Our emergency fund was established shortly after we took the class Financial Peace University (by Dave Ramsey) in 2007. I am so thankful for what we learned in that class. If you haven't taken it, you should! It's a very simple way to take control of your finances. Dave suggests 7 baby steps to financial freedom. Here are the baby steps:
Baby Step 1
$1,000 to start an Emergency Fund
An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen. Learn more
Baby Step 2
Pay off all debt using the Debt Snowball
List your debts, excluding the house, in order. The smallest balance should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first. Learn more
Baby Step 3
3 to 6 months of expenses in savings
Once you complete the first two baby steps, you will have built serious momentum. But don’t start throwing all your “extra” money into investments quite yet. It’s time to build your full emergency fund. Learn more
Baby Step 4
Invest 15% of household income into Roth IRAs and pre-tax retirement
When you reach this step, you’ll have no payments—except the house—and a fully funded emergency fund. Now it’s time to get serious about building wealth. Learn more
Baby Step 5
College funding for children
By this point, you should have already started Baby Step 4—investing 15% of your income—before saving for college. Whether you are saving for you or your child to go to college, you need to start now. Learn more
Baby Step 6
Pay off home early
Now it’s time to begin chunking all of your extra money toward the mortgage. You are getting closer to realizing the dream of a life with no house payments. Learn more
Baby Step 7
Source: http://www.daveramsey.com/home/
We took this class 5 years ago but still use the principals we learned in Financial Peace. I'm proud to say we're on Baby Step 4. We're doing it a little different, though. Instead of putting it in an IRA, we're putting it in a hi-fi savings account we call the "get out of the trailer fund". If/when we decide to buy another house, we will need a large down payment because we still have our mortgage for our Clive house. So, we're very focused in stocking money into the "get out of the trailer fund" every month. I'm thankful for all we've learned about handling finances, for our incomes, and for our ability to be disciplined with what God's given us!
Build wealth and give!
It’s time to build wealth and give like never before. Leave an inheritance for future generations, and bless others now with your excess. It's really the only way to live! Learn moreSource: http://www.daveramsey.com/home/
We took this class 5 years ago but still use the principals we learned in Financial Peace. I'm proud to say we're on Baby Step 4. We're doing it a little different, though. Instead of putting it in an IRA, we're putting it in a hi-fi savings account we call the "get out of the trailer fund". If/when we decide to buy another house, we will need a large down payment because we still have our mortgage for our Clive house. So, we're very focused in stocking money into the "get out of the trailer fund" every month. I'm thankful for all we've learned about handling finances, for our incomes, and for our ability to be disciplined with what God's given us!
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