If you’re looking to get your finances in order, you may want to follow Dave Ramsey’s 7 Baby Steps. These steps are designed to help you get out of debt and build wealth over time. In this blog post, we will discuss each step in detail and provide tips on how you can follow them yourself!
Table of Contents
Start an Emergency Fund
The first step is to start an emergency fund. This fund should have enough money to cover your expenses for at least three months. Having this cushion will help you avoid going into debt if you experience a financial setback.
To start your emergency fund, Ramsey recommends setting aside $1000 as quickly as possible. Once you have that saved up, you can begin working on building up your regular savings account. Begin by setting aside money each month until you have saved up three to six months’ worth of living expenses.
Pay Off All Debt Except For Your Mortgage
If you’re trying to get ahead financially, it’s important to get rid of all your debt. That way, you can start putting your money towards other things, like savings or investments.
To do this, Ramsey recommends following his “debt snowball” method. First, list out all your debts from smallest to largest. Then, focus on paying off the smallest debt first while making minimum payments on the others. Once that’s paid off, move on to the next one until all your debts are gone.
Not only will this help you get out of debt quickly, but it’ll also give you a sense of accomplishment as you check each debt off your list. Plus, it’ll save you money in the long run since you won’t be paying interest on all your debts.
Invest 15% Of Your Income Into Retirement Savings.
The earlier you start saving for retirement, the better off you’ll be. Investing 15% of your income into retirement savings is a good rule of thumb to follow. If you can’t do that right away, try to at least start with $20 per week.
Saving for retirement may seem like a daunting task, but it’s important to remember that even small amounts can add up over time. By following Dave Ramsey’s budgeting baby steps, you can be on your way to a bright financial future.
Save Up To Six Months’ Worth Of Living Expenses.
This is probably the hardest part of the baby steps, but it’s also the most important. Why? Because having an emergency fund gives you a cushion to fall back on if something unexpected comes up.
It could be a job loss, a medical emergency, or anything else that throws your finances off course. Having that safety net will help you avoid going into debt to pay for things you can’t afford.
So how much should you save? Dave Ramsey recommends saving up enough to cover six months’ worth of living expenses. That may seem like a lot, but it’s worth it for the peace of mind it will bring.
Start by setting aside $1000 as quickly as possible. Then, once you’ve reached that goal, start working on saving up to three to six months’ worth of living expenses. It won’t be easy, but it will be worth it in the end.
Pay Off Your Mortgage Early
If you can swing it, paying off your mortgage early is a great way to save money in the long run. Not only will you save on interest, but you’ll also be able to build equity in your home much faster. There are a few different ways to do this, but one of the simplest is to make bi-weekly payments instead of monthly payments. This will shave years off of your loan and save you a ton of money in interest!
Another option is to refinance your mortgage to a shorter loan term. This will lower your monthly payments, but you’ll end up paying more in interest over the life of the loan. However, if you can afford the higher monthly payments, it’s worth considering!
Save for College Funds
If you have young children, now is the time to start saving for their college education. Even if they are still in diapers, it’s never too early to begin planning and saving for college. By starting early, you can take advantage of compound interest and let your money grow over time.
There are a few different ways to save for college, including 529 plans and Coverdell ESA accounts. Talk to a financial advisor to see which savings plan makes the most sense for you and your family.
Saving for retirement should be your top priority, but that doesn’t mean you can’t also save for your kids’ education. By taking advantage of tax-advantaged savings plans, you can make sure both your retirement and your children’s education are well-funded.
Start Giving More Money Away
One of the most important budgeting lessons I learned from Dave Ramsey was to start giving more money away. It may seem counterintuitive, but when you’re trying to get your finances in order, one of the best things you can do is start giving more money to charity.
Not only does it make you feel good to help others, but it also forces you to reevaluate your spending habits. If you’re constantly thinking about how much money you could be giving away, you’re less likely to waste money on unnecessary expenses.
Plus, when you give more money away, it opens up room in your budget for other important things like savings and debt repayments. So if you’re looking for a way to jumpstart your budgeting efforts, start by giving more money to charity.
Do you have a favorite charity that you like to give to? Let us know in the comments below!
Dave Ramsey’s 7 Baby Steps are a great way to get started on the path to financial stability. If you’re feeling overwhelmed and don’t know where to start, give us a call. Our team of experts can help walk you through each step until you feel confident in your ability to budget successfully. Millions of people have followed these steps and found relief from their debt burden; you can too! What is your biggest challenge when it comes to budgeting? Let us know so we can help tailor our advice specifically for you.