If you want to be the bomb with your money, and have lots of it over time, the key is prioritizing our wants. A Skinny book by Bettheny Frankel said something like, “You can have anything you want, you just can’t have it all at once.” It’s the same with money.

So my challenge today is that you really prioritize and order your wants. Here’s three steps to help you build wealth over wants.

1. Make Wealth Building Automatic

The minute you get a new job that allows you to contribute to a 401K or other retirement account, take advantage! Did you know that putting away $350 in pretax money will not have the same effect on your net take home pay? Nope. You’ll see a reduction of around $245, because you’ll only be taxed on the remaining amount. Sometimes it will even bump you to a lower tax bracket.

Also, since money is more about behavior than math, you’ll learn to get by on the amount of your paycheck and you won’t even miss the money. Increase the percentage of contribution regularly–you won’t even notice another 1% every few months. Do this until you’ve maxed out at 15-20% of your pay.

This is extra important for women, because we tend to be in and out of the job market more often. So when you’re in, capitalize on all the retirement savings opportunities you can!

Make sure within your 401K, you’ve picked a balance of stock funds with good growth. Don’t let your money sit around in some lame default fund with 1-4% interest. Remember, money invested at a 10% return will double every 7 years, money invested at 7% will double every 10.2 years.

Choose your balance of funds with this in mind. Morningstar.com is a great place to research your employer’s 401K options.

2. Avoid Debt or Rid Yourself of Debt Like an Abusive Boyfriend with a Bad Mother

Debt is the enemy to wealth. Don’t use credit cards if you can’t pay them off in full each month. Even if you can pay them off, did you know you spend 27% more when using a card versus plopping down cash? Convert to cash. Give yourself a weekly allowance for food, beauty, miscellaneous and when it’s gone, it’s gone.

My husband and I take out our allowance and grocery money on Wednesdays. It’s great for budgeting because a lump sum comes out, it’s one entry in the checkbook, and then we can use our individual allowance how we want. I spend $100 on groceries. Our individual allowance pays for things like eating out and entertainment, hair products or new mascara. My husband spends his allowance on us, if I have extra allowance at the end of the week, I put it in my glove box for beauty emergencies, like a last minute wax. Yes, I’m greedy about my beauty fixes.

The point is, break yourself of the credit card habit. And know that debt for cars and student loans does not have to be a way of life. If you want tons of inspiration on this subject, check out Dave Ramsey’s radio show or podcast. It’s like a daily motivation pill if you need inspiration to get out of debt fast like your hair’s on fire!

3. Know Your Numbers

In health, they say we should know the following numbers: blood pressure, BMI, fasting blood sugar, total cholesterol/HDL. In personal finance, I think we should know the following numbers:

• Take home pay by the month (you’d be surprised how many people can’t answer this question when asked).
• Total debt from all sources. Actually listed on paper.
• Monthly expenses, including semi annual expenses broken down by month.
• Net worth. Your total financial picture that has nothing to do with income. It’s just what you OWE subtracted from the current value of assets you OWN: home, savings, retirement accounts, etc. This should be calculated once per year. A more detailed post here.

Once you know your numbers, it’s harder to stay in denial. Paying attention is half the battle. And if you check your net worth each year, and you start to see traction–your debt goes down, your investments grow, or the value of your home increases, it gets exciting.

And for heaven’s sake, please, please, please have an emergency fund. Some years will be terrible financial years. The economy will hit a rough patch, your house is underwater, your husband loses his job. It’s not “if,” it’s “when.” But if you have three, six or eight months of basic living expenses saved up, you won’t be tempted to do something like short sell your house, put your life on a credit card, borrow or cash out a retirement fund. That money doesn’t exist for you now anyway. It’s the magic fairy godmother of your future. Leave her be, don’t rob her of her magic powers.

Side Note

With every blog I want to remind you of everything. Like an annoying big sister. Trust me, I don’t share or recommend anything I haven’t done myself. I didn’t make my first million blogging or anything of the sort. I’m lucky if anyone reads this. I think my sister in Switzerland does. Shout out to Regina!

I did it by working a regular job, having rough financial years, marrying late. But two things I prioritized, like eating all my vegetables and having dinner before dessert: 1. I maxed out my 401K as soon as I got my first job at 28, and 2. I bought homes that were less expensive than I could afford, planned how I’d spend my money each month, and avoided debt. I lived through two recessions in 2001 and 2008 and then watched my retirement accounts recover and explode…because I left them alone and didn’t freak out when the markets dropped.

As a woman in the workforce I can safely say I was underpaid at every job, despite my education. That sucks and lack of pay equity is one of my biggest pet peeves. But I was determined to be self sufficient and I wanted to be rich someday, with or without a man.

You Can Do This

You can do this! Keep it simple, be focused. As you get rid of debt, all the money that comes in will be yours to decide in advance how you’ll save and spend. Read, Bogleheads’ Guide to Investing if the stock market intimidates you. If you want to be rich, you need to get comfortable with investing. Even if you’re blessed with a $20,000/month income, if you’re not investing it with your future fairy godmother that lives at Wall Street, the money you earn will never take care of you. You’ll always just be chasing the income. Put your money away and it will multiply like rabbits and soon it will kick off enough interest that you can sit back and live off that. And if it’s important to you, owning a home is a great way to build equity and have predictability in your future. (Get a 15 or 30-year fixed mortgage; I recommend 15.)

Be Wise

Last but not least, don’t make choices that will really harm your financial life. Like not carrying adequate auto and health insurance. One hospital stay, like appendicitis, and bam! Hundreds of thousands. If you rely on your spouse’s income, have a 10, 15 or 20-year term life insurance policy representing 10X his income. Term policies are not expensive (whole life is).

And for heaven’s sake, don’t give your money to people to “invest.” The people you should not trust is your brother-in-law, your son, your clergy person, and the nice guy you trust. Just. Don’t. ‘Nuff said. If you need help with your finances, ask your CPA or someone super boring and smart who they trust. I recommend a certified financial planner that you pay by the hour.

Okay, friend. Good chat. I hope this contributes to your canon of research as you take charge of your Wealth Plan. Implement your wealth plan and your current wants will fall into place. You can have both! Just don’t put your wants before your wealth.

xo, tricia