the lifestyle you are used to.

Auto Insurance: It’s hard to imagine anyone without auto insurance. Look at this carefully as this is a place where you can save money. Based on your vehicles age you may not need full coverage or you can raise your deductible to save some money.

Homeowners Insurance: Get a good policy that covers you home well. This too is an area where you can save money by getting just what you need, and increasing your deductible.

There you have it, a plan. Now put a date next to each one and get it done.

Regards.