Paper & Coin's Four-Step Financial Freedom Framework

At Paper & Coin, we’re all about simplifying your approach to personal finances. That’s why we built a straight-forward 4-step framework to help you get your finances back on track. 

If you’re feeling like things have gone a little haywire, the important thing to remember is that we’ve all been there. Even our Paper & Coin financial coaches have made some money mistakes in the past. The key is to pick yourself up, dust yourself off, and try again. But this time, with a plan in place. Ready? Let’s go! 

Step 1: Build your Booster Fund

This is the starting point for your personal finance journey. Your Booster Fund is 1-month’s worth of ESSENTIAL expenses set aside in a high-interest savings account, in case of an emergency. Think of it as a mini emergency fund to tide you over while you’re working on paying off debt. 

This fund should include everything needed to maintain the basic costs of your housing, transportation, food, and bills. For example, if you’re a homeowner, this would include the amount you pay for your monthly mortgage payment, home insurance, property taxes, an average cost of maintenance, and condo fees, if you’re in a condo. But, remember this isn’t a long-term solution. That’ll come later. 

Step 2: Become debt-free

Becoming debt-free is one of THE BEST things you can do for your personal, ever! And, yes, this also includes whatever balances you’re carrying on a credit card. By working towards total debt freedom, you’ll be able to create margin, or wiggle room, in your finances in order to put your hard-earned money towards your investments, and savings. These are the things that EARN you interest, rather than CHARGE you interest. 

Step 3: Build your Buffer Fund

So, you’ve saved up at 1-month’s worth of expenses and  you’re totally debt-free. Now what? The next step is to future-proof your finances by beefing up that Booster Fund into a full-fledged Buffer Fund. 

How do you transform your Booster Fund into a Buffer Fund? You’ll take that 1-month’s worth of expenses, and add an additional 2-5 months of expenses to it.  This will give you an emergency fund of 3-6 months of expenses. Not to mention, major peace of mind. You’ve further reduced the amount of risk related to your personal finances. Plus, you’ve situated yourself to be able to still meet your obligations in case something happens - like a job loss, unexpected large expenses, illness...or global pandemic, maybe?

This isn’t meant to replace things like term life insurance or disability insurance. Rather, it’s meant to act as a “buffer” for expenses that aren’t insurable, but can still pack a punch to your wallet. For example, during the recent COVID-19 crisis across the globe, millions of people were unexpectedly laid off or furloughed. Most had little to no warning or time to prepare. Yes, there was government stimulus and help available, but not everyone qualified for it, and was only available for a short period of time. Additionally, the government stimulus often wasn’t enough to cover all expenses for some people.

Having some money set aside for an emergency fund gives you the margin of time and money you need in case something happens. When life throws you a curveball, you won’t be as stressed as those who don’t have this fund set aside. 

STEP 4: Budget to Give, Invest, Save, and Spend

The final step is going to look different for everyone. Those who are single and living at home will have a different financial lifestyle than someone who is married, has 3 kids, owns a house and two cars in suburbs. But, that’s the beauty of step 4. Once your emergency fund is fully stocked and you’re totally debt-free, guess what?! You have options! And, you get to decide where and how you spend your money. 

Not sure where to start with step four? Don’t worry, we wouldn’t be a financial coaching company if we didn’t give you some guidance. So, here’s how we recommend you structure your monthly budgets. This structure helps ensure you’re stashing enough cash for the future, being generous, while still enjoying the fruits of your labour and treatin’ yo self every now and then. 

GIVE (10%)

We believe that generosity begets generosity, and being stingy and cheap isn’t a good look for anyone. So, we recommend you put your money where your mouth is and incorporate giving into your monthly budget. Make it a line item at the top of your budget. We recommend around 10% of your net monthly income go towards registered charities for causes that are near and dear to your heart. And, it doesn’t hurt to get the charitable donation credit against your income taxes!

INVEST (20%)

Put your money towards things that will make you money. Investing at least 20% in registered retirement investment accounts will allow you to invest in the stock market, plan prudently for your future, and even save a down-payment for your first condo or house. But, guess what?! The only way to make that happen is to actually do it! If you don’t know the first thing about investment check out our online Masterclass launching this September to find out how you can learn the basics. 

Oh, and for those of you lucky people who have an employee match program towards a retirement investment plan, keep in mind that that will be counted towards your annual contribution limit for the year in a registered retirement account. So, keep that in mind as you map out how much you’ll investing into your retirement accounts, 

SAVE (10%)

This is different from investing, as it’s not necessarily money that you’re setting aside to earn a return. Instead, it’s where you’re essentially “parking your money” until it’s time to make that purchase. This is where we recommend setting money aside to buy that new piece of furniture, take that vacation, and maybe even upgrade that car. It’s the money you know you’ll be using to spend on something. If you don’t need to save 10%, go ahead and put this money into your investing budget instead! Again, this is just a guideline, but YOU can decide how much you want to save and for what.

SPEND (50%)

Now, this is a hard one for many people. This category of your budget can be sliced and diced in many ways. But, at Paper & Coin, we believe in uncomplicated finances and keeping it simple. So, whether this is fixed or variable spending, essential or disposable spending, we believe you should aim to only live on half of what you make. 

Now, remember, you can still use your SAVINGS to stash up some money for bigger purchases, but otherwise, on a month-by-month basis, your spending should ideally remain in the 50% range of your net income. This is where being debt-free, having that emergency fund, and cash-flowing your life will really help. Carrying out steps 1 - 3 of our framework should allow you to have enough money to invest, save for something special, and still be intentional with your charitable giving. 

If you found this overview of our Financial Freedom Framework helpful, and you’re looking to continue your financial literacy journey, you’re in luck! We are so excited to announce that we are launching our first self-guided online course this September.





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