I had mentioned that we follow most of Dave Ramsey's methods for finances.
Take a listen in to Dave's story. You will get a bigger picture of where he is coming from, his wisdom, life experience, and why he chooses to "live his life like no one else." He has been through it all.
We choose to follow his methods because they work, his knowledge, his inspiration, and to "live like no one else".
Here are the order of operations at a glance for finances:
Pay basic needs
Set up emergency fund
Pay off debt
Every month, take care of basic needs and bills. Then, once you have that covered, start setting money towards your emergency. Each check, put money towards it to get it up to $1000. After those are covered, pay off monthly payment of all debt payments you have.
If you have money left, it should go towards paying off debt. Not the wants, the latest of technology, etc. Put it towards your debt. Even if that means your student loan or mortgage because you don't have a carry over for credit cards (awesome by the way), still put it towards any debt you have.
Any money beyond that you have goes towards your smallest amount of debt until it is completely paid off. Once you have the smallest debt paid off, use the money from that payment to go towards your next smallest debt. Keep doing that for each one until they are paid off.
If you tap in to the emergency fund because it is a true emergency, then go back to baby step 1, and get your emergency fund set back up.
So what are the baby steps:
- Baby Step 1 – $1,000 to start an Emergency Fund
- Baby Step 2 – Pay off all debt using the Debt Snowball
- Baby Step 3 – 3 to 6 months of expenses in savings
- Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
- Baby Step 5 – College funding for children
- Baby Step 6 – Pay off home early
- Baby Step 7 – Build wealth and give!
It is possible. "Live like no one else now, because then you can live and give like no one else later in life" ~ Dave Ramsey
You have to start where you are. Be consistent, you may have to give some extras up, but it can be done.