---
title: 'The Financial Order of Operations in 7 Minutes'
source: 'https://youtube.com/watch?v=VOglpNQz2qY'
video_id: 'VOglpNQz2qY'
date: 2026-08-04
duration_sec: 426
---

# The Financial Order of Operations in 7 Minutes

> Source: [The Financial Order of Operations in 7 Minutes](https://youtube.com/watch?v=VOglpNQz2qY)

## Summary

This video presents the Financial Order of Operations (FOO), a nine-step system for managing personal finances in the correct sequence. It emphasizes the importance of order to maximize returns and avoid costly mistakes, covering steps from emergency funds to debt payoff.

### Key Points

- **Introduction to FOO** [00:01] — The Financial Order of Operations (FOO) is a nine-step system that tells you exactly what to do with your next dollar. The video will move through all nine steps quickly.
- **Ground Rules** [00:30] — Three ground rules: 1) Generosity is step zero, 2) 'Bedazzle your basic life' - enjoy life but be smart, 3) The FOO is not a straight line; you may need to pause investing for other goals.
- **Step 1: Save for Insurance Deductibles** [01:37] — Save your highest insurance deductible in cash (e.g., in a high-yield savings account). This is before investing or paying off debt to avoid desperate decisions in emergencies.
- **Step 2: Employer Match** [02:19] — Contribute to employer match (e.g., 401k) to get 50-100% return. This beats paying off high-interest debt, even credit cards at 20%+.
- **Step 3: High-Interest Debt** [02:43] — Pay off high-interest debt to zero. Credit cards are always high-interest; other debts depend on age and type.
- **Step 4: Emergency Fund** [03:08] — Build an emergency fund of 3-6 months of living expenses in cash. This is separate from the step 1 deductible fund.
- **Step 5: Max Out Roth IRA or HSA** [03:33] — After steps 1-4, max out Roth IRA or HSA for tax advantages and tax-free growth.
- **Step 6: Max Out Employer Retirement** [04:02] — Increase contributions to employer-sponsored retirement accounts (401k, 403b, 457, TSP) beyond the match.
- **Step 7: Hyperaccumulation** [04:15] — Aim for a savings rate of 25% of gross income for financial independence. This excludes mortgage and non-retirement savings.
- **Step 8: Abundance Goals** [04:41] — Use extra money for personal goals like early retirement, kids' education, or dream life. Secure your own future first.
- **Step 9: Low-Interest Debt** [05:22] — Pay off low-interest debt last (e.g., mortgage at 4%) because dollars are better used elsewhere. This is the final step to financial independence.
- **Skipping Steps and Other Rules** [06:03] — You can skip steps, but it may leave money on the table or create tax issues. The video mentions other rules for buying a home, leasing, and college.

### Conclusion

The FOO provides a clear, sequential guide to financial decision-making, ensuring you maximize returns and minimize risk. Following the steps in order helps build a secure financial future.

## Transcript

know what to do with your money. And not just what to do, but in what order. sequence, it can cost you big time. Guys, I am so excited because today's video is all about the financial order of operations, also known as the FOO.
It's our nine-step system that tells you exactly what to do with your next dollar bills. We're going to move through all nine steps pretty quickly in dive in all this, head to moneyguy.com where we have an entire course that
covers all things FOO. We'll link it in the description below. Before we get some ground rules that we need to quickly cover. These fall outside the you are in your financial journey. Number one, generosity is step zero. We
believe that giving and supporting causes that are important to you, be that with your time or with your money, is something that anyone can do. And if likely you're going to be generous with a lot. Number two is to bedazzle your
requires sacrificing a little bit of today for a more beautiful tomorrow. But just so you can retire a little earlier. Have fun, enjoy life, but be smart about
keeping you from reaching your goals. And number three, the FOO is not a straight line. Sometimes you'll have to dip into your mercy fund and then go have to pause your investing because you're saving up for a down payment on a
home. That's okay. Your financial path won't always perfectly progress from one step to the next. Just make sure you have a plan to get yourself back on track. On to the financial order of operations. The very first thing you
sure that you can cover your insurance deductibles. Insurance is designed to protect you from financial catastrophe, but when something happens, you still form of a deductible. If you can't cover that amount in cash, even one emergency
can derail your entire financial plan. That's why step [music] one is saving up your highest interest deductible in cash, ideally in something like a high if your highest deductible is your
health insurance and it's at $5,000, that's your savings target to complete >> before any sort of investing and even before paying off debt because without a cash buffer, you run the risk of making desperate decisions when, not if, things
go sideways. Step two is your employer match. This is where the fun begins. If you have access to employer match through something like a 401k, this could mean getting anywhere from 50% to 100% return on your money. And that's
why once you have a starter emergency fund covered, this is the next step. A lot of debt crusaders will tell you that you have to pay off most or maybe all of your debt before you even touch investing, but frankly, that's bad math.
Even with credit card rates at 20% or higher, that employer match still beats it. And it helps you jump-start your savings for the future. Step three is tackling any high interest debt and getting it down to zero. As far as what
counts as high interest debt, it depends on your age and the type of debt. Sometimes car, sometimes student loans, but always credit cards. Credit card debt is chainsaw dangerous, definitely too dangerous to play the arbitrage
game. Step four is building up your emergency fund. That's right. Cash is so steps for it. For this, we want you to have anywhere from three to six months of living expenses saved up in cash. That way, in the event that some sort of
emergency or job loss does happen, you can cover your needs while you get it that the cash from step one actually to start from zero. Once step four is
employer match, you've got no high interest debt, and your emergency fund is fully funded. Now, you're on to step [music] five, which is all about maxing out a Roth IRA or an HSA if you're eligible. Beyond an employer match, this
is the first foray into investing because these two accounts offer major tax incentives and let your dollars grow tax-free. Next, in step six, we shift employer-sponsored retirement account. That's likely 401k, 403b, 457, or maybe
the Thrift Savings Plan. Start loading that account up beyond the employer match. [music] We consider step five and six done once you max out all of those territory where we get a lot of questions. Step seven is called
hyperaccumulation, and it's all about accelerating your journey to financial savings rate of 25% of your gross income, and that's for [music] financial independence. So, it does not include a mortgage or any savings that are not
specifically for that purpose. [music] And it's worth noting, some people might hit 25% just by maxing out their retirement accounts, or maybe [music] that enough to check the box on step seven. You can [music] keep the food
savings rate, you're on to step eight. Broadly speaking, these are prepaid like to call them your abundance goals. This is where personal finance gets really personal. Whatever it is that matters the most to you, whether it's
early retirement or setting aside money for your kids, or maybe just living the life you've always dreamed of, that's where you put this money. A lot of food to put money towards something as important as your kids' future, or
toward other areas that are so important to you. And we're not saying that you have to wait this long, remember, but dazzle your basic life. But we do believe it's essential to secure your own financial future before [music] you
time and money elsewhere. They say it on planes all the time, secure [music] your own oxygen mask before helping others. All right, now we come to step nine, paying off low-interest debt. And it shows up this late in the food because
most often, your dollars are simply put to better use elsewhere. A 4% rate on your mortgage isn't really a mathematical priority when right now high-yield [music] savings account. It's difficult to say that you are truly
financially independent as long as you have debt. So, step nine is where you retire. And that's [music] the financial order of operations. All nine steps are sometimes people want to know if they can skip steps or go out of order. And
if you do. I'm sorry. Did it say that or or did I read it wrong? Sometimes people want to know if they can skip steps or go out of order. And we're not going to break your door
down. >> [laughter] your door down if you do. Ultimately, it's your journey. We did put each step
in a specific place for a specific reason. And if you skip steps, you might be leaving money on the table or maybe even creating some extra tax liability and headaches. At this point, you might be wondering, what about buying a home?
about leasing a vehicle or paying for college? We actually have our own rules and guidelines to help you make smart financial decisions as you follow the FU. So, check out this video right here to see all of our other Money Guy rules,
including when to break them. And as always, keep building towards your always, keep building towards your great, big, beautiful tomorrow.