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Have you ever sat there wondering what to do about money?
I mean really truly wondering about how to pay down debt. Save for retirement and maybe just maybe go on a vacation.
We did a few years ago actually. Or should I say I did.
A few years ago my husband lost his job, a good one. He had trained for this job, he had even put in months away from our family.
Then the job was gone…. downsizing.
So what do you do?
You dust yourself off and pick up the pieces and move on. In the moving on and the picking up off pieces I discovered Dave Ramsey.
Do you know who Dave Ramsey is?
If you don’t know who Dave Ramsey is, you should. Not for the sake of knowing who’s, who. It is not a celebrity thing.
You should know who Dave Ramsey is for his personal finance and debt reduction education.
Dave Ramsey is a person who developed a seven step program to pay down debt, build wealth and give back.
This seven step program is called the Dave Ramsey’s Baby Steps.
Baby steps make all the difference.
So when you are faced with debt and in our case job loss. Personal finance can be a bit overwhelming to say the least.
Whether you are facing debt because of job loss or because of student loans or because the credit cards got racked up it doesn’t matter.
What matters is the fact that you are facing it (dealing with it) instead of avoiding it.
Dealing with your debt is a lot easier step by step. And this is where Dave Ramsey’s Baby Steps come in ….
Now I just want to note Dave Ramsey’s Baby Steps aren’t just for those with debt.
You can use the steps to save money, pay off your home early, save for retirement or to inspire you to give back.
We used and are still using Dave Ramsey’s Baby Steps to save our emergency fund, to develop a snowball program to pay off our debt and to save college funds for our child.
Trust me these steps work…. If you are stressed about money, worried about debt and some day want to go on a nice vacation (or just stop the work treadmill thing) you need these steps.
Dave Ramsey’s Baby Steps:
Step One: Set Up An Emergency Fund
You need to set up an emergency fund with money in it strictly for emergencies. And by emergencies I mean car trouble, sick children, hospital visits – real emergencies.
Not momma needs a new pair of shoes emergencies. A general rule of thumb emergency fund amount is $1000 but if all you can save is $500 start there.
Step Two: Pay Off Debt Using The Debt Snowball
Do you have debt? Do you owe money? Do you know how much? Use this easy to use money worksheet to help you figure it all out.
Once you know how much you owe and to who you start your debt snowball.
Which means you start paying off the smallest bill bit by bit and then move on to the next one paying it off bit by bit and so on.
All while you are making the minimum or regular payment amounts on your other bills.
Step Three: Save 3 To 6 Months Of Expenses
Basically in this step you are topping up that emergency fund for the just in case. You want to save up enough to cover 3 to 6 months worth of bills in case you lose your job or in case something happens and you need the money.
Remember this is a step by step program you aren’t expected to save up 3 to 6 months in expenses over night.
Step Four: Invest 15% Into Retirement Funds
This an individual and unique step. One I would also suggest you talk to your banker or investment advisor about. You need to save for retirement so that you can provide for yourself.
Step Five: Fund College For Your Children
Depending on the age of your children you may simply be saving for your childrens college education or you may be assisting in paying for college.
No matter the age of your children again this is a personal choice step. You may choose to help with college education or you may choose to assist your child in applying for scholarships.
How you choose to follow through with this step is again your choice and based on your finances.
Step Six: Pay Off Your Home Early
Your debt is paid off. You have 3 to 6 months of expenses put away. Now it is time to snowball your mortgage.
Start putting money away to pay off your home early. Talk to your bank or your mortgage broker and see what your payment options are.
Again this is not going to happen overnight. It is a step by step process.
Step Seven: Build Wealth & Give Back
I hope to see this step one day. The day that the mortgage is paid off, the debt is gone. The retirement fund is growing. And then….
Then you can build wealth and give back.
How would you give back? How would you pay it forward? How would you share, encourage or inspire?
So how does frugality play a part in Dave Ramsey’s Baby Steps?
In reality it plays a very big part. How do you think you are going to save that emergency fund? Or afford to pay off your debt?
Or save money for this, that and the other thing?
Frugal living is the art of living well on less.
Choosing the generic brand over the name brand to save money. Learning to use a budget and bulk buy.
Understanding that meal planning and being more organized can save you money.
Frugal living is understanding that you don’t need to “keep up” to be happy and rich.
Living within your means today will allow you to be happy in the future.
Home cooking, no spend weekends and family game nights are great ways to spend your time.
Frugality gives you options.
Learning to live well on less will help you save for the future. It will also help you work through your Dave Ramsey Baby Steps.
Here are some great frugal living links to help you get started:
- Secret Must Haves Of A Frugal Home
- Earn Money While You Shop
- 75 Items You Can Freeze To Save Money
- 21 Things We Stopped Buying To Save Money
- 75 Super Frugal Living Tips To Save Money On Your Home Expenses
Have an amazing day,
Saving & Simplicity