I took a crash course with the financial peace university; a program created by Dave Ramsey to help people become debt free and acquire wealth. Financial peace university is based on biblical teachings as it relates to our finances. I learned a couple of things that have helped me with my finances and I thought it might help you give thought and structure to yours. Although the teachings were for people living in the United States, I tried to make it applicable to a general audience regardless of your location.
The course taught 7 steps, depending on your stage in life, so many of them may or may not relate to you. I learned that these steps are supposed to be followed sequentially i.e one after another. Please remember, nothing happens overnight. It is a process that takes time and yield good results. Trust the process.
The first step involves setting up an emergency fund. If you have one already you are a unicorn! A large number of people do not have any money put away for emergencies. God forbid something happens that requires money, what will you do? Call on friends and family to bail you out? Having an emergency fund gives you a sense of security and independence. It is neither a savings or an investment fund that you can reach into whenever you like. It is money set aside strictly for big emergencies. It can be higher or lower depending on the stage you are in life, an average amount is N350,000 or $1000. Don't feel like you have to rush to save this amount, it takes time, commitment, and discipline. When you gather it together, put it in the bank and forget it exists. Ensure you don't have easy access to it in form of debit cards or transfer platforms. Some people actually keep this money in their freezer to avoid the temptation of spending it. The stress of defrosting will stop you from accessing the fund.
Psalm 37:21 (NIV) The wicked borrow and do not repay, but the righteous give generously;
The second step is paying off your debts. Make a list of every money you owe (individuals and corporations) from the least to the most. Start by paying off the smallest debts because it helps you to see significant progress in the reduction of your debts. When you finish with a small debt, it is out of your life forever. Before you know it, the second debt will soon follow until everything is paid off. Get that monkey off your back by paying the people you owe, you will sleep better at night.
The third step is creating a fully funded emergency fund. The first emergency fund is not fully funded, it's strictly for big emergencies. Peradventure someone loses their job and can't get a new one in a short period of time, that emergency fund can't sustain them. This fund should be the total amount you spend monthly times 3. That means for everything you spend per month (fuel, food, entertainment, rent, transportation, data etc), you add it all up and multiply it by a minimum of 3 months or a maximum of 6 months. This serves as insurance just in case your source of income shakes. It guarantees stability until you get another income opportunity. This is not something that you put together in months, it takes time, patience and discipline. You should always have it.
The fourth step is retirement savings. Many young people don't like to hear this - you need to put away money for when you are old. A standard rule of thumb for this is 15% of your monthly income should be put away for when you retire. You have to learn how to pay yourself, your future self will love you better. I know many people have a pension fund or 401K plan. If what is going in there is less than 15% of your monthly income, you need to find back up. You are never too young to start saving for retirement. If you think you have enough saved for retirement, think about the inflation rate and the change in standard of living over time. Talk to your parents, aunts, and uncles who have retired and they will help you with a reality check.
1 Timothy 5:8, NLT: "But those who won't care for their relatives, especially those in their own household, have denied the true faith. Such people are worse than unbelievers."
The fifth step is a education fund. For those that want to get married and have kids, this is very important. Even before you have any children, you should start saving for your children's education. you don't want to bring kids into this world that you cannot take care of, that's irresponsible and selfish. Planning for the future is key.
The last step is having blow money. Blow money is for helping people in ways that they will be blessings to others. This doesn't have to be sequential, it can be as little as setting aside $10 or N2000 monthly to give to your welfare/benevolence team at your place of worship, a charity organization or as a gift to someone you know that truly needs it. Proverbs 19:17, if you help the poor, you are lending to the Lord...
This is not a 10 step to be rich or something that will give immediate results. It takes years to achieve financial peace and you should never feel like you have to rush it. Remember, we are all running a race and our pace is different from others. That is fine! Don't feel like you have to rush life to achieve anything.
Additionally, if you are religious don't forget to give your tithes and offerings from your heart.
"I believe that through knowledge and discipline, financial peace is possible for all of us" - Dave Ramsey.