If you've been following this guide from the beginning and have made it so far, you should be seriously proud of yourself. Maybe you've always been used to living paycheque to paycheque, no matter how much you've earned. Or you held on to a false belief that you're "bad with money".
Well, I'm here to tell you that you're good with money. The plan you used to save up $1000, one month, and three months in your emergency fund is the same one that will get you to the final goal of six months. Not very surprising, I know. But the secret to financial success is merely staying consistent with your plan.
Here's a summary of what we covered in this guide:
The last two topics I want to cover are lifestyle creep and what to do after you complete your emergency fund goal.
You would be surprised at how many people earning 6-figure salaries live paycheque to paycheque and continue to feel that their income is not high enough. This is due to lifestyle creep: the habit of upgrading your lifestyle and cost of living every time your salary increases. It's a cycle that keeps you stuck in the same financial position, no matter how much more money you earn.
Even worse, some people upgrade their lifestyle at an even faster rate than their income! Buying too much house is the best example of this.
Next time you get a raise, don't immediately trade-in your car for a newer model. Keep living your life as if nothing changed and use all of the additional income to fund your financial goals, starting with that emergency fund.
Of course, we all want our lifestyle to improve over time. The 1-bedroom apartment you shared with your spouse in your 20s is not the same place that you want to raise a family in. But you need to be mindful about how quickly you upgrade your lifestyle and whether those upgrades are still below your means.
So you've fully funded your emergency fund, and now you have all this extra money to use. That's a good problem to have. It means that you're ready to move on to the next milestone in building your financial freedom - but what exactly is that step?
Here are the basic steps for each one:
The Waterfall Method
Dave Ramsey's 7 Baby Steps
Both methods teach you to prioritize financial goals one at a time, building up momentum as you go. Anyone with an average salary and enough time can build wealth following these steps.
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If you've read every post in this free guide, thank you. And if you've left a comment to share your thoughts, you made my day.
I've covered a ton of material based on personal experience and all of the books, blogs, and podcasts about personal finance that I've consumed over the years.
If you feel like I've helped you along your financial journey, there's one thing you can do for me to return the favour.
Share this guide with your friends and family. It might just be the thing that points them in the right direction and inspires them to improve their financial situation.