Guest Post by Karen Billings from Karen Billings Graphic Design
If you’re like me, and many of us in today’s unstable economical environment, you may be feeling overwhelmed and stressed about money and debt. It’s so easy to get in over our heads with consumer debt, student debt, and even become concerned about home equity in this uncertain market. Regardless of where we are in our financial journey, there are steps we can be taking to make ourselves feel more secure now, and in our future.
My family has found comfort in the teachings and money-management principles of Dave Ramsey, a world-renowned author, speaker, teacher and financial advisor. His “baby steps” are practical, easy steps for getting out of debt and building a secure financial future for our families:
Baby Step 1:
Build up an Emergency Fund of $1000 in savings. This is your new “when things go wrong” fund, rather than a credit card. Cut up your credit cards. Quit using them…cause even in an emergency, you now have an Emergency Fund!
Baby Step 2:
Pay off your debt with the Debt Snowball! List your debts in order with the smallest payoff or balance first. Do not be concerned with interest rates or terms unless two debts have similar payoffs, then list the higher interest rate debt first. Make only minimum payments on everything except the smallest/lowest balance. Attack that one balance aggressively until it’s paid off. Then move to the next lowest balance. With each paid-off balance, your excitement, satisfaction and confidence will grow.
Baby Step 3:
Expand your Emergency Fund till you have 3 to 6 months of expenses in savings. The peace that comes with knowing your family is covered should there be an unexpected layoff or loss of a job is priceless!
Baby Step 4:
Invest 15% of your household income into Roth IRA’s and pre-tax retirement accounts. This is where we switch from paying off debt and building security to actually starting to build wealth.
Baby Step 5:
Start building a college fund for your children. Notice this comes AFTER your start building for your retirement.
Baby Step 6:
Pay off your home early. Once your smaller debt is gone, and you have money in savings, money in retirement, and are saving for your children, it’s time to start chunking any extra money toward your mortgage!
Baby Step 7:
Build wealth and give! Leave an inheritance for future generations, and bless others now with your excess. It’s really the only way to live!
Okay….so these are baby steps. My family has been baby stepping for a while, and it seems to be the old “two steps forward, one step back”. It seems every time we get our emergency fund built up, an emergency comes along! The good news is, we now have money set aside for those emergencies, and aren’t pulling out our credit cards for every flat tire. Unfortunately, though, there are some emergencies our fund hasn’t been able to cover….like our entire HVAC system going out in the dead of winter! So we find ourselves bouncing back and forth between baby steps 1 and 2. It can be frustrating at times, but the good news is we ARE getting debt paid down. I look forward to the day when both cars are paid off, student loans are paid off, and all we have left is the mortgage. Some days it seems impossible, but it IS an attainable goal. We have friends that are a success story. And every small debt that gets paid off is a major victory.
So, for more information on practical ways to implement Dave Ramsey’s baby steps in your life, or to read success stories of people who have really MADE IT WORK, check out www.daveramsey.com. We really can be free of debt and have financial peace!
Related posts you may enjoy:
- Guest Post: Making Your Own Organic Baby Food
- Guest Post: Going Green, Saving Money
- Dave Ramsey’s Town Hall for Hope
