The 3-step plan that's helping me pay off debt, build my net worth, and create generational wealth

"Proper documentation is so important to help grow and protect your assets."

Shaquana Watson-Harkness is the founder of Dollars Makes Cents.
Courtesy Shaquana Watson-Harkness

Ten years ago, I was struggling to make a plan for my money. I was dealing with debt and didn't have much in the way of investments. I believed that the only way to build wealth was to have a high-paying salary. 

But one day during the fall of 2011, I came across an episode of "The Suze Orman Show." Orman was speaking with a viewer who had substantial retirement savings and little consumer debt. She said that they were on the right track, but Orman also recommended adding a term life insurance policy to their financial plan. 

I was intrigued. I had never really thought about wealth beyond what I could earn from a job. I realized that I wanted to create a safety net for myself now. And in the event something happened to me, I didn't want to place a financial burden on my loved ones. So inspired by that episode, I decided to buy a life insurance policy. That was one of the first steps I took to start building generational wealth and feel more confident about my finances.

Around the same time, I began investing in retirement accounts through my employer and with a brokerage firm. And then in 2018, I decided to get serious about eliminating my debt once and for all, and I created a plan to pay it off. 

At this point, I have paid off over $169,000 of consumer debt, have accumulated a six-figure investing portfolio, and I have financial documentation, like life insurance and a will, to protect my assets, no matter what the future holds. Here are the steps I've been taking to accomplish my goals. 

1. I found the debt elimination plan that worked for me  

At the end of 2017, I realized that I had never accomplished any of my financial goals, and I was so tired of living paycheck to paycheck. When I started seriously focusing on eliminating my debt in February 2018, even though I was determined, I was still overwhelmed. 

So I did some research across a nine-week financial coaching program that helped me create a plan. Once I put it in place, I was able to pay off $169,000 within 20 months

The first step in my plan was determining all my outstanding balances and paying off the minimum amount due each month. Any extra savings I found within my budget, I would apply it to the smallest debt balance until it was paid off. 

All the while, I was consistently tracking my progress. Seeing it laid out month to month and acknowledging my wins, big and small, gave me the motivation to keep going.

What's the difference between a debt avalanche and a debt snowball

Video by David Fang

Thinking about my money in terms of building a financial legacy made it a lot easier for me to be intentional about my decisions. While I was eliminating debt, I was also reducing my expenses and making sure to automate my savings. 

Today, I allocate about $800 towards my savings and retirement accounts each month. For me, eliminating my debt was my foundation for creating wealth, because it freed me up to put more money toward long and short-term goals like saving for a 20% down payment on a new home over the next couple of years. 

2. I consistently invest within my budget  

I've found that one of the best ways to make your money grow is by investing it. I started investing through the retirement accounts offered by my employer. Part of the work I did with my budget was to see how much of my paycheck I felt comfortable contributing each pay period to my Roth IRA and other accounts.

My contributions have grown over time, and depending on your company's system, during the course of the year, you can adjust your contributions to add more.  

Before I make any decisions about my portfolio, I do some research about the types of investments included in those employer retirement accounts, and their past performance within the stock market, especially during volatile periods. And while past performance doesn't equal future results, it is a helpful reminder of the importance of investing for the long term.

Why boring investments are actually better

Video by Courtney Stith

Before I make any investing decisions, I turn to resources like Morningstar to look up the investment's ticker symbol to see its performance over the last 10 years. I would also recommend consulting with a financial advisor on the best types of retirement accounts and investments for you, based on your personal risk tolerance.  

When I wanted to learn more about investing and get some advice on how I could create a million-dollar investing portfolio, I connected with a financial advisor. They helped me with my investment strategy, and I learned about compound interest and how to best max out my monthly contributions, which I plan to start doing once I pay off the remainder of my debt. 

3. I got the documentation I need to protect my assets 

When we think about creating generational wealth, sometimes we only consider the numbers. But the proper documentation is so important to help grow and protect your assets.

Some of the key financial documents you need are a will and a trust. I currently have life insurance and have drawn up a will, which I drew up in 2017, after I had been married for about three years. 

A will tells everyone what you want to be done with your estate. A life insurance policy can be used to cover funeral expenses and outstanding debt obligations. And a trust, which can cover many different types of assets, including real estate and art, in addition to money, has special instructions that are executed by a trustee that you can appoint. 

When we think about creating generational wealth, sometimes we only consider the numbers. But the proper documentation is so important.

My financial planner taught me that it is a good idea to draw up a will if you have dependents, like children, or you hold a significant amount of assets.

And when looking into life insurance policies, my best advice is to make sure you understand the requirements to get approved for the policy, whether the payment for the policy will increase in the future, and the overall terms and conditions. I personally looked into at least three different insurance agents before making my decision. 

Ultimately, with these three steps, my goal is to create a financial legacy that will outlive me, and help create generational wealth for the future. 

This information is being provided for informational purposes only, and is not intended to provide, and
should not be relied on for, accounting, legal, or tax advice. You should consult your accountant, tax, or
legal advisor regarding such matters.

Shaquana Watson-Harkness is a wealth literacy expert and personal finance contributor who has been featured within Grow, CNBC Make It, KYW News Radio, TheGrio, and Black Enterprise. She is the founder of Dollars Makes Cents and her goal is to help professional millennial women achieve financial independence by shifting their mindset towards wealth building. Stay connected with her on her personal finance blog, Instagram, or Facebook for more personal finance tips and resources.

More from Grow: