Understanding the Financial Order of Operations: A Comprehensive Guide 2024

The Financial Order of Operations (FOO) is a systematic nine-step plan devised to streamline financial priorities, helping individuals at any stage of life to navigate through the complexities of financial planning. Introduced by Brian and Bo in their groundbreaking YouTube video in 2017, FOO has emerged as a resilient all-weather strategy, guiding users in managing their finances efficiently regardless of their financial circumstances 15. Akin to the mathematical order of operations known as PEMDAS, FOO offers a structured approach to tackling financial decisions, ensuring that each step is meticulously followed before progressing to the next, thus harmonizing investing, budgeting, and debt management to achieve financial goals and freedom 23.

At the heart of FOO lies the Money Guy philosophy, which emphasizes the importance of generosity, investing 25% of gross income, avoiding debt, relishing work, and maximizing life enjoyment. The nine methodical steps include covering deductibles, capturing employer matches, eliminating high-interest debt, establishing an emergency fund, contributing to Roth IRAs/HSAs, maximizing employer plans, entering hyperaccumulation, prepaying future expenses, and finally, paying off low-interest debt. This comprehensive guide serves not only as an answer to the perennial question, “What should I do with my money?” but also as a beacon for achieving financial order and ultimately, financial freedom 34.

Understanding the Basics of Financial Order of Operations

The Financial Order of Operations (FOO) presents a nine-step system meticulously crafted to assist individuals in prioritizing their financial objectives and fostering wealth accumulation. At its core, FOO is a holistic strategy aimed at financial management and wealth creation, designed to be universally applicable, regardless of one’s financial condition or life phase 1. This system draws parallels with the mathematical principle of PEMDAS, suggesting a sequential approach to personal finance management 2.

Critics of the FOO argue that its complexity and the perceived redundancy of certain steps may deter some. However, its structured methodology provides a clear path through the often convoluted landscape of personal finance 1. The initial four steps of the FOO specifically address risk management and wealth maximization by ensuring adequate coverage for insurance deductibles, optimizing employer matches, eliminating high-interest debt, and establishing emergency reserves 4.

Moreover, the FOO emphasizes the significance of tackling financial goals sequentially rather than attempting to address multiple objectives simultaneously. This focus aids in mitigating the overwhelming nature of personal finance, encouraging individuals to learn from potential missteps and to align their financial strategies with their life ambitions and needs 5. This adaptability underscores the FOO‘s utility as a general framework, allowing for tailored adjustments to cater to unique financial scenarios 5.

The First Steps: Budgeting and Emergency Funds

Creating a budget is the cornerstone of financial management, allowing individuals to gain a clear understanding of their income versus expenses 6. Utilizing tools like Bankrate’s Home Budget Calculator or various budgeting apps can streamline this process, making it easier to allocate income towards different financial goals, including emergency funds 6. It’s essential to calculate take-home pay, list essential living expenses, and determine discretionary income to set realistic savings targets 7.

An emergency fund acts as a financial safety net, providing stability and peace of mind. The goal is to save between three to six months’ worth of living expenses, keeping this fund in a high-yield savings account for both easy access and competitive yield 6. Options like certificates of deposit (CDs) and money market accounts (MMAs) offer alternatives with potentially higher yields, though they come with their own set of conditions 7.

To effectively build this fund, consider automating your savings through direct deposits or savings apps, gradually increasing your savings rate, and saving unexpected income like tax refunds 69. It’s also wise to start small, setting modest initial goals and prioritizing debt repayment where necessary. Remember, the emergency fund should be reserved for true emergencies, with clear guidelines established for its use to avoid mismanagement 810.

Maximizing Retirement Contributions and Employer Matches

Maximizing retirement contributions and employer matches is a crucial step in the Financial Order of Operations, building upon the foundation laid by earlier steps 3. Employees have the opportunity to contribute to both 401(k) and IRA plans within the same year, enhancing their retirement savings potential 13. Employer contributions to 401(k) plans can significantly boost an employee’s retirement fund, typically matching 50 cents or $1 for every dollar the employee contributes, up to a certain limit 14. To fully leverage this benefit, employees should aim to contribute at least enough to receive the full employer match, effectively doubling their retirement savings in some cases 17.

Strategies to maximize 401(k) matches include:

  • Seeking employment with companies known for generous 401(k) matches 14
  • Setting up automatic 401(k) contributions to ensure consistent savings 14
  • Understanding the employer’s matching formula and adjusting contributions accordingly 18

Employer matches not only provide immediate financial benefits but also contribute to the long-term growth of retirement savings through compound interest. Starting early and maximizing contributions can result in a substantial retirement nest egg, underscoring the importance of this step in achieving financial freedom 17.

Addressing High-Interest Debt

Addressing high-interest debt is pivotal in achieving financial stability and moving towards broader financial goals. High-interest rates, especially from unsecured debts like credit cards and personal loans, can significantly compound borrowing costs, making it difficult to clear these debts 19. Mortgages and federal student loans typically offer lower interest rates, contrasting sharply with the high rates charged by credit cards and payday loans, which can be as high as 8% or more 20.

Effective strategies to manage and pay off high-interest debt include:

  • Making more than the minimum payment on credit cards to reduce the principal balance faster and decrease overall interest paid 19.
  • Utilizing the debt avalanche method, which prioritizes paying off debts with the highest interest rates first, thereby reducing the amount of interest accrued over time 19.
  • Considering balance transfer credit cards, such as the Wells Fargo Reflect® Card or the Citi® Diamond Preferred® Card, which offer 0% APR introductory periods. This can provide a window to pay down debt without accruing additional interest 20.

Additionally, exploring debt consolidation options or seeking credit counseling can offer structured plans to tackle debt efficiently. Non-profit credit counseling agencies, for instance, provide free assessments and can guide towards effective debt management solutions 23. These steps, combined with disciplined budgeting and spending habits, pave the way towards financial freedom by mitigating the impact of high-interest debt on financial well-being 2124.

Investing in Your Future: Roth IRAs and Long-Term Savings

Investing in your future requires a strategic approach to Roth IRAs and long-term savings, focusing on maximizing the benefits these investment vehicles offer.

  • Start Investing Early: The key to building a substantial retirement fund is starting early. By opening an online brokerage account and making regular contributions, investors can take advantage of compounding interest over time 12. For those under 50, the contribution limit to Roth IRAs is $6,500 in 2023, increasing to $7,000 in 2024, with an additional $1,000 allowed for those aged 50 or older 13.
  • Roth IRA Benefits: Unlike Traditional IRAs, which offer tax deductions on contributions but are taxed upon withdrawal, Roth IRAs provide no tax break for contributions. However, withdrawals are tax-free, offering a significant advantage for long-term growth and tax-efficient retirement income 13.
  • Diversification and Investment Choices: It’s crucial to diversify your portfolio across various asset classes, including stocks, bonds, and real estate investment trusts (REITs). Consider broad-based U.S. stock index funds, global stock index funds, and dividend stock funds to balance risk and potential returns. Moreover, employing strategies like dollar-cost averaging can help mitigate the impact of market volatility 262728.

By understanding and utilizing these strategies, investors can effectively navigate the financial order of operations, setting a solid foundation for financial freedom and achieving their long-term financial goals.

From Debt Repayment to Financial Freedom: Final Steps

Transitioning from debt repayment to financial freedom involves several critical steps, each designed to build upon the previous, ensuring a smooth progression towards your financial goals. Here are some of the final steps to consider:

  1. Clearly Define Your Financial Goals: Start by visualizing what financial success looks like for you. Write down these goals using the SMART format – Specific, Measurable, Achievable, Relevant, and Time-bound 11 31.
  2. Create Multiple Streams of Income: Diversify your income sources. This not only helps in achieving financial security faster but also plays a crucial role in attaining financial freedom. Look for opportunities that align with your skills and interests 11.
  3. Stay Educated on Financial Issues and Maintain Your Property: Keeping abreast of financial news and changes in tax law can help you make informed decisions. Similarly, investing in the maintenance of your property can prevent costly repairs in the future, thereby saving money in the long run 12.

These steps, when followed diligently, lay a solid foundation for financial freedom, allowing you to build wealth and secure your financial future.


Through the exploration of the Financial Order of Operations (FOO), we have ventured on a comprehensive journey, delineating a step-by-step guide designed to prioritize financial goals and maximize wealth accumulation. The article navigated through the nuances of effective financial management, from budgeting and emergency funds to tackling high-interest debt and maximizing retirement contributions. By adhering to this structured approach, individuals are better equipped to navigate the complexities of personal finance, ensuring that each strategic move aligns with broader financial goals and the pursuit of financial freedom.

Reflecting upon the essence of FOO, it becomes evident that the core objective is to harmonize financial decisions within a meticulously crafted framework that champions informed and deliberate financial planning. This guide not only outlines a pathway to financial stability but also underscores the significance of investing in one’s future, showcasing the vital steps toward achieving and sustaining financial freedom. As readers digest these insights, they are encouraged to reflect on their financial strategies and contemplate the broader implications of these practices, fostering a culture of financial literacy and empowerment.


What are the key steps in the Financial Order of Operations?

The Financial Order of Operations (FOO) consists of nine key steps:

  1. Ensure deductibles are covered.
  2. Take advantage of employer matching in retirement plans.
  3. Pay off high-interest debt.
  4. Establish an emergency fund.
  5. Contribute to a Roth IRA and/or Health Savings Account (HSA).
  6. Maximize contributions to employer-sponsored retirement plans.
  7. Enter the hyperaccumulation phase.
  8. Prepay for upcoming expenses.
  9. Consider other strategic financial moves.

Can you explain Step 7 in the Financial Order of Operations?

Step 7 is the hyperaccumulation phase, which involves saving 20-25% of your gross income. This step is about planning for the future and reaching a status where you are saving at an accelerated rate.

How does one identify high-interest debt according to the Money Guy?

High-interest debt is classified based on the interest rate and your age. For student loans, it’s considered high-interest if the rate is above 6% in your 20s, above 5% in your 30s, above 4% in your 40s, or any rate when you’re 50 or older. For auto loans, the guidelines are to put 20% down, pay it off in three years or less, and ensure the payment doesn’t exceed 8% of your gross income.

What is a solid financial tip for saving money?

A valuable financial tip is to prioritize saving over spending. Think of saving as an investment in your future. To build a nest egg or emergency fund, start with small, manageable amounts. For example, save $100 or even $50 per month by setting up an automatic transfer from your paycheck to a separate savings account that earns interest.


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