The cure? A plan and action.
Here’s yours.
Lay the Groundwork (Steps 1-4)
1. Create Your Starter Emergency Buffer
Save $1,000 to $2,000 in a high-yield savings account.
This stops small emergencies, like car repairs, from pushing you deeper into debt.
2. Capture Free Money with Your 401k Match
If your employer offers a match, take it.
That is a 100% instant return on your contributions. For 2025, you can contribute up to $23,500 ($31,000 if 50+), but at this step just focus on hitting the match.
3. Eliminate High-Interest Debt
Credit cards, personal loans, high-rate car loans. Pay off anything above 5 to 6%.
Paying down an 18% credit card balance is the same as earning an 18% return.
4. Build a Full Emergency Fund
Expand to 3 to 6 months of expenses. Keep it liquid in a high-yield savings account earning 4 to 5%.
Build Momentum (Steps 5-8)
Step 5. Maximize Retirement Savings
Boost 401k contributions toward 15% of your income, including the match.
Choose Roth if you expect higher tax rates later, or traditional if you are in a high bracket now.
6. Use a Health Savings Account (HSA)
If you are eligible, HSAs are unbeatable.
Contributions are tax-deductible, the growth is tax-free, and withdrawals for medical expenses are tax-free.
In 2025, you can contribute $4,300 as an individual or $8,550 as a family.
7. Add an IRA
Contribute up to $7,000 ($8,000 if 50+).
Roth is generally best if your income allows, but traditional works if you need the deduction. Consider Roth conversions in low-income years.
8. Start a Taxable Brokerage Account
Once you have maxed out tax-advantaged accounts, open a regular brokerage account.
Stick with broad-market index funds and ETFs for tax efficiency.
Expand Your Horizon (Steps 9-10)
9. Optimize and Protect Your Wealth
Get the right insurance, such as term life if you have dependents and disability coverage to protect your income.
Rebalance investments and consider tax-loss harvesting when it makes sense.
10. Build Legacy Wealth
With everything else checked off, you can choose between paying off your mortgage faster (if you have one) or investing more.
At this stage, think bigger: estate planning, generational wealth, and charitable strategies.
The Golden Rule
This isn’t a competition, it’s about progress.
Work the steps in order. Get each step substantially complete before moving to the next. Review yearly and adjust as your income and goals change.
If you found this useful, share it. Someone you know may need the nudge.
Do you want to learn more about any of these steps? Reply and let me know which!
