• Add to Your Knowledge by Reading Financial Literature
  • Identify How Your Income is Allocated
  • Explain the Principle of Paying Yourself First
  • Understand the Three Specific Phases of Saving
    • Create a Cash Buffer for Emergencies
    • Increase Your Monthly Free Cash Flow
    • Build Your Retirement Nest Egg


  • Read – Chapter 5, Save Your Way to Wealth
  • Complete the activities
  • Go on a personal Treasure Hunt

Workbook Download

Lesson 5- Go On A Treasure Hunt


People who spend every penny they make, and then some, rob themselves of ever getting ahead. Saving money sometimes requires sacrifice and often, it also requires a change in the way you think. For example, many people in debt look at their paychecks as an opportunity to make new purchases or to pay only the minimum payments of existing bills. There is a mentality of ‘spend ‘til it’s all gone’. If this is the case, we often find ourselves with more ‘month’ at the end of the ‘money’—instead of the other way around. While on the other hand, the one trait all wealthy people seem to share is the ability to save. In other words, wealthy people have learned how to pay themselves first.

Activity 5.1: Suggested Reading Project

Suggested reading—The Richest Man in Babylon, by George S. Clason. Ross highly recommends reading this book—either check it out from the library or add it to your personal collection. The amazing principles taught in this book written nearly 100 years ago still apply today.

Key Point

One of the lessons taught in The Richest Man in Babylon is that a part of all you make is yours to keep. What a profound concept!

Where Does Your Income Go?

When you receive a paycheck or other income, where does that money go? Does it seem to just fly out of your account or disappear from your wallet? Too often all of what we make is used to pay for housing, to pay credit card companies, department stores, to pay for transportation, to pay for groceries, for children’s extra curricular activities such as piano lessons, sports fees, to pay for clothing, or to the liquor store, etc. You get the picture—not so easy come, but easy go!

Activity 5.2: Where Does It All Go?

It is important to note that you should live off last month’s income rather this month’s paycheck-or from paycheck to paycheck. Living off last month’s income will create a buffer just in case you are faced with an emergency. In that event, you’ll have extra cash on hand to pay for car repairs or medical emergencies without placing the unexpected charges on a credit card.

Learn How to Pay Yourself First

As discussed earlier, wealthy people have learned how to pay themselves first. This lesson focuses on changing your mind-set and encourages you to pay yourself first. Your goal in saving is to begin to put aside a minimum of 10% of your net monthly income. Over time that 10% is going to be used for 3 specific phases of saving. In order of priority they are:

  1. A cash buffer for emergencies equal to one month’s take home pay
  2. Increase free monthly cash flow to 10% of your net monthly income
  3. Build up a substantial nest egg to invest for a comfortable retirement

Let’s take a look at each of the 3 phases in a little more detail.

Phase 1 – Create a Cash Buffer for Emergencies

The first step in getting debt-free is to create a cash buffer for emergencies. This cash buffer will help you avoid going further into debt in the inevitable event of an emergency. To start, your goal should be to save one month’s take home pay. You can’t plan for every emergency, but if you have some cash on hand, it can help deal with the emergency without doing it the old fashioned way of putting it on a credit card.

The Goal—Cash Equal to One Month’s Take Home Pay

The goal of Phase 1 is to create a cash account equal to one month’s take home pay in the next 60 days or less. But remember, while working on this goal you shouldn’t put off paying off your debts any longer than is needed to build up a little reserve.

If it’s unrealistic to save one month’s take home pay in the next 60 days, then start with something more realistic, like $500 – $1,000. That’s enough to deal with most minor emergencies without taking away your focus on getting out of debt.

You should set a goal to find it and build your cash buffer in the next 30 days. It will take a lot of focus and sacrifice, but you can do it and the rewards are well worth the effort.

Activity 5.3: Emergency Fund—Target Cash Amount

Remember, when it comes right down to it, you need to start living off last month’s income rather than this month’s paycheck. That’s the buffer we’re looking for. Once you get debt-free, you’ll want to increase that cash buffer to three to six months of take-home pay. that will enable you to weather almost any emergency that comes up without going into debt to do it.

Activity 5.4: Three – Six Month Emergency Fund

What is your three to six month emergency fund goal?

Note: This should be accomplished sometime within a year after you’ve re-tired your consumer debt.

Jump-Start Your Emergency Fund

What’s in Your Attic?

Most people have hundreds of possibly even thousands of dollars available to them in some very obvious places. As Ross explains you can get a big start on your emergency fund by simply getting rid of a few things that you don’t use or need. Look for items still in good condition that would be valuable to someone else.

Here are a few ideas you may consider to jump-start your emergency saving fund:

Garage Sale – Involve family members (children and teenagers) in some of the busy work such as cleaning the items, attaching price tags, and placing flyer on signs around town. Place an advertisement in the local newspaper and in the free online classifieds. Be sure to include the dates, time and address.

eBay – selling items on eBay can be fun as well as lucrative.

Sell some Luxury Items – These items may include a second car, a boat, RV, motorcycle, collectibles, etc. When you consider the cost of these luxuries and how much they are worth, you’ll see that you can make some great progress with a few simple sales. The peace of mind a debt-free life will bring to you makes it easier to make these kinds of sacrifices.

Liquidate Real Estate – In extreme cases, you may need to consider selling your home to reduce your debt burden and free up some cash to help with your other debts. This is not an easy decision but one that may be necessary to get back on solid footing.

Housing is often the single biggest expense in most household budgets, which means it’s also possibly the area with the most potential for savings to apply toward your debts.

Do the Math

Selling your house sounds harsh; however, you may need to face some difficult realities and make some hard decisions. Do the math. How much equity is in your house? What is the market value? What are your financial obligations? Will you be able to get yourself back on (or closer to) solid financial ground by selling your house (or other real estate) moving to more modest housing and paying off debt?

As you begin this program, you should consider every major asset you own and ask this same question. My personal challenge to you is to “Go Big.” A dramatic change in your lifestyle will not only jumpstart your debt elimination program, but help you make the emotional commitment to completing this important task. When you’re “All in,” you’ll see results faster and those results will motivate you to do even more to reach your goal.

Remember, if you make the sacrifices now, they may only be temporary. Once you have ample financial reserves, then you will be able to make decisions to enhance your lifestyle without adding to your debt problems.

Activity 5.5: Get The Cash Flowing!

Refer back to Ross’s suggestions for liquidating items still in good condition that would be valuable to someone else. Or, think of some original ideas to get the cash flowing. Think of ways you personally can begin to build your emergency cash fund.

Plan and execute this activity in the next two weeks so you can establish your emergency fund and use any excess cash to pay down the first debt in your debt priority list.

If you’re like most people who complete this activity, once the items are gone and you have cash in hand, you’ll never miss them and wonder why  you didn’t get rid of them sooner.

When you finish you Personal Treasure Hunt, Create a short video or email that answers these three questions.

  1. How much money did  you raise with your treasure hunt?
  2. What did you do with the money?
  3. How did completing this activity make you feel?

Post your Treasure Hunt video email on youtube and Facebook and share the results with your friends and family and challenge them to make some changes in their financial life with their own personal treasure hunt.

Share your video or email with Ross so he can revel in your success. Send a link to the video or a copy of your written story to [email protected]