Dave Ramsey Baby Step 7

 

Baby Step 7: Build Wealth and Give

You know what people with no debt can do? Anything they want! The last step is the most fun. You can live and give like no one else. Find out your current net worth, then keep building wealth and become outrageously generous, all while leaving an inheritance for your kids and their kids. Now that's what we call leaving a legacy!

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The point of building wealth isn’t just to stockpile enormous amounts of money for your own benefit. Instead, building wealth should incorporate more charitable giving to help you leave a positive legacy in your community and the world at large.

Nobody will remember much about your investments when you pass away, but many people will remember how you donated time and money to needy individuals and organizations. I’ve also talked multiple times about why I’m a big fan of giving back to your alma mater. 

Also some great insight HERE to diving deeper into it if you are in this amazing position and have attained this height! Congratulations!!!!

BABY STEP 6 * PAY-OFF THE HOUSE

 BABY STEP 6 * PAY-OFF THE HOUSE

Home Sweet Home is even sweeter when the mortgage gets paid off early! I know, because I did it!

This is the next step in the Dave Ramsey Baby Step Program.

So, you have gotten rid of your debt in the first few baby steps, you have a fully funded emergency fund, you are working on your retirement fund, or have funded it fully...

This step could take quite awhile, but will be worth it! I took on an extra job to put all of the income from it towards paying off our mortgage.

Consider some popular strategies for attacking a home mortgage:

• Make half payments every 2 weeks rather than a full payment monthly.  The trick here is that a 52 week year has 26 two week intervals which equates to 13 payments.  One payment more per year than the 12 month calendar.  On average, this approach will shave 6-7 years from a traditional 30 year mortgage.

• Many folks are electing for a 15 year mortgage rather than the traditional 30 year term.  Given how mortgages are amortized, cutting your term in half does not equate to a doubling of your monthly payment.  Often it is only a couple hundred dollars.  An easy increase to handle if you’ve eliminated your consumer debt.

• Extra payments are valid if you have an irregular income stream or are unable to refinance into a shorter term.  Pay raises, gifts, bonus payouts, etc are easy ways to ply additional dollars against your mortgage.

• Tag Team… imagine paying half payments every 2 weeks against a 15 year term loan and tossing a healthy chunk of your annual bonus into the mix as well.  Suddenly 30 years looks like 15 which looks a lot like 9, which can begin to look even smaller

Dave Ramsey Baby Step 5 Explained

Baby Step 5: Save for Your Children’s College Fund

This step is one that I can say that I did not do, because we got started on the Dave Ramsey steps too late in life. Depending on your particular age and situation, you have to make your own choices here. Maybe you have to skip this step to save for retirement for yourself.

Perhaps your particular child/children are not geared for college. Depending on what their individual giftings are, their goals may be met better another way. 

And, if they are going for a degree, make sure it's a degree that will get them into the field/profession that they want to be in. I know so many people who have gotten degrees and they don't use them in the field they work in. They went back and had more education to qualify in their field of interest.

 Avoiding student loan debts can be one of the biggest factors in staying out of debt as a young adult. If you can pay for your kid's college tuition then you'll ensure their financial security in the future, as they'll better be able to stay out of debt. 

Dave Ramsey recommends using either a 529 college savings plan or an education savings account (ESA). Talk to your bank or credit union about setting up these accounts for these specific purposes. 

If you’re saving for college, Ramsey advises, “as much as possible” use Educational Savings Accounts (ESAs) and 529 tax-advantaged savings plans known as qualified tuition plans.

“Never use insurance, savings bonds, or pre-paid tuition.”

And he says: Pay cash. No college loans.

Also, there is absolutely nothing wrong with your kids saving up for their own college if you cannot. They can work and save ahead of time, and work during their college educational years.

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Dave Ramsey Baby Step 4 Explained

 

Baby Step 4: Invest 15% of Your Household Income in Retirement

Now you can shift your focus off debts and what-ifs and start looking up the road. This is where you begin regularly investing 15% of your gross income for retirement. Because if you're still working at 67, it should be because you want to, not because you have to. An investing pro can help you build a solid strategy.

How: Here’s the simple breakdown. When you start this step, first look into your employer’s 401(k), if you have one, and invest up to the match. Then open a Roth IRA and max out how much you can contribute to this fund. If you hit the max and still haven’t reached 15% of your income, go back to your 401(k) and contribute the rest there!

Note: If your employer offers a Roth 401(k) and you like the investment options, you can invest your whole 15% there.

Because it’s so confusing, we suggest you don’t make money moves like that without finding a reputable investment pro. These people enjoy investment lingo but know how to talk to you in a way you can understand. They’ll listen to your preferences and help guide you on your investment journey as you set yourself up to save for the retirement of your dreams.

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Please note that I am not affiliated with Dave Ramsey or any links. I have done the baby steps

and just wish to share them with others.

Dave Ramsey Baby Step 3 Explained

 Ok...step 3. 

If you are here you have paid off all of your debt! Congratulations!!!!

According to Dave Ramsey's Method: 

You will have more than $1k’s worth of emergencies in your life. That’s why one of the pros to Dave Ramsey’s baby steps is that he recommends going back and fully funding your emergency fund in step 3.

This refers to expenses, not income. And once you’re out of debt, your expenses will be lower.

That’s likely why it’s listed as step 3. It’s a lot easier to save 3-6 months (or more!) of expenses when you don’t have that many expenses. There are no cons to fully funding your emergency fund.

Since I took the course they also now talk about Baby Step 3b or the Secret Baby Step...

3b is when you rent while working the baby steps, but would like to own a home. So 3b is saving for your home. Dave would, of course, like everyone to pay cash for their home, but in today’s housing market, that isn’t very realistic.

Dave begrudgingly admits that you may need to take on debt to purchase a home. So 3b is saving for that downpayment, ideally at least 20% of the cost, so you don’t pay private mortgage insurance (PMI).

Yet, even better is if you only take on a 15-year fixed-rate mortgage. That’s his bottom line. So you may be in this step for two years or so. But in the long run, you will save SO MUCH in interest; it is well worth it!

I read this on the following blog about the Dave Ramsey Steps

Moneyforthemamas.com

Keep your momentum going, it's tough, but you are now seeing some HUGE progress! So proud of you!

Dave Ramsey Baby Step Two Explained

 Ok, if you are here you are trying to get out of debt.

The first step was to save $1,000 for your emergency fund.

Make sure you are current on all of your bills...make sure you and your family are taken care of before you dive into this. You need to have FOOD, SHELTER, UTILITIES, and TRANSPORTATION. 

Next, you sit down and make a full list of every single debt you have.

Now, Step Two of Dave Ramsey's Baby Steps:

Now it’s time to attack debt with a vengeance using the debt snowball method. Pay off one debt at a time from smallest to largest, gaining momentum until you’re debt-free.

How Does the Debt Snowball Method Work?

The debt snowball method is a debt-reduction strategy where you pay off debt in order of smallest to largest, gaining momentum as you knock out each remaining balance. When the smallest debt is paid in full, you roll the minimum payment you were making on that debt into the next-smallest debt payment.

Here’s how it works:

Step 1: List your debts from smallest to largest regardless of interest rate.

Step 2: Make minimum payments on all your debts except the smallest.

Step 3: Pay as much as possible on your smallest debt.

Step 4: Repeat until each debt is paid in full.

Now, before you start arguing about the interest rates, hear us out. If your largest debt has the largest interest rate, it’s going to be a long time before you start to see a dent in that crazy balance of yours. But when you stick to the plan (without worrying about interest rates), you’re going to be jumping up and down when you pay off that smallest debt super quick. That excitement is what’s going to motivate you to keep working hard—all the way to that debt-free finish line. But more on this later.

Make a chart to put on the frig if you need to. Write yourself motivational notes. The term snowball here is exactly right! You want to keep up intensity as you pay off that smallest bill first, and then move to the next one... I got a second job, I sold stuff...everything I could to pay off quickly.

I still say the most important thing is to stop spending leaks!

Dave Ramsey Baby Step One Explained

 So I posted that I became debt-free using the baby steps by Dave Ramsey. 

Step one is so important!

 We all have emergencies...you get sick, your dog get sick...a flat tire... so take some of the stress out of the inevitable by saving up $1,000 that you never touch-strictly for an emergency! 

 Decide what quantifies an emergency...it's not buying that cute shirt because it's 50% off...or a once in a lifetime deal on a new car.  Make your own guidelines for an emergency. This could keep you from putting an emergency situation on a credit card and creating more debt that you need to get out of.

Here is how:

Start saving more money and spending less. You can save $1,000 quicker than you think—really. It just takes a little focus and some hard work. Try selling stuff, clipping coupons, saying no to extra expenses, planning your meals, eating out less, using or selling old gift cards, and downloading money-saving apps. The ways to earn or save $1,000 are nearly endless. Pick a few and get down to saving up.

For more free info see Dave Ramsey's website by clicking here

Got Debt?

 If you have debt, here is a way to help you get rid of it!

In light of the current economic situation, I would highly encourage you to curb your spending, or at least be more intentional.

I actually followed these steps and am debt free...even my mortgage!

We went to a local church and did the Financial Freedom seminar by Dave Ramsey!

It was a total game changer, and it works!

You can too!

1. Save $1,000 for Your Starter Emergency Fund.
2. Pay Off All Debt (Except the House) Using the Debt Snowball.
3. Save 3–6 Months of Expenses in a Fully Funded Emergency Fund.
4. Invest 15% of Your Household Income in Retirement.
5. Save for Your Children's College Fund.
6. Pay Off Your Home Early.
7. Build Wealth and Give.

Having the starter $1,000 emergency fund is essential! It is for WHEN, not IF you have an emergency...car trouble, medical issue, pipe leaking...we all get them!

This method is not hard to understand, you don't have to buy any program, you just use a tablet and paper like I did!

I was later in life when I started, so I haven't built wealth, but I absolutely do the giving.  So, if you are starting later in life, don't be discouraged, the majority of people at the seminar that we took several years ago were past 50.

May God bless you in this financial journey!

Click here for more free detailed info from Dave Ramsey's site.

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