As a Preferred Ramsey Coach, I happily coach my clients through the baby steps. Even after helping hundreds of folks, it never gets more complicated or less simple than these magical steps. If you think it is, that’s when you need to reach out to me for 1-on-1 coaching and I’ll help you.
Step 1: $1000 in EMERGENCY fund.
- As you embark on this journey, you need a cushion for whatever life is going to throw your way. That’s your emergency fund.
- 67% of Americans don’t have enough savings to cover a $1,000 emergency. Almost 40% of American adults wouldn’t be able to cover a $400 emergency without going further into debt.
- Gather $1,000 as quickly as possible and set it aside in an account that you can access quickly. Use if for emergencies. What are emergencies? Things like flat tires, plane tickets for funerals and more. DO NOT touch this money unless it meets three criteria: the need is urgent, the need is necessary and the need is unexpected. If those don’t match, it’s not an emergency.
- The peace of mind you’ll have knowing you have a cushion set aside will be amazing! You also MUST take this step first or else you risk going further into debt when an emergency happens. You’re now going to be ready for the little things that could happen and now you can charge forward with Baby Step 2.
Step 2: Pay off all non-mortgage debt.
- Debt is a thief. It steals your money. You need to pay it all off and be able to control your single greatest wealth building tool: Your Income!
- 78% of workers live paycheck to paycheck. 66% of Americans are in debt and their average load is $34,055. 35% of adults with debt have debt in collections.
- List every debt you have, smallest to largest. Tackle each one, one at a time, fully focused. As you pay off one, roll the minimum from it to the next debt on the list. Gain momentum! Crush debt!
- Add up how much you send out in monthly debt minimums. Imagine what you could be doing with that money each month? It’s kind of mind blowing, isn’t it? When you pay off all your debt, you’ll owe no one anything except for a smile. 😉 That’s FREEDOM. And it gives you back the power of your paycheck.
Step 3: Set aside 3-6 months of expenses.
- Now that you’re out of debt, we’re going to help you stay that way. You’re going to set aside a larger savings account so that you have peace of mind and your future is covered.
- 59% of workers worry about their future financial state. 34% of workers cite current financial concerns as negatively affecting their lives.
- Add up your monthly expenses and multiply it times 3 (married/steady income/stable situation) or 6 (single/unstable/self-employed). Then set aside that money before you do anything else. This isn’t an investment, it’s a chunk of money for a specific purpose. This step is easy to skip or try to do in tandem with the next step. Don’t do that. Don’t split your focus.
- If you have a medical emergency, you’ll be ready. If your job starts getting shaky, you have the confidence you can do without for a while. You’re not going to have to go back into debt come what may.
Step 4: Invest 15% of your income.
- You’re going to take 15% of your gross income and invest it in your employer-matched (hopefully) 401K and/or Roth IRA. When saving for retirement, you it doesn’t need to be complex, just consistent.
- Only 22% of Americans have saved at least $50,000 for retirement, and 27% have empty nest eggs.
- Just like most everyday millionaires, you’re going to be super smart and invest in stuff you understand like mutual funds. Set aside 15% every time you get paid.
- The earlier you start, the better! You’re goign to use the power of time and compound interest to build wealth.
Step 5: Start saving for kids’ college.
- Now that you’ve got your financial house in order, you can help your kiddos. Remember, on the airplane you have to put your own oxygen mask on first! Then you can help those around you. Helping your kids by teaching them not to use student loans is the best help you can give. If you want to offer monetary help too, that’s awesome!
- Americans now owe more than $1.6 trillion in student loan debt.
- Discuss this big life decision with your kids. If college is a fit, set up a 529 College Savings Plan and teach your kids about the woes of Student Loans.
- I don’t have to convince you to do this, your heart already wants to I’m sure! You might be tempted to help your kids in a different order. But, if you don’t take care of yourself first, you’ll wind up being a burden on them later. So, help them, yes, help them! But help yourself first.
Step 6: Pay off your mortgage!
- The American Dream: To own a home. This is going to be you! You’re now going to get super focused and pay that bad boy off!
- The average American owes over $171,000 on their home, and the average monthly mortgage payment is more than $1,000. But there’s hope–more than 20 million Americans actually own their homes.
- Get really focused and send all of your non-budgeted, non-Baby Step 4 & 5 money to your mortgage.
- When you own your home, you don’t have to pay a mortgage. That’s obvious isn’t it? But imagine what you’re going to do with NO DEBT WHATSOEVER. I’ll tell you what you’re going to do-you’re going to move onto Baby Step 7.
Step 7: Live & give like no one else.
- Being generous is a natural human desire and joy. Now you get to be generous and live your best life.
- Researchers say there’s a connection between happiness and the performance of selfless acts. Giving to others activates and area of the brain that has to do with contentment and the dopamine reward cycle. These researchers say there’s a strong link between being generous and being happy.
- Be a good steward of your finances. Be generous. Enjoy the wealth you’ve built. Teach others maybe. Leave an inheritance, build your family legacy!
Alright, that’s the long and short of it. Here’s the deal: I can lay this out for you but it doesn’t make it easy TO DO. I mean, the REAL first step is a zero-based budget and that’s always a bit tough to begin! That’s where a coach comes in. I can work with you 1-on-1 until you’re confident in carrying out this plan. FIll the form out below and we’ll see if we’re a good fit.