Have you ever heard the phrase; you’re running a marathon, not a sprint? This saying could not be more true when it comes to your finances and growing wealth. Even establishing good money habits take time. It doesn't happen overnight. Patience is not a gift that was bestowed upon me - but God sure does teach you patience in many forms. For me, it was with my finances and paying off debt. Honestly, we’re still paying off debt so it’s a lesson that (apparently) I’m not done learning yet. You may or may not be familiar with Dave Ramsey – but I’m a big believer in the things that he teaches. I’m actually a Dave Ramsey certified Financial Coach. So, you can say I’m a little bit of a fan. His teachings about money has changed my life and my husband’s life and our future children. According to Dave Ramsey, establishing good money habits can be broken down into 7 baby steps.
Baby Step 1: Save $1,000 for your Emergency Fund
This baby step is crucial to establishing good money habits and building that little bit of cushion for when emergencies to occur. Emergencies like blowing a tire on the freeway and unexpected hospital visits. Once you’ve built up your baby emergency fund, it’s time to go on to baby step 2.
Baby Step 2: Pay off all debts (except the house) using the debt snowball
Each step is important for its own reason - for this particular step, it’s important to establish your financial freedom before you can start to build wealth. Financial freedom is actually biblical. Proverbs 22:7 states, “Just as the rich rule the poor, so the borrower is servant to the lender.” The debt snowball method is attacking your smallest debt first and paying it off and then rolling that payment to your next largest loan until you’re 100% debt free.
Baby Step 3: Save 3-6 months expenses in a fully funded emergency fund
Now that you’re 100% financially free, it’s time to safeguard that freedom. By building up a 3-6 month emergency fund, you’re protecting your family from future debt. Your building up a safety net just in case you lose your job or a large emergency happens.
Baby Step 4: Invest 15% of your household income in retirement
Now that you’re financially free and you’ve ensured that freedom, it’s time to start building your wealth.You’ll want to save 15% of your household income for retirement and look to the nest baby steps because baby steps 4,5, and 6 are all done consecutively.
Baby Step 5: Save for your children’s college fund
If you have kiddos, it’s time to start saving for their education. If your littles are still babies, you lucked out and can save a little more conservatively. If your babies are just about grown up, you’ll have to be more aggressive in your saving tactics. Or, if you’re like me and don’t have children, you can skip onto the next step!
Baby Step 6: Pay off your home early
It’s time to focus on becoming 100% debt free - including your house! Have a paid for home gives you a deep sense of financial security. No one can take your home away from you. That home and the land it sits on - it’s yours.
Baby Step 7: Build wealth and give
All of these steps ultimately lead to this last, and most important steps. It’s time to have the most fun you’ll ever have with money, and that’s to give it away. I don’t know about you, but I get the warm fuzzies inside whenever I give someone a gift of randomly pay for someone's coffee. It’s the little things in life. So, while you’re building up your wealth to secure your retirement and passing down that wealth to future generations - why not help someone else out that’s in need?
My husband and I are currently running our marathon in baby step 2. Oh, has it been a marathon. But, we’re running it together. Side by side - working together to pay off over $200,000 of debt. We’re currently under $150,000 and still going strong. We couldn’t have linked arms with finances if it hadn’t been for a mentor showing us the ropes.
Honestly, that’s a big reason that I decided to become a financial coach. I’ve known too many families and witnessed several couples fight endlessly about money and it breaks my heart to witness. So, I decided to do something about it. You can book your free consultation with me today, if you’re ready to stop working for money and have it start working for you. I think it’s time that y