My husband and I recently took a class at our church called Financial Peace University, which is a set of eleven videos made by financial guru, Dave Ramsey. On the Dave Ramsey Show on the Fox Business Channel, he said, “Debt is dumb. Cash is king. And the mortgage is the house. The mortgage has taken the position of the BMW as the symbol of choice”. Dave Ramsey is all about financial freedom and not being a slave to debt and his advice really works. These steps must be done in sequence, or the flow of funds leaves vulnerable to harvests and failures. Read ahead and see for yourself.
Step #1: $1000 in the bank
Before you do anything else, before you start paying off debt, start an “emergency fund” with $1000 in the bank. You can still get this money, even if it means buying newspapers or baking pancakes on the weekend. This money is just for emergencies, like if the car breaks down or something like that. Buying a big screen TV does not qualify as an emergency!
The second part of this step is to create an hourly household budget and completely approach the “cash” only system. Once you’ve decided what your expenses are, you can start taking money out of the bank each month to pay for things like groceries, restaurants, gasoline, and whatever else you spend during the month. This helps to keep you from spending money, because once the money is gone in a month, and you have to wait until the beginning of the next month for more money to come out. In the way of groceries, if you run out of grocery money, then you’ll start having a problem with what food you have in your house. It also “hurts” more money in cash, so that each purchase you make, you really think about whether you need to dip into the money itself. This single cash flow system has helped finance our home, and I know it can do the same for you.
The bottom line is that you will never go out of debt for anything. If you can’t pay for it, you shouldn’t buy it. In Proverbs 22:7: He who borrows is the servant of the lender. Dave Ramsey often uses the analogy of a person borrowing money from their parents, and how this is also a bad thing that changes. the relationship from parent to child (even if that “child” is an adult). It is said that the Thanksgiving dinner tastes a lot different at the master’s table than at your father’s table, and how true it is! Think about it.
Step #2: Pay Debt using “Debt Snowball”
Dave Ramsey explains at Financial Peace University how to pay off debt (everything except the home mortgage) using a “debt snowball.” He says that debt is a mental problem more than an actual money problem, and he addresses the debt snowball. It says to list your debt from the least amount owed to more than what is owed. You start with the smallest that you can pay off faster. He says to make the smallest payments of any other debt on snowball debt, and to pay as little as possible until it is paid off. Then you’ll move on to the next payment, putting everything you’ve been paying down to the next debt in line. Every time you pay your credit card, take it down and cut it into pieces! The debt snowball really works, and since you’re paying things off, it feels like progress, which makes paying off larger amounts seem much more manageable.
Step #3: Spend 3-6 Months into SAVINGS
After all your debt (except the home mortgage) is paid off, in the Financial Peace University videos, Dave Ramsey says you should then set aside the rest of your emergency fund, which is 3-6 months of your expenses. What you need to do to figure out the amount is to look at your monthly budget (which should have been created in several steps before) and what you spend each month on your mortgage, electricity, etc. banks This emergency fund is great for catastrophic events like someone losing their job. With this emergency fund that allows you to find a new job, take up to six months to find a new job and not change your lifestyle. Job interviews take it much easier when you are not desperate to get the first job offer. Six months really allows you to find a job that not only pay the bills, but that you can actually afford. as well.
Step #4: Retirement
Dave Ramsey teaches at the Financial Peace University that the ultimate goal in investing is to invest a total of 15% of your household into various income streams. The first thing you need to do is invest in your 401K program. Put as much into it as your company will match. Then you put whatever is left over to invest a total of 15% in a Roth IRA. This plan can be set up by a financial advisor, and if you go to Dave Ramsey’s website, you can find financial advisors in your area who are certified through the Dave Ramsey program.
Step #5: College Funding
College funding comes after investing in retirement, which I found odd at first, but it really makes sense when you think about it. You really need to take care to secure your future needs after retirement before you can worry about your child’s education. There are many options out there for saving education, and Dave Ramsey really advises against things like Gerber Insurance and education policy. He says that this money should be put into a 529 something plan, which is available in most states. These are similar to IRAs in that they are invested differently and have quite a high risk, but certainly better returns than a standard savings account< /a>. Again, this type of system can be established through financial planning.
Step #6: Pay off the mortgage
After everything else is taken care of, Dave Ramsey tells you that you should systematically pay extra money every month to pay off your mortgage. at first If the mortgage is ever out of the house, he says it will be for 15 years or less. It doesn’t add much more to your monthly payment, and over time, you could pay hundreds of thousands of dollars less on a home.
Step #7: Build Wealth and Give!
This is, of course, the last step, and it was my personal lesson in the Financial Peace University series. Thus we finally inspire the audience that we do not build our wealth to preserve, but to take away. Dave Ramsey used God as an example and how he sent his one and only son – he gave the ultimate gift! And we should do the same with our money.
I am also very interested in learning at the Financial Peace University that most of the cashiers do not put their money in, but there is a community among them that they liberally take their money out.
Where I am and what I have learned
My husband and I recently started a college savings fund for our son, as step #5. I guess technically we have to pay off the mortgage, but there are some things we’re going to do before we tackle that gear. In about a year we will start the international adoption process (we want a bay girlcredit and no debt except our mortgage. We continue to save for our adoption. I know that our money is always saved up, our money is always ready. us So hang in there! God also has great things in store for you, and if you are patient and do life at your own pace, God will bless your life very kindly, just as ours is already so blessed. May God bless you more than you could ever imagine.
