The first, and perhaps the most important step, is to live within your income. In today’s society, this may seem like a foreign concept. It wasn’t always that way. In fact, prior to the advent of credit cards in the 1950s, living within one’s income was commonplace. About the only credit available was a home mortgage and a car loan.Homeowners made do with what they had. Appliances, cars, etc. were repaired rather than replaced. If money weren’t available for an item they wanted, or even needed, the mind set was to wait until they could afford it.

Today, the feeling is if we can pay our debt service each month everything is OK. So we continue to create new debt until we can’t afford any more debt. Unfortunately, some go past this point without a thought of the consequences until it is too late.

The second step is to pay yourself first by paying off all your debts, including your mortgage, before investing or even saving. This is an unique concept to the financial planning community.

Paying off a credit card with a 15% APR is the same as receiving an equivalent return of 15% from an investment. In addition, this return is guaranteed.

The process is to pay off one debt first. Add additional money to the minimum payment if you can. Once that debt is paid off add all the money used for the first debt with the minimum payment of the next debt. Continue the process until all of your debts are eliminated. After all your debts are gone, the money you were using to pay your debts is now available for investing. To become debt free can take from 5 to 10 years, many years before the time required to pay off the mortgage alone. What also is important that by freeing yourself from debt you are not vulnerable to financial misfortunes such as a loss of income. .

The third step is to create wealth by investing your money in low risk investments over a long period of time. A debt free 60-year-old may not have enough time to build real wealth. However, without debt even the 60-year-old still can enjoy a debt free lifestyle. On the other hand, someone in their thirties or early forties could conceivably amass over one million dollars in retirement wealth.

It is recommended you invest for the long term using dollar cost averaging. This means investing the same amount of money each month no matter what the market does.

My intent is not to give investment advice since this isn’t my area of expertise. Rather, I am suggesting a way to invest for the long term without having to learn the ins and outs of investing in the stock market.

The rewards by following these three steps are immeasurable. Think about how much disposable income you would have when you have no debts.

Starts today by living on less than you earn. Next pay off all of your debts before saving or investing.. Then build retirement wealth by investing the money you were putting towards debt payments in conservative, low risk investment vehicles.

Remember most Americans believe that “everything will just work out.” It doesn’t work that way. You must take action to build real wealth and to achieve financial freedom.