Mom, I need new shoes for wrestling. The motor just went in the car. The dog has a mass on his shoulder. Hours are getting cut at work. Surgery for your wrist is scheduled and you will be out of work for 6 weeks. Time to crawl in a hole right?
Statements like this can be instantly depressing if you don’t have a rainy day fund. I don’t and believe me those statements scared the hell out of me and depressed me for weeks. Now, I am taking the steps, through Dave Ramsey, to get control back with my money and tell IT where it needs to go instead of dreading looking in the mailbox.
I will be doing a series showing my journey from being thousands upon thousands of dollars into debt to finally living debt free. I am going to take control of my money one step at a time. Is it going to be easy? NO. Is it going to be worth it? YES!
Dave says that there are 7 baby steps to take. These steps, I will admit, scare me. They don’t look easy at all but again will it be worth it?
First things first. I have to create that dreaded budget. I just downloaded Every Dollar. This budget/manage money tracker app that I downloaded to my iphone. Dave recommends it and I figure if it is good enough for him it is good enough for me. 🙂
Today is the first day of my taking control of my money. Today I plan out my budget for the month. Today I am setting my financial goals and sticking with them.
Dave’s 7 Baby Steps:
1 – Save $1000 to create an emergency fund
I know I know. If you are like me I took a look at this and said what the hell Dave! If I am living paycheck to paycheck why wouldn’t I want to try to pay off bills so that I am not being hounded by collectors. Wouldn’t I want to pay off bills instead of just letting money sit in a bank? But he assures me that it is important to have that rainy day fund for those unexpected emergencies.
2 – Pay OFF ALL Debt but the House
List ALL of your debts but the house in order from smallest to largest. The smallest one should be your number one priority.
3 – 3 to 6 Months of Expenses in Savings
This step is all about building a full emergency fund. It’s time to kick debt to the curb. Sit down and calculate what you would need to live on for 3 to 6 months and start saving to protect you from some of lives bigger surprises.
4 – Invest 15% Of Your Household Income Into Retirement
With no payments put 15% toward your retirement. The money you were using to pay off your debt can now be used to build your future. There are plenty of options out there so pick what is right for you.
5 – College Funding for Children
College tuition and housing is so expensive. Don’t let it creep up on you. Start a savings now. There are two smart ways to save. A 529 college savings fund or an education savings account.
6 – Pay Off Home Early
Imagine your life with no mortgage. This is your last debt keeping you from being completely debt free! Apply all of the extra money to paying off your home. You will save thousands in interest fees.
7 – Build Wealth and Give
This is the LAST step! Give yourself a pat on the back! Build your wealth, give generously and set your future generations up with an inheritance. People with no debt can live and do anything they want. 🙂