lot of us want to beef up our bank account and have a financially secured future. One of the best ways to do it? Follow Dave Ramsey’s Baby Steps.
Just because they are baby steps do not mean those are not a big deal.
Actually, they are a big deal. They could even make you a million dollars or more.
If you’re struggling to make a dent on your debt, save up money for a house or car or something, or want to put money away for retirement, these Dave Ramsey’s Baby Steps are what you need.
In this post, you’ll learn:
- How to easily save money for emergency purposes
- How to make money online without spending a dime
- How to have fun and still make your way to the bank with a hefty pocket
If you are interested:
Dave Ramsey's Baby Steps for Financial Health
For those who want a financial change for good, now is the best time to do it. You don’t have to do extraordinary things to see results.
Believe it or not:
It only takes a couple of courage, will, and patience to create a financial environment you wish you had a long time ago. Here are Dave Ramsey’s Baby Steps you can do right now.
Step 1: Starter Emergency Fund of $1,000
Saving money takes quite a bit of time, but it's important to note that you have to start somewhere.
Dave Ramsey recommends starting the process off by compiling an initial emergency fund of $1,000.
Okay, sure, $1,000 isn't exactly a few bucks and it will take time to raise this amount of money, but it is possible to save cash in this way.
This initial emergency fund highlighted in Dave Ramsey's Baby Steps suggestions will provide you with a little buffer should you need some extra cash in a quick manner.
Whether you have an unexpected expense or perhaps you need some more money to pay an overly costly bill, having access to these funds in the case of an emergency will help you out greatly.
The fact is: You can always make extra money fast online, get a side hustle, or something to make extra money.
Although you may be tempted to use your credit cards to pay the unexpected bill, you shouldn't do so as this can have bad consequences for the future.
Always keep in mind that paying in cash is better as you won't be using up credit and getting charged the high interest rates which are often attached to these cards.
By using your cash in a $1,000 emergency fund, you can pull money from a source which is readily available to you at the moment and one where there is no interest charge involved.
It's important to note that although the $1,000 emergency fund may take a little bit of time to build up, don't worry, because you can do it.
Should you use any of the emergency funds along the way, just be sure to return the used money to the bank account so that the amount returns to $1,000 and is kept at that amount on a continual basis.
Here are some easy ways to make money online:
- Take paid surveys. Get paid for your opinions on your time without leaving home. Some of the best survey sites are Survey Junkie and Survey Club – where one person made over $4,000 in a month. Plus, it’s FREE to join.
- Get paid for doing almost everything. Working out? Watching TV? Listening to the radio? Folding clothes? There are a lot of ways to earn money doing what you do using Swagbucks. Plus, it’s FREE to join.
- Invest in real estate. You don’t need a lot of money to begin real estate investing. All you need is $500. You can do that with Fundrise – the company that has historically produced returns between 8.7% and 14%.
- Get a gig online. There are gigs online or work at home jobs that can even make you thousands a month. They include freelancing, teaching, customer service, and others.
Step 2: Use the Debt Snowball Method to Pay Off All Debt Except Mortgage
There are many ways to handle debt payoffs and do so in a timely manner.
One way to pay off debt, which is encouraged by Dave Ramsey's Baby Steps program, is the debt snowball method.
With the debt snowball method, you start out by listing all of your debts in the order of smallest to largest in amount.
When it comes time to pay your bills, you'll start by making the minimum payment on all of the debts except for the smallest one.
The smallest debt is the one that you will pay any extra money you might have towards that specific debt until it's all paid off.
Then, the following step is to tackle the next smallest debt by paying the minimum amount plus any minimum payment you were paying on the recently paid off smallest debt.
At the same time, you should take any extra funds you might have access to and use those to pay the next largest debt.
You will continue this process until the debt is paid off.
By paying the minimum on the debts you currently owe and then adding extra payments to those debts from your paid off expenses, you'll find that living debt-free in the near future is well within your reach.
The trick is to keep utilizing this debt snowball method to pay off your current debts with ease and do so until all debts have been taken care of.
Here are some options to help you get rid of your debt:
- Tally – Tally will pay your debt to save you money on interest and penalties. You just pay Tally an agreed amount monthly. That’s it!
- SoFi – You can consolidate your loans and get a much lower interest rate from SoFi. It could beat by a mile those pesky credit cards that charge arm and leg on interest.
Step 3: Establish a Fully-Funded Emergency Fund Containing 3-6 Months of Expenses
After you've constructed the initial $1,000 emergency fund, you want to take that cash-in-hand planning one step further and establish a 3-6 month emergency fund.
This is the next step to tackle in Dave Ramsey's Baby Steps program and one to complete once you've paid off all of your debt, except for your mortgage debt.
Keep in mind that your mortgage debt will be dealt with at a later time.
This larger backup fund will contain 3-6 months of expenses to have in reserve should you need a large emergency expense fund.
Raising money of this magnitude may seem to be a bit scary, but remember, you've already eliminated much of your debt by using the debt snowball method.
This next step will be easy to accomplish since you'll only have basic bills and your home mortgage to contend with in regard to your monthly payments.
Each month, or whenever you receive your paycheck, you should put money aside in a savings account to build up your fully-funded emergency fund.
By doing so, you'll have easy and constant access to a hefty savings account should you need it.
You never know when potential job layoffs may occur or medical emergencies may become an issue in the future.
By having this savings account in place and within reach, you can rest assured that you will have access to cash should you need it in the case of an emergency.
To expedite your goal of getting 3-6 months worth of expenses, you could do the following:
- Save your money in high-interest bearing account. You won't be making money when you deposit your money in a bank that pays 0.02%. That's a fact. Not with CIT Bank, which offers up to 2.40% in interest. That's 24 times the national average. You have to save your money somewhere, right? You might as well put it somewhere it will grow fast.
- Slash expenses you don't need. When you can no longer cut your expenses even further, believe me when I say that Trim app can cut those in unbelievable ways. Last month alone, it saved customers over $1 MILLION, most of those came from customers who tried everything to cut their expenses down.
Step 4: Take 15% of Household Income and Invest it in Retirement
Step 4 of Dave Ramsey's Baby Steps program revolves around thinking towards the future as it pertains to retirement.
Now that your debts are paid off and you have savings account cash to help you out in the case of an emergency, you can take the next step and start building up a retirement reserve fund.
It's financially wise to think of the extended future and not just a few years ahead of time.
By slowly and continually saving for retirement, you will have quite a good bit of cash saved up for the future.
The best way to save money now or for retirement which won't put you in a bad current financial situation is to take out 15% of your household income each paycheck and put it into your 401(k) or IRAs.
Make sure that you're following the legal limits and contributing the amount that you are allowed to according to law.
By thinking about the future, you can feel good in knowing that the near future is taken care of as well as the extended future.
Step 5: Save for the Kid's College Fund
If you have children, the next step in Dave Ramsey's Baby Steps program is to save money for your kid's college fund.
Whether your child attends a university or decides to go to trade school, you're going to need some funds in reserve to make sure that education is paid for throughout the years.
Putting money aside now will be extremely helpful as your children make their way through higher education.
Take the extra funds, which were used for past debts that are now paid off, and boost your savings for your children's higher education.
No matter if they want to attend a community college or a private university, higher education is expensive and saving money now means that you won't have to stress about it in the future.
In addition to saving for college or trade school, you should also consider scholarships for your kids as these will help with the costs of higher education.
Step 6: Pay Off Your Mortgage Early
At this point in the payoff game, you've eliminated your debt, established an emergency fund, invested in retirement, and taken care of your children's future education.
Now, according to Dave Ramsey's Baby Steps, it's time to focus on paying off your home mortgage.
This is a big expense, which is why it's the last debt to be tackled.
At this point in your spending and debt handling, you know exactly what you have coming in to the bank and what you have going out for monthly expenses.
Now is the perfect time to take all of that extra money that you no longer pay on all of your other debts and use it to pay down your mortgage.
Your mortgage may be a little or a lot, but the overall goal is the same…to pay off your home loan!
Consider your income, especially if you make money at home, and note what is possible when it comes to paying off that pesky, expensive mortgage.
When paying your mortgage each month, just keep in mind what you need to get by with your monthly expenses and extra costs and pay off your home loan as quickly as possible.
Once you do this, you'll find so much peace of mind in knowing that this large monthly payment is no longer a burden to you and your family.
Step 7: Build Your Wealth and Give to Others
Congratulations! At the final step in Dave Ramsey's Baby Steps program, you are debt free!
So, what should you do with all of your funds?
First, you should continue to build your wealth and get rich, if you want.
Keep putting your extra income away after you've paid your monthly expenses.
For those who have a lot of extra savings, you may find that philanthropic causes call to you.
It's a good idea to continue to save, but you can always provide others with a helping hand should you have the extra money to do so.
From local charity organizations to charities abroad, there are ways to pursue philanthropy should you be in a position and have a desire to do so.
Final thoughts on Dave Ramsey's Baby Steps:
Believe it or not, a lot of people have followed these Dave Ramsey’s Baby Steps and walked away with financial independence. I know that’s something you’d like to have.
The reality is:
It’s not that difficult to follow these steps. Sure, you’ll get stumbled on some of these. But that’s the part of going through these steps.
If these steps are so easy, then, a lot of people would be doing them and a lot of them would be successful by now.
The fact remains:
Those who tried and followed these steps could see big, better financial changes in their lives.
Have you done any of Dave Ramsey's baby steps? If not, are you willing to try them to improve your financial situation?