7 Steps to Financial Peace
A practical roadmap from financial stress to financial peace.
Start an Emergency Fund
Start with a goal of saving ฿10,000. If that feels impossible, try ฿5,000. The purpose is to build a wall of defense between you and going deeper into debt. Life happens, and you don't want more debt when a personal emergency strikes.
Save this money in a separate bank account that you can access quickly. A separate savings account is critical. If it stays in the account you normally use for food and bills, it will disappear. Do this as fast as you can. Clean out your house and sell something if you have to.
An emergency is an expense that is unexpected, necessary, and urgent.
Eliminate Consumer Debt
Consumer debt includes credit cards, personal loans, vehicle loans, and any other kind of high interest debt.
You're paying massive interest to lenders. It's like stealing from your future income, because those interest payments could be going toward saving or investing. When you remove monthly debt payments, you build wealth much faster. More importantly, you achieve financial peace which has a positive impact on almost every area of your life. That's something you can't place a value on. The fight to get out of debt is worth it!
Yes, but not yet. Your house is usually going up in value and the interest rate is usually pretty low. For that reason we recommend you focus on paying off your consumer debt first. We'll deal with the house in Step 6. For now, just stay current on your monthly mortgage payment.
We recommend using what some people call the "snowball method."
List your debts in order from smallest to highest balance. Focus on paying off the smallest debt first. Make minimum payments on all your other loans to avoid going deeper in debt. Throw every extra ฿ you can find at the target debt. Once a debt is paid off, take that payment and add it to the next debt, like a snowball growing bigger as it rolls. Get aggressive and excited about it!
Research suggests that paying off a small debt first can build motivation and help some people stick with a debt payoff plan, even though paying highest-interest debt first usually saves more money.1
Earn More
- Can you get more hours at work?
- Work hard and ask your employer for a pay increase.
- Find a 2nd job on the weekends or evenings.
Sell Something
- Most of us have stuff we don't need anymore.
- Even small amounts of money can help accelerate the process of getting out of debt.
Cut Expenses
- What expense can you eliminate so you have more money to pay debt each month?
- Even small cuts can have a big impact.
- Learn to live on a budget.
Remember, It's Temporary
- Working hard to pay off debt is only a temporary season of sacrifice in your life.
- It will be difficult at first, but once you see your debt start to disappear, you'll gain momentum towards your goal!
Many people think debt consolidation is the answer. Most of the time, this is nothing more than a bandaid that doesn't fix the heart of the problem; your behavior. It doesn't matter how you reorganize your loans; at the end of the day, you still need to spend less than your income and take responsibility for your own financial decisions. The real solution is changing the behavior that got you into debt in the first place.
Finish Your Emergency Fund
At this point, you're debt-free of everything except your house. The small emergency fund from Step 1 protected you from flat tires and broken fridges. Step 3 protects you from life-changing emergencies such as job loss, serious injury, or major home repairs.
Ask yourself, "How much does my family need to survive?" Include housing, food, utilities, transportation, insurance, and basic living expenses. Don't include entertainment or vacations. Only what you need to survive.
Now multiply that number by 3 to 6 months. If your family depends on one income, aim for 6 months. If you have multiple sources of income, 3 months may be enough. If your wife feels more secure with 6 months, you'd better save 6 months!
Keep this money in an easily accessible bank account. This is not investment money. With your debt payments gone, most people can finish this in less than one year. When the emergency fund is complete, stop adding to it and feel your financial stress begin to fade away.
Begin Long-term Investing
Now that you're protected with a full emergency fund, it's time to build for the future. A good starting point is to invest 15% of your income. If your household income is ฿30,000 per month, that's ฿4,500. If your household income is ฿50,000, that's ฿7,500. What matters most is that you invest consistently and regularly.
of Thai people have no retirement plan, according to a
2024 Bank of Thailand survey.1 What is your plan?
Provident Fund
- If your employer offers a provident fund, use it
- You contribute a percentage of your salary
- Your employer often matches your contribution which is free money!
Government Pension (กบข)
- For government workers
- You contribute 3% of salary
- The government adds 3% match + 2% extra
- You can contribute more if you want
RMF (กองทุนรวมเพื่อการเลี้ยงชีพ)
- Tax-deductible retirement fund available at many banks.
- Must invest at least once per year
- Penalties if you withdraw before 55
Mutual Funds & ETFs
- Investments in broad market funds through your local bank. You can even invest in foreign markets like the U.S.A.
- No tax benefits, but historically good for long-term growth
- Invest and leave it alone
Talk to your employer or visit your local bank to discuss investment options suitable to your situation.
Save for Your Family
By now you're debt-free, have a full emergency fund, and you're investing for the long-term. Well done! Now it's time to think about your family's future needs.
Children's Education. A 4-year Architecture degree at a famous university might cost ฿500,000. A 4-year English degree at a small local university might cost ฿120,000. That's a big difference. Do some research on education costs, decide how much you want to save, and start a monthly savings plan in a separate bank account.
Weddings. Do you want to help pay for your child's wedding? If yes, how much? Weddings can easily become emotional spending events so plan ahead and don't spend more than your budget.
First Home Support. Helping your children buy their first home is a huge blessing. It helps them avoid massive interest expense and gets them started with homeownership.
Honor your parents by making a plan for their care.
Aging Parents. Will you need to help with your parents' living expenses, medical bills, or housing? Have you had a clear conversation with them about expectations? Have you talked with your siblings about how responsibility will be shared? Many families have broken relationships because of unclear expectations. Planning ahead for parental care and even death does not dishonor your parents. You're doing the opposite!
Own Your Home
By this point, you are free from consumer debt, have a full emergency fund, are investing consistently, and are saving for your family. Now we talk about your largest financial asset: your house.
If you don't have a mortgage or don't plan to get one, skip to Step 7. There's nothing wrong with renting. In many seasons of life, renting is wise. But do not buy a home while you still have consumer debt or no emergency fund.
Big Down Payment
Save aggressively until you have at least a 20% down payment so you can qualify for a better rate and keep your monthly payment lower.
Shortest Term
Choose the shortest loan term you can comfortably afford, ideally 15 years, to get a better rate and pay less total interest.
25% Rule
Keep your mortgage payment under 25% of your net income so your budget stays manageable.
Your mortgage interest rate is usually fairly low, around 5–7%. Homes may go up in value over time, and investments also have time to grow. Long-term investing works best when you start early, because compound growth needs time. For many people, that makes investing more important than paying off a low-interest mortgage early.
Make extra principal payments. Use bonuses or inheritance toward the principal. Even just 1 extra payment per year can reduce your loan term by several years and save significant interest. But keep your emergency fund full and continue investing. Don't sacrifice those to pay off the house faster. Check out the mortgage calculator to see how extra payments can have a huge impact.
Build Wealth & Give Generously
You've made it! You're debt-free, you have an emergency fund, you're saving and investing, and your home is paid off. Now it's time to build wealth and give generously.
Keep it simple. Banks and salespeople often offer complicated investments. Stick with things you understand. Spread your money across different types of assets, such as investment funds, retirement accounts, and debt-free real estate.
Increase your giving. Help children in need. Surprise a single mom with a car she needs. Repair an elderly neighbor's home. Help pay for a child's education. Use your financial freedom to make a difference in the world.
Celebrate milestones. Travel with your spouse. Enjoy your money without guilt. You earned this by making hard choices and staying disciplined.