I am constantly learning how to package things so that they are easy to understand. This is incredibly important because you can have the best, most powerful, life changing thoughts but if people can’t hear them or understand them they do no good.
Dave Ramsey has a few baby steps that I wanted to talk about. If you boiled down action items that I talked about, these are the steps that I recommend to get to a point in your life where you are free from money being a master over you.
Step 1) Build a Starter Emergency Fund
A starter Emergency Fund is $1,000 in the bank ($500 if your income is below $20,000). I want you to put this in place because life is going to happen. Money Magazine says that 78% of people will have a major negative financial emergency in any given 10 year period. Your refrigerator is going to stop running, your car is going to break down, your air conditioning is going to blow the only variable is we don’t know when. Life is going to happen, we might as well be prepared for it.
The other reason why I want you to put this in place is because your get out of debt plan or your financial goals take a major hit when life happens and you don’t have something in place to cushion life’s blows.
Step 2) Get out of Debt
Check out Attack that Debt on a detailed plan how to eliminate debt from your life.
Step 3) Build a Fully Funded Emergency Fund
A fully-funded emergency fund is 3 to 6 months of expenses saved up. Once you get this emergency fund saved up you have freedom from your finances. Every day when you go to work you are CHOOSING to be there, rather than being a slave and FORCED to be there. You are in a position to do whatever you were put on this earth to do and that is powerful. You are now able to be in tune and do whatever God might call you to.
Not only are you free from your finances, you are also in a position to be free from the financial burdens of major emergencies. Most of the time when a major emergency happens we have a life crisis and a money crisis. Now you can eliminate one of those. Imagine how great it would be if you lost your job and you did not have to rush into a job that you hated just because you needed to make ends meet. You could wait a month or two and accept a job that you are really passionate about.
My passion is to make our money be a blessing to us and control it rather than letting it control us.
Step 4) Invest 15% of your income into retirement & other savings.
Retirement is coming, future life goals that cost money are coming. It is wise to set aside a systematic amount towards that. I strongly advise people to only invest in well-difersified mutual funds with long track records of success. I do not mess with stocks because there is a huge risk associated when you do not diversify your money.
I won’t expound on any of these in the hopes to keep things simple. Have a good weekend everybody.
