Why You Need a Strategic Plan
65%
of Americans live paycheck to paycheck
$87,000
median retirement savings for all American families
36%
of Americans have zero dollars saved for retirement
58%
of workers say their retirement savings are behind where they should be
57%
of Americans can't cover a $1,000 emergency expense from savings
$18,762
median non-mortgage debt per American household
What is The Wealth Building Sequence?
Having a strategic financial plan isn't just about managing money—it's about creating a clear path to achieving your goals and building lasting wealth. Without a deliberate sequence, people often make costly mistakes like investing in individual stocks before having an emergency fund, or neglecting employer matching contributions while aggressively paying down low-interest debt. A well-structured plan ensures every dollar is optimized for maximum impact.
The Wealth Building Sequence is not something I created—rather, it's what I call the framework of steps that are generally accepted in the personal finance community for prioritizing your financial resources. I was highly influenced early-on by Dave Ramsey's baby steps. However, I have grown to favor the Money Guy's Financial Order of Operations (FOO). Below is a synthesis of both methodologies, representing the generally accepted industry consensus on how to prioritize your financial resources.
đź“š Comparing Popular Methodologies
Two of the most respected frameworks are The Money Guy's Financial Order of Operations (9 steps) and Dave Ramsey's 7 Baby Steps. Both are proven systems that have helped millions achieve financial independence.
The Money Guy Financial Order of Operations
Philosophy: Optimize every dollar for maximum wealth accumulation while balancing protection and growth.
Best For: Those who want to maximize wealth building, investors comfortable with complexity, and people seeking to achieve financial independence early.
Key Feature: Emphasizes getting employer matches and tax-advantaged growth early, even before fully funding emergency reserves.
Dave Ramsey Baby Steps
Philosophy: Behavior modification and psychological wins. Build momentum through small victories while eliminating debt completely.
Best For: People struggling with debt, those who need clear simple steps, individuals seeking behavioral change, and anyone overwhelmed by complex financial advice.
Key Feature: Focuses on being completely debt-free (except mortgage) before investing heavily, using the psychological "snowball" method.
đź“Š Side-by-Side Comparison
| Priority | Money Guy Financial Order of Operations | Dave Ramsey Baby Steps |
|---|---|---|
| Step 1 | Deductibles Covered | Save $1,000 starter emergency fund |
| Step 2 | Employer Match | Pay off all debt except mortgage (debt snowball) |
| Step 3 | Pay Off High-Interest Debt | Save 3-6 months expenses (full emergency fund) |
| Step 4 | Emergency Reserve (3-6 months) | Invest 15% in retirement |
| Step 5 | Max Roth & HSA | Save for children's college |
| Step 6 | Max Retirement (Reach 25% savings rate) | Pay off home early |
| Step 7 | Hyper-Accumulation | Build wealth and give |
| Step 8 | Prepay Future Expenses | — |
| Step 9 | Prepay Low-Interest Debt | — |
🏗️ Foundation: Before You Begin
Throughout your wealth building journey, these foundational elements should be in place and maintained:
1. Create a Budget and Track Your Spending: It's impossible to know how much you need for an emergency fund, or how much you can allocate toward financial priorities, without understanding where your money is currently going. A budget is your financial GPS—without it, you're driving blind. To learn how to set up an effective budget, visit our Budgeting Basics guide.
2. Establish a Net Worth Statement: You need to see the complete picture—what assets do you have, what debts are you carrying? Having this information documented gives you clear direction and allows you to track your progress as you work through each step. Think of it as your financial starting point on the map.
3. Get Aligned With Your Spouse (If Married): Financial progress becomes nearly impossible when partners are working in different directions. It's like one person rowing the boat forward while the other rows backward—you'll just spin in circles, get exhausted, and probably start arguing about whose fault it is that you're still in the same spot. Getting on the same page about priorities, goals, and spending is critical. Learn how to work together with our guides on Budgeting as a Household and Handling Financial Conflicts.
The Wealth Building Sequence
Cover Your Insurance Deductibles
đź’ˇ Why This First?
You need a small buffer to prevent minor emergencies from derailing your entire financial plan. This modest fund keeps you from using credit cards when life inevitably happens.
đź“ť Example
If your car insurance deductible is $1,000, health insurance is $2,500, and home insurance is $1,000, save at least $2,500 (your highest deductible).
Get Full Employer Match
đź’ˇ Why Before Paying Off Debt?
A 100% return (employer match) beats paying off even 18% credit card debt mathematically. Plus, this money grows tax-deferred for decades.
đź“ť Example
If your employer matches 100% of the first 3% you contribute, and you earn $60,000/year, contributing just $1,800 gets you another $1,800 free. That's instant $3,600 working for your future.
đź“š Learn More
To learn more about the various retirement accounts see our Retirement Accounts Dashboard. To learn how to invest the money in the accounts see our Investment Types & Asset Allocation guide.
Pay Off High-Interest Debt
đź’ˇ Why This Is Urgent
Paying 15-20% interest while hoping for 10% investment returns doesn't make mathematical sense. Every dollar of high-interest debt you eliminate gives you a guaranteed return equal to that interest rate.
🎯 Two Methods
Avalanche Method: Pay minimums on all debts, throw extra money at highest interest rate first. Mathematically optimal—saves the most money.
Snowball Method: Pay minimums on all debts, throw extra money at smallest balance first. Provides quick psychological wins.
The best method is the one you'll actually stick with. Learn more about these methods and identify which one is right for you with our Debt Payoff Calculator: Avalanche vs Snowball.
Fully Fund Emergency Fund (3-6 Months)
đź’ˇ Why This Before Maxing Retirement?
Without this cushion, any emergency forces you to raid retirement accounts (paying penalties and taxes) or go into debt, destroying years of progress. This fund allows you to stay invested during market downturns instead of panic-selling.
đź“ť How Much Do You Need?
- 3 months: Dual income household, stable jobs, low expenses
- 4-5 months: Single income household, moderate job stability
- 6+ months: Self-employed, commission-based income, high expenses, or high specialized career
- 12+ months: Retirees or those very close to retirement
đź“š Calculate Your Need
Visit our Emergency Fund Calculator to determine how big of an emergency fund you need based on your specific situation.
Determine How Much You Need for Retirement & Utilize Tax Advantaged Accounts
Depending on your current income and tax bracket, you may want to utilize other tax-advantaged accounts such as Traditional IRAs or Traditional 401(k)s, which provide tax deductions today and tax-deferred growth. If you're planning to retire early, you'll also want to consider brokerage accounts, which offer tax advantages through long-term capital gains rates (typically lower than ordinary income tax rates) and provide flexible access to your money before age 59½ without penalties.
đź’ˇ Why These First?
Tax-free growth compounds dramatically over time. Money invested at age 30 can grow 40+ years tax-free. That's the difference between having $1 million and $1.5 million in retirement.
đź“š Comprehensive Retirement Planning Resources
To determine how much to be setting aside for retirement please see our page Calculate Your Retirement Number and run scenarios and create a plan using our Retirement Planning Dashboard. See how small contribution changes can make major impacts with our Retirement Contribution Calculator. If you're married please visit our Retirement Planning for Couples to get aligned on what type of retirement you both envision.
To learn more about different tax-advantaged retirement accounts and how to utilize them, see our Retirement Accounts Dashboard.
Note: Consider consulting with a financial professional for more personalized guidance and to create a comprehensive retirement plan tailored to your specific situation.
Save and Invest for Long-Term Priorities
đź’ˇ Key Principle
"Secure your own oxygen mask first." Your children benefit more from parents who can retire comfortably than from a paid-for education that leaves you unable to retire. Kids college falls in this step and not the previous step due to this key principle. They can borrow for college; you cannot borrow for retirement. Trust us—they'll thank you later when they don't have to choose between funding your retirement home or clearing out their basement for you to move in.
đź“š Tools for Your Goals
We have a suite of tools to help with many of these different goals and priorities:
Vehicle planning: Car Affordability Calculator and Car Buying Readiness Assessment For Couples Planning a Vehicle Purchase
Education savings: College Savings Guide
Home planning: Home Affordability Calculator
Vacation planning: Vacation Planning Financial Assessment
Wedding planning: Wedding Planning Financial Assessment
Pay Off Low-Interest Debt (Including Mortgage)
🤔 To Prepay or Invest?
Pay off if: Interest rate > 5%, you're risk-averse, or approaching retirement
Invest instead if: Interest rate < 4%, you're young, and you can handle market volatility
Many financial enthusiasts split the difference—pay extra on the mortgage while also increasing investments.
Build Wealth & Give Generously
đź’ˇ True Wealth
At this stage, money is no longer scarce. You can pursue passion projects, support charitable causes, help family members, and create a lasting legacy. This is what financial freedom really means.
đź“ť Where My Approach Differs from the Money Guy FOO
While I deeply respect the Money Guy's Financial Order of Operations and have adopted much of their framework, there's one area where I take a more nuanced position: retirement savings and account selection.
The Money Guy separates retirement contributions into distinct steps: Step 5 (Max out Roth & HSA) and Step 6 (Max Retirement to reach 25% savings rate). I've chosen to consolidate these into a single comprehensive step for several important reasons:
1. Individual Circumstances Matter: Depending on your income, stage of life, and financial priorities, a Roth may not make sense for your situation. There are multiple types of tax-advantaged accounts (Traditional IRAs, Traditional 401(k)s, Roth IRAs, HSAs, brokerage accounts), and the optimal mix varies dramatically based on your current tax bracket, expected future tax bracket, and retirement timeline.
2. The 15-25% Rule is a Starting Point, Not Gospel: While 15-25% of gross income is a great rule of thumb, it's not universally applicable. Depending on your current age, desired retirement lifestyle, and existing savings, you may need significantly more—or you may even need less than this guideline. A 45-year-old with no retirement savings needs a very different strategy than a 25-year-old who's been saving since age 22.
3. Optimize for Your Life, Not a Formula: That's why I emphasize first identifying what your spending needs in retirement will be, then investing the appropriate amount to achieve those specific goals. This prevents two common mistakes: under-saving and failing to reach your retirement vision, or over-saving and unnecessarily sacrificing your present quality of life.
So rather than rigidly following "max Roth, then max 401(k)," I encourage you to determine your retirement number first, understand which tax-advantaged accounts make sense for your situation, and then contribute strategically across all available accounts to reach your personal target. This is why I've consolidated their Steps 5 and 6 into my single Step 5.
đź’ Why This Matters: My Financial Journey
Growing up, finances weren't really discussed in my household. I'm the son of two entrepreneurs who emphasized having a strong work ethic and weren't interested in "keeping up with the Joneses." Hard work? Absolutely. Living within your means? You bet. But an actual strategy for building wealth? That wasn't part of the conversation.
I went to college and studied International Business with minors in Finance and Mandarin. I learned all the impressive-sounding terms and theories: efficient market hypothesis, capital asset pricing model, compound interest calculations. I could define them. I could explain them on an exam. But when it came to actually applying any of this to my daily life? I was completely lost. It was like learning a foreign language but never actually having a conversation—I could recite vocabulary words but couldn't order a coffee.
When I graduated and entered the real world, I had no financial strategy, no roadmap, no plan. And because of that, I made some spectacularly bad decisions.
Fortunately, I had one saving grace: a strong conviction against debt, thanks to early exposure to Dave Ramsey's principles. That conviction kept me from completely derailing my financial future. But not having a strategy still cost me—big time.
As an intern, I had a boss who strongly recommended I contribute to the company 401(k) to get the full employer match. "It's free money," he told me. But I didn't listen. I thought, "I'm just an intern. I need that money now. I'll start later."
That mistake? It cost me a 12% contribution rate (6% from me plus 6% match) for two years. When you project that out over 40 years at an 8% growth rate, I gave up $222,000 I could have had in retirement. Two hundred twenty-two thousand dollars. Gone. Because I didn't understand Step 2 of the wealth building sequence.
Then there was the vacation timeshare. You know the one—they lure you in with promises of affordable luxury travel, free gifts just for listening to their presentation, and "exclusive" deals available only today. I got conned. Completely. Hook, line, and sinker. Thankfully I was able to get out of it, but not before wasting time, stress, and money I couldn't afford to lose.
The real problem wasn't just these individual mistakes—it was that I had no intentionality with my money. Dollars came in, dollars went out, and I had no idea where they were going or why.
But as I grew and matured, everything changed. I discovered The Money Guy channel on YouTube. I worked with a financial advisor who helped me see the bigger picture. I became passionate about personal finance and started consuming financial education ravenously—books, podcasts, articles, anything I could find.
The turning point came when I finally created specific goals and a written plan. Suddenly, every dollar had purpose. Every financial decision had context. I wasn't just reacting to life anymore—I was intentional. And that intentionality has allowed me to progress financially to a point I never would have imagined I'd reach in my 30s.
Now, I know what you're probably thinking: "Written plan? Future goals? That sounds like living on beans and rice and saying no to everything I enjoy." Trust me, I get it. But here's what I've learned: that's not how it works.
Yes, in the beginning, it required a lot of hard work, discipline, and denying myself some things I would have liked to have. But now? I have so much more freedom than I would have without a strategy. I can take my foot off the gas a little. I can say yes to things my peers can't afford because they're still nursing their financial hangover from decisions they made earlier.
Dave Ramsey puts it perfectly: "If you will live like no one else, later you can live and give like no one else." That's my reality now. While many people my age are still trying to figure out where their money went each month, I'm living with more freedom—and yes, more fun—than I ever could have without following this sequence.
The wealth building sequence isn't about deprivation. It's about optimization. It's about making sure every dollar you earn is working as hard as you did to earn it. I wish someone had handed me this roadmap the day I graduated college. But since no one did, I'm sharing it with you now.
đź“Ś Key Footnotes
⚠️ Important: Protect What You're Building
As you work through these steps, don't forget to protect your loved ones and your legacy. Life insurance ensures your family's financial security if something happens to you, and estate planning guarantees your assets are distributed according to your wishes and that underage children are protected and go to who you would want to care for them. Use our Life Insurance Needs Calculator to determine appropriate coverage and review our Estate Planning Guide to protect everything you're working to build.
🔄 Sometimes You Have to Go Backwards
Life happens. An emergency comes up and you have to dip into your emergency fund. A job loss requires you to pause retirement contributions temporarily. There's nothing wrong with moving backwards a step or two when circumstances demand it—that's exactly why you built these safety nets. The key is recognizing when stability returns and getting back on track. Progress isn't always linear, but the sequence remains your roadmap.
🎯 Key Takeaways
- Progress over perfection: Follow the steps in order, but don't obsess over minor deviations—the best plan is one you'll actually follow consistently
- Employer match is sacred: Always capture free money before anything else (except deductible coverage)—it's an instant 50-100% return you'll never get anywhere else
- Emergency fund prevents backsliding: Without this safety net, unexpected expenses force you back into debt and destroy years of progress
- Math vs. Behavior: The mathematically optimal plan isn't always the best plan—sometimes psychology beats optimization, so choose the approach you'll actually stick with
- Retirement before college: Your kids have options for education funding (loans, scholarships, work-study); you don't have options for retirement—secure your oxygen mask first
- Stay flexible: Life circumstances change—revisit and adjust your priorities annually as your situation evolves
- Automate everything: Set up automatic transfers to remove temptation and ensure consistency—willpower is finite; systems are forever
- Sometimes you go backwards: Life happens and emergencies arise—there's nothing wrong with pausing progress or moving back a step temporarily when circumstances demand it
- Foundation matters: Budget tracking, net worth statements, and spousal alignment aren't optional—they're the infrastructure that makes everything else possible
- Learn from the experts: The Money Guy Show (moneyguy.com) and Dave Ramsey (ramseysolutions.com) have helped millions—use their proven frameworks as your guide