I’m an enthusiast of all things personal finance. Over my 30-year career as a certified public accountant, I’ve been blessed to work side by side with many brilliant CPAs and advisors and nurtured close advisory relationships with numerous successful clients. But my role with these clients has been more than that of an advisor. I’ve been a passionate student and intentional observer of the behaviors and strategies they used to build wealth.

I’ve learned there are hard truths and behaviors consistent across everyone’s journey. I’ve observed as wealth increases, more complexities arise and wealth journeys become more intimate. With that, I’d like to share what I believe are the 10 stages of the wealth journey.

Stages one through four are consecutive, focusing on financial stability. Complete one step before moving to the next. Stage five is a transitionary stage and the heartbeat of the wealth journey, although you could think of it at any point along the way. Stages six through 10 are concurrent. You might be active in each stage to varying degrees based on your circumstances and where you are along the wealth journey. Stages six through 10 are where a team with an investment advisor, CPA, lawyer and others can add significant value to your journey.

Stage 1: Plant investment seeds. Time is a vital tool in building wealth. The earlier we start planting investment seeds — even with small dollars — the bigger the wealth tree grows in the later stages of our journey. The best way to get started is to participate in your employer’s retirement plan and take advantage of the employer match. This is free money and too good an opportunity to miss. 

Stage 2: Create a Murphy fund. Murphy’s law is an adage typically stated: “Anything that can go wrong will go wrong.” We should prepare for unexpected emergencies by having cash on hand. A Murphy fund allows us to avoid high-interest consumer debt to cover emergencies. Your Murphy fund should be customized to your circumstances.  Choose a dollar amount between $1,000 and the total of your deductibles for auto, home and health insurance.  Determine an amount that makes sense for you based on your unique circumstances related to health history, vehicle reliability, age of pets, age of appliances and other factors.

Stage 3: Pay off consumer debt. High-interest debt presents a significant headwind on our wealth journey. To build financial stability, pay off consumer debt using either the debt snowball method in which you pay off the lowest balance first, then move to the next lowest balance or the debt avalanche method in which you pay off the highest interest balance first, then move to the next highest interest balance. 

Stage 4: Create a fully funded emergency fund.  Here’s where we grow our Murphy fund to an emergency fund equal to three to six months of household living expenses. A fully funded emergency fund provides peace of mind we can weather nearly any financial storm that comes our way.

Stage 5: Know your why. This might seem fluffy. But trust me, it’s important. Simon Sinek started a revolution with his books “Start With Why” and “Find Your Why.” Your why and how — principles, behaviors and actions that bring your why to life — is about serving others and improving their lives. Having an effect increases the value others will see in you and, I believe, your ability to maximize your income, an important element leading into the next growth stages of the wealth journey.   

Stage 6: The retirement account waterfall.  I consider retirement accounts as a series of descending buckets.  Each individual’s waterfall looks different. But a common strategy would be to fund an employer retirement plan up to the point of the match, then fully fund a health savings account, then fully fund a Roth individual retirement account, then go back to the employer retirement plan and fill it up to the max before allowing all excess savings to spill over into an after-tax brokerage account. A good goal is to save 25 percent of your pre-tax income into the retirement account waterfall.

Stage 7: Build it big. Focus on supercharging wealth building through investing in a combination of three things: an after-tax brokerage account started in stage six, real estate and other alternative investments and closely held businesses. Many advisors will forget to mention a closely held business as an integral component of building wealth. As an experienced CPA advisor, I’ve watched clients build significant wealth through the startup, nurturing and exiting of closely held businesses. 

Stage 8: Fund college and other future expenses.  Using 529 plans to fund college expenses is important for those of us with young children. However, college savings should be thought of only after prioritizing retirement funding. You can also begin to set aside cash for such expenses as weddings, vehicles and home down payments.

Stage 9: Strategically pay off the mortgage. At a minimum, I’m a proponent of paying off your mortgage as you enter retirement. Paying off the mortgage early might not be the right choice for everyone. Consider developing a payoff plan customized to your unique journey.

Stage 10: Legacy. This is the preservation stage of the wealth journey. Philanthropy, planning for generational wealth transfer and living life abundantly are key elements of this stage.

These stages should be thought of as a general customizable framework versus a rigid cookie cutter process. Your journey could look vastly different than another’s, even though both might result in success.

Good luck. I look forward to seeing you on the path of life’s wealth journey.