The right financial plan changes everything. One simple plan that has changed things for thousands and thousands of people is Dave Ramsey’s Total Money Makeover.
The Baby Steps.
The 7 Baby Steps are detailed in Dave Ramey’s The Total Money Makeover. These formed the backbone of my family’s personal financial plan. This is the plan that my wife and I started following (or at least tracking) in July 2009.
Over time, we made used some adaptations mainly based on our stage of life. Due to our late start, we did not actually do Baby Step 5. We missed the train on that one. We did not finish Baby Step 2 until our oldest was a freshman in college. By the time we finished BS3/BS4, Daughter #2 was already in college. With 2 more daughters to go, we decided to skip BS5 and teach our daughters the Baby Steps.
Update: Daughter #1 paid off $90,000 in student loans in 18 months!
Being a teacher has taught me that not all students have the same needs. In education, we call it the Principle of Individual Differences. In personal finance, it means we’re all at different spots along the path to financial peace. In addition, my rich life is not necessarily your rich life. My coaching biz helps folks through the first three baby steps, especially establishing a budget.
So we have now chosen to adapt (rather than adopt) the Baby Steps. Maybe your situation is unique, too. I still think Dave Ramsey’s Baby Steps are a solid foundation for typical middle-class people with lots of credit card debt. It’s kinda like the Tailosive Tech guy is an Apple sheep (but he talks about some other tech stuff, too).
The precursor step (Baby Step 0, if you will, and my specialty) is to always get on a budget, and cut up your credit cards (or at least stop using them stupidly). Note: One rule we broke was forgoing the plasectomy; we recognized our problem, and we didn’t feel we were 5-year olds with a dangerous toy. We screwed up, and we recognized it. We still use credit cards but we use them as cash, because we use a monthly cashflow plan. A.K.A., a budget.
So here are Dave Ramsey’s Baby Steps:
- 1. $1000 in the bank for a starter Emergency Fund
- 2. Pay off all debt (except mortgage) with Debt Snowball
- 3. Save 3-6 months’ expenses in the Emergency Fund
- 3b. Save a down payment for a house (if you’re in the market)
- 4. Invest 15% (or more!) in retirement accounts
- 5. College funding
- 6. Pay off home early
- 7. Build wealth and give!
Shoot me an email at mark@marknoldy.com. Or you can call or text me at 570-731-0425. Let’s set up a free exploratory conversation or click here. Whether you need help working on your budget, setting up a debt-dumping plan, or starting to save for retirement, let’s get you on a system that leads to success.
In a nutshell, successful “programs” encourage spending less than you earn, investing the difference, and avoiding debt.