Seven Money Tips That Will Change Your Life

(Iknow, because they changed mine!)

I shared with you in my debt free story part two that when I started following Dave Ramsey's plan to get out of debt and live on a budget, something clicked. I was not as intimidated by the concept of budgeting and I started to believe that it is possible to have a life without any payments. I began to appreciate the budget and use it as a tool to help change my financial situation instead of something to mock me on where I was failing with juggling money.

Enter Seven Baby Steps

Since I will be talking about the Seven Baby Steps a lot here on this blog, it would be a good idea toexplain them so that you all understand what it is that I am talking about.

The Seven Baby Steps

1. Save a $1,000 baby emergency fund.

2. Pay off all your debt using the debt snowball.

3. Save 3-6 months of expenses in savings.

4. Invest 15% of household income into Roth IRA's or pre-tax retirement.

5. College funding for children.

6. Pay off your home early.

7. Build wealth and give!

Taken from Dave Ramsey (not a paid affiliate link).

There are great articles, helpful tools, and a wealth of information on the Dave Ramsey site and if you are trying to budget or get out of debt, I would recommend that you spend some time on that site and put into practice the advice found there.

Save

Save

1. Save a $1,000 baby emergency fund.

I was very impressed once I had saved my $1,000 baby emergency fund how my 'emergencies' became fewer and fewer. There was not as much bad stuff that seemed to happen. When something happened, we could scrape together what we needed from cash and our other savings to cover the expense. I know that part of the explanation ofless emergencies was due to the fact that we started budgeting for some of them (car repairs) and started saving the amounts each month until we needed the money.

Then once I had to dip below my $1,000 this summer, it felt like all the sudden therewere expenses after expenses that were unplanned for and kept bombarding us. Yea, I am going to do my best to not dip that low again, too stressful! The baby emergency fund is back up to full health and I am increasing it to become a3 month stash by the end of the year.

2. Pay off all your debt using the debt snowball.

The second step took some work to get out of the mindset that we will always have debt and payments to someone, but once we were able to realize that we can indeed pay off our debt and made some traction, paying off our debt became much easier.

Dave Ramsey recommends listing your debts smallest to largest, regardless of the interest amount, paying minimum payments on everything except the smallest debt. You then pay as much as you can squeeze out of your budget and any extra cash that you can get your hands towards the smallest debt. Once this one is paid off you take the money that you had been using to pay off the first debt and add it to the minimum payment of the second debt.

Not only does the money start accumulating quickly, but you are able to have small victories that keep you motivated to continue cleaning up your debt. Plus you will havegreater momentum to work through the rest of your debt when you look at the progress that you have made.

3. Save 3-6 months of expenses in savings.

We are currently on the third baby step and have been for 5 years. Several times a year, I do have a sizable savings account. If something were to happen and I could not work, we could use that money to live off of for a while. However, that fund gets drained every four months when we make another tuition payment to ASU.

I know that paying the tuition is an investment into my husband and our future, but at the sametime I am a little frustrated that it has taken us this long, only to still be working on step 3. That is why I decided that 2015 is my year to build up my emergency fund to at least 3 months of expenses. I need to tighten the budget down further and bring in more income in order to make this happen.

Baby step 3b can be saving for a down payment for a house, as Dave says often on his radio show. We are willing, when the time comes, to wait a while longer before buying a house so we can save up a substantial down payment before buying.

As much as I would love to be in a house our house as soon as possible, I am a little house-shy. I have seen so many people get into houses that they could not afford and eventually ended up losing the houses for various reasons.

That process looks way too stressful for me. I can wait.

Save

Save

Can I tell you what my real goal is for baby step 3b? I would be so thrilled if we work super hard after Jeremy graduates, continue to live on a shoestringbudget, and save every dollar possible so we can pay cash for a house in just a few years. Jeremy is agreeable to trying to make my plan work, as long as it does not take a very long time.

Well, friend, when I am told that it is not possible or can not be done (about anything), I do my best to prove people wrong and I fully plan to use that determination on baby step 3b. I will definitely keep you updated on what progress I can make on this goal. (My parents even told Jeremy that I was stubborn when he asked to court me...)

4. Invest 15% of household income into Roth IRA's or pre-tax retirement.

At this point, I do have some retirement savings thathas been automatically taken out of my check from the college where I interpret classes for students. I am not able to contribute any additional funds to that savings, nor will any more money be deducted from my check at this time. I can not touch it until I am at retirement age so this money will just have to continue to sit there and grow for me. Other than that, we are not yet at the point where we can start investing.

I do think about the fact that we are in our early thirty's with very little put away into retirement at this point and wish we were further along. Once in a while, when I am a little freaked out that 40 seems to be comingway to quickly, I will head over to the Dave Ramsey site and play around with the investment calculator.

Knowing that as soon as we do reach the point where we are able to start investing, we will be able to invest a decent amount fairly quickly and the money will grow comforts me. There is still a lot of time left for us, Lord willing, and we should be fine on our retirement savings by the time we retire. I need to continue to be diligent now with my money choices.

One reason we should be fine is that we no longer have any school loans to pay back. In fact, we do not have any debt payments holding us captive.

5. College funding for children.

We do not have children yet, but I am working to be in a position that when we do, we will be able to start saving for college as soon as they are born- they will need 18 years of contributions and interest growth! Have you seen the tuition costs lately?

It has only been the last year and a half or so that tuition has not increased, at least here at ASU. However, prior to 18 months ago, tuition had seen an increase each year. I fully expect there to be increases in tuition before much longer.

6. Pay off your home early.

I am really hoping that we can just skip this step since we are aiming to buy a house for cash in baby step 3b.

7. Build wealth and give!

I am really looking forward to seeing this step as I love giving and helping people. It is hard to be as giving as you want to be when you do not have much margin in your life and you are stressed out to the max about taking care of your own household.

As a Christian, I believe that everything we have is a gift from God and that we are to manage well what He has given us, including giving to others and taking care of their needs. He has blessed us so richly and with so much, how can I not give to others out of the surplus that God has bestowed on me?

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