Dave Ramsey is a famous American businessman and motivational speaker who has helped large numbers of people work their way out of debt. A common question asked by people is what are Dave Ramsey’s 7 baby steps to financial peace? If you have not read up on any of Mr. Ramsey’s articles or watched any of his courses, then it is worth checking out to see if you can benefit from his motivational speeches and teachings. We’ve include an overview of his 7 baby steps for your review below.
Dave Ramsey’s 7 Baby Steps to Financial Peace
Step 1 : Save $1,000 in an emergency fund.
The very first step before paying off a new bill or even thinking about investing under Dave Ramsey’s 7 Baby Steps is to save $1,000 as quickly as possible. He makes the good point that life is not going to simply stand by and wait on you, and bad things will happen. By having the starter, emergency fund available, you will be that much more ready for those unexpected life events that are had to plan for occurring. If you do not have $1,000 that is OK. Making a regular contribution in your savings account until reaching the figure is key. If you are not getting there quick enough, consider selling old stuff on EBay, at Yard sales, and Amazon to get additional funds more quickly.
Step 2 : Pay Off All Debt (Except the House)
Dave Ramsey is a big proponent of using the snowball technique to pay of all debt except for one’s house. To get started with this step, list all debts that you have from smallest to biggest. Dave then recommends paying off the smaller credit cards and loans first. Then, as you build success, use the excess money to pay off the next bigger debt and so forth. Apply this to all bills except your mortgage.
Step 3 : Setup a Fully Funded Emergency Fund
Now that you are really moving along with the plan, it’s time to get your emergency fund where you really need it to be. The goal is to have between three and six months of expenses saved up which will vary significantly based on the individual, family debts, mortgage, car payments, and more.
Step 4 : Invest 15% into Retirement
After getting the emergency fund properly setup, it’s time to think about retirement. Dave’s recommendation is to invest 15% of your income towards retirement now that all of the bills are payed off.
Step 5 : Save for Children’s College
If you have not already been doing so, this is the point to start saving u for college tuition and housing costs. The earlier that you can get to this step, the easier it will be when it comes time for your children to go to school.
Step 6 : Pay Off Your Home
Once the retirement and college savings are on track, the next big step for consumers is to now start working on paying down and off your home. The step is saved until number six in order to ensure the remainder of the financial base is sound, but is a big step.
Step 7 : Build Wealth and Give
Finally, once everything is taken care of, the home is paid off, and there is nothing else left its time to continue to build wealth while giving to others generously. Most people who make it to this state of the journey find it the most fulfilling, and it also allows for an inheritance to be built up for future generations.
Dave Ramsey, 7 Baby Steps to Financial Peace
Dave Ramsey, Wikipedia