Step 3: Finish the Emergency Fund

Before you get to step three, you should breathe a sigh of relief. By this time you will be debt free, except the house (if you own one). You will have no payments and $1000 in an emergency fund.

Now that the debt is paid off the next step is to have an emergency fund of three to six months of expenses. This step should probably take a few months, maybe less.

Remember this account is only for true emergencies, such as losing a job. This emergency fund will also minimize the damage done by a real emergency. What used to be a financial crisis will be more of an inconvenience.

If you have no debt and an emergency of three to six months of expenses you may not worry too much about an $850 car repair. Although when you have lots of debt and no savings this can be a nightmare. Expenses like this probably would not even need an emergency fund since you have no debt. You could easily afford something like this in your normal budget.

If you do not own a home you could start saving for a home. The best option would be to buy a home in cash. Buying a house with cash can be a blessing. How awesome would it be if you could buy a house with cash? Not many people can do that.

So in two steps you are debt free and the third step is just building up emergency savings. What about the other four steps? The next steps deal with wealth building. Are you ready to build some massive wealth?