Just like babies must take small steps as they begin walking, we have too must take baby steps when moving toward our financial goals. I want to share with you Dave Ramsey’s seven baby steps to financial freedom. These baby steps have helped Trent and I achieve many of our financial goals.
1. Start your emergency fund with $1,000 in the bank.
We’ve all had our car break down, an appliance break or any other sort of emergency. This will help keep you on track from going into further debt.
2. Pay off your debt using the debt snowball.
Make a list of your debts (excluding your house) and arrange them smallest to largest. While making minimum payments on all debts, begin attacking the smallest one first. Once you get the snowball rolling you will get more and more momentum (this will also encourage you to keep pressing forward). After you have paid off the smallest debt, move to the next one on your list. Continue until the last item on your list is paid off.
3. Complete your emergency fund by placing 3-6 months worth of expenses in savings.
You will want to place this in an account that you can get quick access to.
4. Invest 15% of your household income into Roth IRAs and pre-tax retirement.
After paying off all debts, many people skip this step and go straight to paying off their house. It is important to remember to save for retirement; it will be here before we know it.
5. Begin a college fund for your children.
6. Pay off your home.
7. Build wealth and give.
Dave’s catchphrase is “live like no one else so that later you can live like no one else.” I promise that when you achieve your financial goals you will be glad that you “lived like no one else” for a season.