7 Baby Steps to achieving financial Freedom-by personal finance guru Dave Ramsey

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Dave Ramsey happens to be a very well-known personal finance expert. He has been able to create a multi-million dollar company and changed the lives of millions of people through his financial advice.

Ramsey is well known for his 7 baby steps that he uses to teach people to get out of debt, build an emergency fund, save for retirement, pay off your mortgage, invest, and more.

According to Ramsey you need to complete one baby step before proceeding to the next. These steps by Ramsey have however been proven to work for hundreds of thousands of people.

Baby Step no 1

Save $1000 for your starter emergency fund

$1000 is about kes 100,000. According to Ramsey having an emergency fund saved is very important and should be the first thing you do in baby step one. This emergency fund is supposed to be a life saver for the day you run into a crisis and don’t have any funds.

Where should you keep your emergency fund?

Your emergency fund should be kept in a separate account, away from your savings or checking accounts to avoid accidentally spending it.

We would however recommend you save your emergency fund in a high yielding savings account that way you can earn some interest.

Baby Step no 2

Pay off all debt using the snowball method

According to Ramsey true financial freedom is achieved when we are completely debt free. Now that you are done saving your emergency fund, it’s time to start paying off your debt using the snow ball method. Read on it here. This might be any debt from a car loan, credit card, or school fees loan. Every extra dollar at this stage should be sent to paying off your debt.

Once your first debt is paid, it will free more of your money then you will use that money towards your next debt.

Then you are expected to continue with this process until all your debt is completely paid.

Baby Step 3

Save 3-6 months of expenses in a fully-funded emergency fund

Once all of your debt is fully paid according to Ramsey, it is time to fully fund your emergency fund. This means that you need to save 3-6 months of your expenses.

This is in case someone in your household loses their job or is badly injured, you will need this money. Having a fully-funded emergency fund account is supposed to prepare you for any unexpected occurrences.

Baby Step 4

Invest 15% of your income in your retirement

Are you currently investing in your retirement? Either way, according to Ramsey you should consider investing at least 15% of your annual income

Some people are lucky to have a pension plan from their work place but if you don’t at this point start investing in one. You can meet this 15% requirement by eliminating some of your expenses or simply picking a side hustle and saving the revenue for baby step number 4.

Baby Step 5

Save for your children’s college funds

Do you currently have kids or do you plan to have some in the near future?

This is one step that seems to be overlooked maybe because we consider our kids too young but the truth is your kids will definitely need these funds to go to college and it’s better to save when you have time to do so.

According to Ramsey this will save you a huge deal may be in your retirement age!

Baby Step 6

Pay off your mortgage early

At this point we are assuming that you are debt-free, already have a 3-6 month emergency fund, investing 15% in your retirement, and saving for your child’s college fund. In this case then it’s time to pay for your housing.

Baby Step 7

Continue to build wealth and give!

Reaching this point means you MADE IT! It’s time to build more wealth and give to charity like no one else!

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