Financial Success in 16 Steps

Adapted from Dave Ramsey’s “Baby Steps”

Start with #1. Then #2. Then #3. Do them in order. It may take a decade or more to finish- don’t be discouraged if one step takes time.

STEP #1  Health Insurance
Basic coverage (even high-deductible, low-premium plan) to protect you against catastrophic health costs (Cancer, I.C.U., major illness, etc.) which could bankrupt you. Your plan doesn’t need to cover every little cost, just the big ones, in case of something really costly happening.
Usually best deal is through your employer. Or try

STEP #2  Long-term Disability Insurance
If you have a child or other person who depends on your income, you need enough disability insurance to cover this need should you become disabled. More people become disabled than die during their working years. Become aware of your coverage through Social Security (average benefit is about $1200/month) (Link to more info) or work plan, and fill in the gap.
If your employer doesn’t offer Disability Insurance, try Zander Insurance (Link) – they shop companies for you and find the best value.

STEP #3  Term Life Insurance
If you have a child or other person who depends on your income, you need enough life insurance to cover this need should you die. Recommended amount is 8x’s your annual income. Term should cover until youngest child turns 20. Avoid all other types of life insurance besides Term Life Insurance, which is the only kind you need (Avoid Whole Life, Univeral Life, Variable Universal Life.)
If your employer doesn’t offer Term Life Insurance, try Zander Insurance- they shop different companies and find the best value. Easy to use. Link to Zander

STEP #4  Will & Living Will
A “Will” determines who gets what after you die (who gets custody of your kids). A “Living Will” determines what forms of life support you want used if you become mentally unable to make health care decisions. Use online forms to do this cheaply and quickly. (Link to Legal Zoom)

STEP #5  3-Month Supply of Normal Foods
“Build a small supply of food (and water) that is part of your normal, daily diet… purchase a few extra items each week to build a one-week supply of food. Then you can gradually increase your supply until it is sufficient for three months.” (Link to more info)

STEP #6  Emergency Fund of $1,000
Use a local bank savings account. Still easy to access the money if needed, but separate from your checking account. Not to earn much interest, but to buffer you against small emergencies (car repairs, medical bills, etc).

STEP #7  Employer Match on 401k Plan
Contribute to 401k up to your employer’s “match.” The match is free money- take full advantage! (If employer doesn’t offer a match- skip this step). 401k Match – Calculator

STEP #8  Pay Off All Debt (except mortgage)
To accomplish this step, use a “debt snowball” and pay the highest interest debts first (Pay Day loans, then credit cards, then personal loans, then car loans). (why this method works best)

STEP #9  Emergency Fund Equal to 6 Months of Expenses
Save up money equal to 6 months of your expenses. Save it into the highest interest-paying “money market” account you can find.
for the highest yields across the country. Little interest will be earned, but you will be protected against larger emergencies. (Loss of job, major car repairs, major medical bills, etc.)

STEP #10  1-Year Supply of Basic Foods
Store basic foods that would be required to keep your family alive if you did not have anything else to eat…water, wheat or other grains, legumes, salt, honey or sugar, powdered milk, and cooking oil.
(About $800 for 1 person for 1 year)

STEP #11  Earthquake Insurance
If you live near a fault line, you will want to buy earthquake insurance. Usually can be added on to your Home Insurance. (About $400/yr for a 15% deductible on a $200,000 home).

STEP #12  Pay Off Mortgage Completely
Experts used to recommend investing before paying off your mortgage…but since this is a sure thing and stocks are more volatile, it may make more sense to have a paid-off home. Many experts now are shifting to this view, and warn against seeing your house as an “investment.”(Savings Calculator)

STEP #13  Retirement Plan
Start a regular investment of 15% of your income into ROTH IRA’s and 401k’s (use a “target-retirement date” mutual fund).
(’s Roth IRA “Open an account screen”)

STEP #14  College Savings for your Children
Consider Utah’s saving plan– it’s one of the best & can be used in any state.

STEP #15  Invest
Max out your Roth IRA’s (one for each spouse), then your 401k or buy real estate. For stocks, use mutual funds, preferably low-cost, broad market “Index Funds” inside of a tax-sheltered retirement plan like a Roth IRA or 401k.

STEP #16  Umbrella Insurance Policy
“Extra” insurance designed for people with significant assets. (

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