7 Baby Steps to Financial Freedom
Jesus talked more about money than He spoke about Heaven and hell combined! Clearly, God wants us to manage our money well – to be good stewards. Money is not to be an idol or a ruler in our life. It is simply a Kingdom tool. Taking control of your finances is not as hard as you might think.
Dave Ramsey applies Kingdom principles to financial management that sets people free from debt. Following his 7 Baby Steps as explained below will set you on a path that leaves money worries behind and equips you to use your money as God intends.
1. Save $1,000 for your starter emergency fund.
This fund covers those unexpected life events you can’t plan for … and there are plenty of them. It prevents you from digging a deeper hole when you’re trying to work your way out of debt!
2. Pay off all debt (except your home) using the debt snowball.
Start by listing all of your debts except for your mortgage (i.e. cars, credit cards, and student loans). Put them in order by balance from smallest to largest and knock out your debts one by one. Debt snowball!
3. Save three to six months of expenses in a fully funded emergency fund.
Once you pay off the debt, use the money you were applying to loans to build a fully funded emergency fund. This is to protect you against life’s bigger surprises, such as a job loss or car repairs.
4. Invest 15% of your household income in retirement.
It’s always the right time to get serious about retirement. With debts paid off and an emergency fund in place, invest 15% of your gross household income into retirement. Start with your company’s 401(k) plan and receive the full employer match. Invest the rest into Roth IRAs – one for you and one for your spouse if you’re married.
5. Save for your children’s college fund.
With debts paid off, an emergency fund in place and retirement investments underway, save for your children’s education with 529 college savings plans or Education Savings Accounts (ESAs).
6. Pay off your home early.
Now, bring it all home. Baby Step 6 is the big dog! Your mortgage is the only thing between you and complete freedom from debt. Can you imagine your life with no house payment? Any extra money you can put toward your mortgage could save you tens (or even hundreds) of thousands of dollars in interest.
7. Build wealth and give.
You know what people with no debt can do? Anything they want! The last step is the most fun. You can live and give like no one else! Keep building wealth and become insanely generous. Leave an inheritance for your kids and their kids. Now that’s what we call leaving a legacy!
Ramsey Solutions provides a wide array of tools and resources to help you complete the 7 Baby Steps. From free assessments to help you fine-tune your goals, to classes, educational articles, budgeting tools, and financial calculators, their website provides the information you need to take control of your money!
Used with permission from DaveRamsey.com.
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