Those numbers in the banner represent the current baby step that I am on. Green is complete, Yellow is what I’m currently working on, and Red hasn’t happened yet.
Through Dave Ramsey, a person I now consider to be my finance counselor, I have learned what he calls the “Baby Steps” to getting out of debt and living like no one else. They are rather simple, and with a few modifications, I’ll lay out the basic steps here.
Dave’s Baby Step 1 starts after two critical components have taken place, so I’ll add two steps and I’ll call them -1 and 0.
So, here goes:
Baby Step -1
Get a job dude. You need income before you can do any of the baby steps. If you aren’t generating income, you’re not going to be able to move forward.
Baby Step 0
Get current. If you’re behind on ANYTHING, get current. If your income won’t allow it, prioritize who you will be holding off on paying based on how important they are in the scheme of your finances, and get current on the important things.
Baby Step 1
Put $1000.00 away in a liquid account that can be easily accessed for emergencies only. This buffer will help defend your home from Murphy’s law. It’s important that you develop the discipline to know the difference between a real, and an imaginary emergency. If your alternator dies, you can consider that an emergency because it effects one of The 5 Essentials. If you need an engagement ring…well, that is not an emergency. Once you have the $1000.00, you’ll have a little taste of the peace of mind that’s coming.
Baby Step 2 (The Debt Snowball)
Pay off all outstanding debt, smallest balance to largest.
Baby Step 3
Build your full emergency fund based on your type of income. Self-employed should have at least 6 months. If your emergency fund seems monumental, then it’s possible your expenses are too high. Lower your lifestyle. Get it all paid off, except for the house.
Baby Step 4
Start investing 15% of your income in Growth Stock Mutual Funds.
Baby Step 5
Put 15% of your income in educational savings for your kids college funds.
Baby Step 6
Pay off the mortgage.
Baby Step 7
Grow, Live, Give! Have a blast, and build wealth.
