Debt-free? Yes, this is actually happening all over the country. People are deciding to keep their hard-earned money. People are cutting up their credit cards and paying off their debt. We are some of those crazy people and are set to pay off a huge piece of our debt this year.
As Americans, we think that debt has to be forever some of us have even been told this. We think that you will always have a car payment or a mortgage but we don’t have too. As a teen I remember my mom telling me the day she paid off the mortgage, she was so excited, I was excited because she was excited. My teen brain thought “That’s cool!” but didn’t really comprehend it. She was debt-free. She owed no one! This should have been a perfect example of why I shouldn’t get into debt,
but I was stupid,
so I did
and now I have to pay if off
and it sucks!
…So Dave Ramsey. If you have never heard of this guy, you need to. He was a millionaire in his 20’s, then lost it all. He paid off millions, got sued a bunch, started over, and became a millionaire again but this time he did it God’s way.
Dave discusses the book of proverbs a lot. Proverbs is a book in the bible that is full of logical money advice. Throughout this process, Dave discusses various scriptures that back up his reasoning.
So here are the 7 baby steps to become debt- free created by Dave Ramsey and translated by me, tehehe.
Step 1- Save a $1000 dollars emergency fund
An emergency fund is money to use in case of an emergency. An emergency is your refrigerator went out and you need a new one, you have a car accident and need to pay your deductible. Your child’s birthday or vacation is not an emergency. Granny was the best at having an emergency “tucked” away. These are the money lessons I learned from her.
Step 2 -Payoff all your debt except for the house
This is where it gets real. Make a list of all of your debts, pull your credit report, find out who you own and how much. That number might be scary, I know ours was, but you can do it. Dave has had people on his show who’ve paid off over 400,000 and no they weren’t doctors or lawyers.
Start paying off all your debts from smallest to largest using the debt snowball. Yes, start with the smallest debt first. Soon you’ll be screaming “We’re Debt-Free!” I can’t wait to do this!
Step 3- Save 3 to 6 months of living expenses
Yep, that’s a lot! This money will ensure you don’t go back into debt. Remember this is an emergency fund and should only be used in an emergency. Don’t keep this money in a savings account connected to your debit card. Keep this money in a money market account or in a savings account at a different bank so you won’t be tempted to use it. If you are planning to buy a house, you would start saving for a down payment or saving to pay cash for it after you finish step 3. This is called baby step 3b.
Steps for 4,5 and 6 are all done at once.
Step 4- Invest 15% of your household income
Invest 15% of your income into a retirement fund. According to Chris Hogan, author of Everyday Millionaires says that the biggest wealth-building tool used by the Everyday Millionaires in his book was their 401k. An Everyday millionaire is a person who has a net worth of 1 million dollars or more, that they earned on their own. That means not inherited or because they won the lottery.
Step 5- Save for your Kids’ College
Start a college fund for your kids. What’s the point. To keep your children from taking on student loan debt and to keep you from using your retirement to help them pay for college. If you have student loans you know how long they take to pay off. You don’t want your child to start life in debt. If your kids are grown you can do this for your grandkids. If you don’t have kids then you can skip this step!!
Step 6 Pay off the house early
Now that you don’t have any debt, you can use all of your income to pay off your house and kiss your mortgage goodbye!! If your house is paid for you can also skip this step too!!
Step 7 Begin building wealth and give.
One of Dave’s famous quotes is “Live like no one else so you can live and give like no one else” This is what baby step 7 is all about. You have lived frugally, are debt-free, saved for retirement, invested and now you can live however you want. Now you can give however you want too. Dave says this is the fun part! I can’t wait to give like crazy!!
Save $1000, become debt-free, build your 3-6 month emergency fund, invest 15% of your income, save for your kids’ college, and live like no one else. Reading these steps makes them sound really simple. But actually doing it is another story. We started baby steps a few years back but got sidetracked, did some stupid so here we are starting again. We have a clear plan on how to make this work and are finally on the same page as a couple. I can’t wait to get to step 7! Although we are not there yet, this( step 7) is where I want all of you to be. Let’s keep each other encouraged and share your success with us via Facebook or Instagram, they keep us all encouraged! Be Blessed!
