I am so grateful to Dave Ramsey for his website and, his podcast and website. 7 baby steps. Dave Ramsey has helped countless people break free from the crushing and painful impact of living in debt. His radio show, Podcast, books and seminars are well known. Financial Peace University is available online, and in many religious facilities. He has created very helpful workbook and even takes phone calls during his live radio broadcast. In the book of Proverbs 22:7 “The rich rule over the poor, and the borrower is a slave to the lender.” We aren’t totally free, unless debt are debt free. When I began writing this blog, it was my intent to change my life, to chase Financial Independence. This is a fight for our lives, just like a Lion is chasing us, we have to chase being debt free.
It is Critical to have Foundation Which begins with a Budget or Spending Plan
Personal Finance is truly personal, I am not here to direct how and where you ought to spend or save your money. I am mostly writing this for myself and hopefully it will help others. Reviewing my bank statements for 3 months has helped me see where was my money going and how much of it am I actually spending. The bad habit of stopping at a gas station on the way home to pick up something has caused me to waste money and feed a want rather than a need. Wants and needs are so easy to identify because most of them are tied to a monthly bill. We need a place to live, so we are paying either mortgage or rent, transportation to work and back home, food, clothing, grooming and other needs. I don’t know about you, but there is always something that I didn’t intend to buy at the grocery store when I only stopped for Corn Nuts and next thing I know I spent $5.00 instead of $1.25. It is so easy to spend money, so the habit has to be replaced to save money. Having the crazy snack-a-doodle purchased at the grocery will cost as much as 40 percent less. In anger I have heard myself say I am tired of making someone else rich. Personal Finance is personal and I choose to stop making someone else rich.
Baby Step 1, is to save $1,000.00. The first step to solving a problem is to identify the problem. Where is your money going? How much money is coming in and where is your money going? Being brutally honest with yourself and your significant other. You must cut out needless spending to find the money to actually save $1 000.00 to set up an emergency fund and keep this fund where you can access it. Life happens anytime you make plans. This is why everyone needs an emergency fund.
Baby Step 2, is to payoff all your debt. This will take continuous disciplined action, as well as dedication and intense focus. Anyone pursuing anything worthwhile will experience set backs like a job loss, death of a loved one. When they happen, go back to Baby step one. When we fall down, we must get back up again. Sticking to your debt payoff plan is as important as wanting to be able to retire and not having to choose to buy food, or buy medicine and living life on your terms.
Baby Step 3 is to save 3 to 6 months of monthly expenses. In his book, Dave Ramsey encourages us to pay off all your debt before you start increasing savings by growing your Emergency Fund. While there are others that suggest that you need to do both. By setting aside some money, like 5 to 10 percent each time you get paid each and every pay period in order to increase your savings while you are paying off your debt so that you can begin your journey to becoming debt free.
Baby Step 4 is to invest 15 percent of your income for retirement. This step is meant to be methodical and intentional because getting out of debt ought to preceed maxing out our 401K, Roth IRA and any unqualified account you have. To clarify the reason for waiting is because most people may be tempted to rush to this step quicker because the interest rate on Credit Cards and other Consumer Debt tend to be higher then most return from investments.
Baby Step 5 is to save for college for your children. Saving for your children’s education will provide them a clean start in life upon graduation from college, trade school or job training program. Student loan debt is a how many of us have completed our under graduate or graduate School and six months after graduation the monthly payments will come due. Student loans are very common and many of us graduated with this debt. If someone finds an employer with a student loan repayment program he or she needs to know that student loans is one of the few debts you cannot discharge and must be paid.
Baby Step 6 is to pay off your house. As you have noticed getting out of debt is our goal, our intention this includes our home. Not having a Mortgage payment frees up one of your largest expenses and once it’s gone you can now maximize every dollar you used to pay the mortgage towards retirement. Can you imagine how good it will feel when you have now saving and invest the hundreds or thousands of dollars monthly instead of having to pay off debt. How good will it be to say, “I am or, we are debt free!”
Baby Step 7 Baby is to build wealth and give. This final baby step is going beyond being debt free because my interpretation is that, you are now building a legacy. Should we not strive to leave our family inter – generational wealth?
In closing, Personal Finance is very personal, my intention is to use this knowledge and to share it with others. The road to reaching step 7 will take work, commitment, discipline, intense focus and prayer. Thank you for taking the time to read this. Please hit like and share.