Here are Dave Ramsey’s seven steps to help you get financial freedom.
One of my favorite talk radio shows is the Dave Ramsey Show. For those of you who don’t know who Dave Ramsey is, he teaches people how to get out of debt and build wealth for their future. One of his favorite sayings is, “If you live like no one else, later you can live like no one else.” The fundamental system that he’s created is called the Dave Ramsey Baby Steps, which are designed to set you up for a future like no other.
Let’s take a look at these seven steps:
1. Save $1,000 for your starter emergency fund. Your goal is to save $1,000 as fast as you can so that you’re able to cover unexpected life events that are impossible to plan for otherwise. You don’t want to have to dig yourself into a deeper hole while trying to climb out of debt. Budget for emergencies first.
2. Pay off all debt (except for your house). Using the debt snowball strategy, pay off credit cards and student loans. Start by listing all your debts in order by balance from smallest to largest, regardless of interest rates. You’ll gain momentum by paying off the smallest balances first, working your way up to the more daunting ones with confidence.
3. Save three to six months of expenses in an emergency fund. You’ve paid off your debts, but don’t slow down now. Take that money you were throwing at your debt and use it to build a more robust emergency fund that will protect you against life’s bigger surprises like the loss of a job or a broken-down car without slipping back into debt.
4. Invest 15% of your household income into retirement. Now’s the time to get serious about retirement. Start with your company’s 401k program and receive a full employer match, then invest the rest into Roth IRAs—one for yourself and one for your spouse if you’re married.
5. Save for your children’s college fund. Dave recommends 529 college savings plans or education savings accounts (ESAs).
6. Pay off your home early. It’s time to bring your improved debt-management skills home to tackle that most intimidating debt; your mortgage is the only thing standing between you and complete financial freedom. Can you imagine life without a household payment? Any extra money that you can put toward your mortgage can save you tens or even hundreds of thousands of dollars in interest.
7. Build wealth and give. Do you know what people with no debt can do? Anything they want! This last step is the most fun one of all: Keep building wealth and become exuberantly generous. Leave an inheritance for your children and their children—now that’s what we call a legacy!
Hopefully, you found these seven “baby steps” empowering. Don’t hesitate to reach out by phone or email if you have any real estate needs. As a Dave Ramsey-endorsed provider, it would be an honor to serve you soon.