The Money Guys Financial Order of Operations

 I'm always on the lookout for simple steps that beginners can look at to get started, and ran across The Money Guys Financial Order of Operations (FOO). I like it a lot more than the baby steps, and it rhymes with the popular S&P 500 index fund VOO! 

You can read all about it here but here are my thoughts.

They start off with some ground rules... like a preface. First, their big goal is having you save 25% of your gross income, so if you like thinking long term you might figure up what that is now. Second, they state why they left out giving and charities... because that's not a step. It's part of everything. I agree! We shouldn't WAIT to make the world a better place, our help is needed now, so always find a way to give. But let's get into the steps. 

1) Deductibles Covered

Look at your insurance deductibles (health, home, car) and save up enough to cover your highest one - you're probably not going to blow out every deductible at once.

2) Save for retirement up to your employer's matching amount

Don't leave free money on the table! If your employer gives you an extra 50 cents for every dollar you invest in the 401K plan, that's a 50% return... it even beats the 20% credit card interest rate.

3) High interest debt

Pay off those credit cards and car loans. Don't worry about your 7% mortgage quite yet.

4) Emergency Fund

NOW boost your emergency fund to 6 months in a high yield savings account or money market fund. That said... if you read my post about improving the baby steps, you'll know I recommend saving 5% a month in the emergency fund instead of having a specific fund. 

5) Roth IRA/HSA

Max out your Roth and Health Savings Accounts for the year, since you can never go back in time and these are great ways to invest without paying taxes on the growth. Don't forget to INVEST them! If you need to use your HSA for actual healthcare that's okay, but the goal is to boost your savings so you can use other funds for healthcare and save your HSA for a time when you're not on employer health plans anymore. 

6) Max out 401K

This takes a lot, the maximums are big, but your end goal is investing 25% of your income so you might as well use the 401K.

7) Hyperaccumulation

Their goal is to have us investing 25% of our GROSS income. I still say investment goals should be based on spending, as I said in this Savings rate post. 25% is great, and on that post I did the math about why it means preparing to be retired around age 55. 

8) Prepay future expenses

FINALLY start saving for your kids college. I did this a little earlier in the interest of state tax benefits, but I agree it's more important to save for our retirement than our kids college. I personally chose the cheapest state school in the midwest and life has been fine, so I'm not saving house-buying amounts for college, sorry kids. 

9) Low interest debt

And finally, pay your mortgage off early!