7 Baby Steps To Financial Peace - Dave Ramsey Review
This article is intended to be a review of Dave Ramsey's 7 Baby Steps to Financial Peace.
Dave Ramsey's 7 Baby Steps program was designed by him to be very simple for anyone to follow. When a person is trying to take control of their finances they must start out with baby steps just like a child who is learning to walk. Each step in Dave Ramsey's program is a building block in the whole plan of achieving personal financial freedom.
The 7 Baby Steps from his program are listed here with an explanation for each.
Baby Step 1: $1,000 To Start An Emergency Fund
The first step is to establish an emergency fund. This step is setup to help people to build up a small amount of savings to relieve them from their dependence on credit cards. Having this emergency fund helps people to have money available for unexpected expenses that come up.
Baby Step 2: Pay Off All Debt Using The Debt Snowball (excluding your house)
The second step is to pay down all of your debt by using the debt snowball method. The idea is to start by paying off your smallest debt first and making the minimum payments on all other debts. Then once you pay the first one off you move to the next smallest debt and put all extra money toward it. You follow this process until all debts are paid off (excluding your house payment).
Baby Step 3: 3 to 6 Months of Expenses In Savings
The third step is to establish a complete emergency fund of 3 to 6 months of expenses. If we do not have this in place then if we incur unexpected expenses we could be forced to put them on a credit card and then be right back in the middle of step 2.
Baby Step 4: Invest 15% of Household Income Into Roth IRAs and Pre-Tax Retirement
If you have reached this point you are now on your way to success. The fourth step is to begin to save for retirement. The idea is to take 15% off of the top of each check and put it into a tax free retirement account so you can feed yourself once you retire.
Baby Step 5: College Funding For Children
This fifth step is very important and can be applied to saving for your own college or your childrens college. You need to make an estimate of how much you will need for college. Then you need to use a savings calculator to find out how much you need to save each month at X interest rate to end up with the total amount needed for college.
Baby Step 6: Pay Off Home Early
This step is also very important. After doing everything else you need to move on to paying off your house. The key here is to pay off your house quickly. Doing this will help you save on interest and also will allow you to be able to allocate your entire house payment amount toward other things.
Baby Step 7: Build Wealth And Give! (Invest In Mutual Funds And Real Estate)
The final step is Dave Ramsey's seven baby steps program is to build wealth. To do this you should begin by putting most of your excess money toward investments. This means putting this money in investment accounts that are invested in mutual funds.
This review of the Seven Baby Steps program has given you an excellent idea of how it works and also shown that anyone can be successful if they take on their personal finances one step at a time.
Please follow Dave Ramsey's personal finance advice and begin taking your journey toward financial peace.
Jesse Chettle is a Financial Advising expert who specializes in giving out free Personal Financial Advice over the internet. You can visit his blog to learn more about the 7 Baby Steps to Financial Peace and Dave Ramsey.
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