Be Free and Prosper
What's the number one cause of separations and divorces in America? Money fights. What's one of the most crippling fears that Americans face during and after school? Debt. It's no secret that money is a touchy subject. No one enjoys talking about their finances, otherwise known as their insecurities. Fortunately, it doesn't have to be an insecurity any longer. Follow these cut and dry steps laid out by Dave Ramsey and you will be put back in the driver's seat when it comes to your financial future.
Step 1: Save a $500 Emergency Fund
While it may seem insignificant, this step means a lot. By accomplishing a small goal, we are able to approach our next goal with a bit more confidence (and, not to mention, a bit of added security). This $500.00 is not to be touched except for an ABSOLUTE EMERGENCY. This means that unless a catastrophic event is going to occur if not monetarily addressed immediately, this money stays where it's at.
Step 2: Get Out of Debt
Easier said than done, right? Well, as hard as it is to stay focused and vigilant, the fear of crippling debt is enough to drive most who start this journey to finish. List your debts (excluding a mortgage) in order of smallest to largest and then pay them in that order, regardless of the size of interest rates. This includes ALL debts, whether that be car payments, student loans, past due bills, etc. Budget out per month where each and every dollar is going to go. This means that every single dollar which comes into your household has a predetermined destiny, which is set by you. It is imperative to stick to this written budget. Pay for food, utilities, and rent, and then everything else is thrown at debt. Your most powerful wealth-building tool is your income. Therefore, the faster you can pay off debt, the sooner your income is freed up to save, give, and enjoy. No one said it would be easy, but it is simple. In my opinion, it is worth it to live a "scorched-earth" lifestyle while paying off debt so that sooner rather than later you can enjoy your money. The borrower is always slave to the lender and I do not intend to be a slave to anyone. It's a concept known as being "gazelle intense". Punch debt in the face until there is no life left in it.
Step 3: Build Emergency Fund to 3-6 Months' Worth of Expenses
CONGRATULATIONS!!! You're out of debt!! Now comes the fun part. Here we save an additional three to six months' worth of expenses in our emergency fund to either support us in the case that we lose our job, or to be able to pay WITH CASH for an unexpected emergency such as a medical bill or car repair. Remember, we just worked so hard to get out of debt. We certainly aren't going back there.
Step 4: Set aside 15% of Income for Retirement
Step 5: (Optional) Save for Kids' College
Step 6: Pay Off Home Mortgage
These steps all happen at the same time. The best way to set aside for retirement is through a Roth IRA invested in Growth Stock Mutual Funds which hold a good track record of at least 15 years. It is imperative that you choose a Roth IRA in lieu of a Traditional IRA because a Roth is post-tax, which means that there is no need to pay taxes on the return which is generated by your investments. This is not the case with a Traditional IRA. Money should be invested equally into four separate funds. The four fund types are Growth, Growth and Income, Aggressive Growth, and International. By investing in a diverse spread of stocks, there is a higher level of security within your investments. Additionally, you should be able to find funds which have averaged approximately a 12% return rate per year.
Keep in mind, throughout this entire process, we are still on a monthly written budget. We have more spending money, but we are still pre-planning where it will be used.
Step 7: Build Wealth and Be Outrageously Generous
From here on out, building wealth is exponentially easier. There is no longer a mortgage, no payments, nothing holding us back. This allows us to budget in much more generosity and personal enjoyment. The misconception of budgeting is that it is paralyzingly limiting. In truth, budgeting provides freedom. When you know what your limits are, it enables and empowers you to enjoy everything to its fullest potential within those limits and without any guilt. As step 7 is reached, there should be no reason at all to worry about an inability to retire with dignity and comfort.
As a bonus, check out this budgeting app known as "Every Dollar". It makes it ridiculously easy to plan out your monthly income and expenses, giving you control over your money once again. Best of all, it's free! This invaluable tool can be taken advantage of by Apple and Android users alike.
https://www.everydollar.com/
As always, Good fortune and Godspeed.
-Mike Knipp
Step 1: Save a $500 Emergency Fund
While it may seem insignificant, this step means a lot. By accomplishing a small goal, we are able to approach our next goal with a bit more confidence (and, not to mention, a bit of added security). This $500.00 is not to be touched except for an ABSOLUTE EMERGENCY. This means that unless a catastrophic event is going to occur if not monetarily addressed immediately, this money stays where it's at.
Step 2: Get Out of Debt
Easier said than done, right? Well, as hard as it is to stay focused and vigilant, the fear of crippling debt is enough to drive most who start this journey to finish. List your debts (excluding a mortgage) in order of smallest to largest and then pay them in that order, regardless of the size of interest rates. This includes ALL debts, whether that be car payments, student loans, past due bills, etc. Budget out per month where each and every dollar is going to go. This means that every single dollar which comes into your household has a predetermined destiny, which is set by you. It is imperative to stick to this written budget. Pay for food, utilities, and rent, and then everything else is thrown at debt. Your most powerful wealth-building tool is your income. Therefore, the faster you can pay off debt, the sooner your income is freed up to save, give, and enjoy. No one said it would be easy, but it is simple. In my opinion, it is worth it to live a "scorched-earth" lifestyle while paying off debt so that sooner rather than later you can enjoy your money. The borrower is always slave to the lender and I do not intend to be a slave to anyone. It's a concept known as being "gazelle intense". Punch debt in the face until there is no life left in it.
Step 3: Build Emergency Fund to 3-6 Months' Worth of Expenses
CONGRATULATIONS!!! You're out of debt!! Now comes the fun part. Here we save an additional three to six months' worth of expenses in our emergency fund to either support us in the case that we lose our job, or to be able to pay WITH CASH for an unexpected emergency such as a medical bill or car repair. Remember, we just worked so hard to get out of debt. We certainly aren't going back there.
Step 4: Set aside 15% of Income for Retirement
Step 5: (Optional) Save for Kids' College
Step 6: Pay Off Home Mortgage
These steps all happen at the same time. The best way to set aside for retirement is through a Roth IRA invested in Growth Stock Mutual Funds which hold a good track record of at least 15 years. It is imperative that you choose a Roth IRA in lieu of a Traditional IRA because a Roth is post-tax, which means that there is no need to pay taxes on the return which is generated by your investments. This is not the case with a Traditional IRA. Money should be invested equally into four separate funds. The four fund types are Growth, Growth and Income, Aggressive Growth, and International. By investing in a diverse spread of stocks, there is a higher level of security within your investments. Additionally, you should be able to find funds which have averaged approximately a 12% return rate per year.
Keep in mind, throughout this entire process, we are still on a monthly written budget. We have more spending money, but we are still pre-planning where it will be used.
Step 7: Build Wealth and Be Outrageously Generous
From here on out, building wealth is exponentially easier. There is no longer a mortgage, no payments, nothing holding us back. This allows us to budget in much more generosity and personal enjoyment. The misconception of budgeting is that it is paralyzingly limiting. In truth, budgeting provides freedom. When you know what your limits are, it enables and empowers you to enjoy everything to its fullest potential within those limits and without any guilt. As step 7 is reached, there should be no reason at all to worry about an inability to retire with dignity and comfort.
As a bonus, check out this budgeting app known as "Every Dollar". It makes it ridiculously easy to plan out your monthly income and expenses, giving you control over your money once again. Best of all, it's free! This invaluable tool can be taken advantage of by Apple and Android users alike.
https://www.everydollar.com/
As always, Good fortune and Godspeed.
-Mike Knipp
every since I was 16 I have had an emergency fund started out with 100 not its a little over 500. When people ask me to go and do something a little out of my price range I tell myself im broke or in other words I have responsibilities I never spend more than I make. I will check out that app thanks
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