Seven Steps to Financial Freedom. This blog isn’t only for kids. We like to
discuss a variety of financial topics for everyone in the family.
As a practicing
CPA for over 10 years, I am asked questions related to personal finances often.
When it comes to adults, I always recommend one program – the Dave Ramsey
method. I am so passionate about his teachings that whenever the name Dave Ramsey
comes out of my mouth, there is an auto-responder in Camille’s brain that
signals EYES GLAZE OVER…well maybe not that bad.
The reason I am so passionate
about his teachings is because they work! I have gone through the “Baby Steps”
myself and seen several friends also achieve financial freedom using his
teachings. Did you know the #1 reason for families splitting in divorce is money
Dave Ramsey’s (www.daveramsey.com) “Baby Steps” are summarized as
1) Put $1000 in an Emergency Fund – This is for emergencies only, which
means put it in an account you won’t touch.
2) Use the “Debt Snowball” Method
to Pay Off All Debt Except Your House – List all your debts smallest to largest
and start making extra payments on the smallest. Work your way down the list
until you are debt-free. Many financial experts recommend paying the debt with
the largest interest rate first. Dave argues (and I agree) that this journey is
mostly a mental and emotional journey. The emotional traction and momentum built
as debts are paid off will yield the most benefit and success.
3) Save 3-6 Months
of Expenses – Put this into an account that you won’t touch. If you have a
stable income, 3 months is great. If you work on commission or have seasonal
income, 6 months is recommended.
4) Invest 15% of Your Income in Retirement
Accounts – We won’t get into Roth (post-tax) vs Traditional (pre-tax)
investment accounts. That’s a topic for another day and is really unique to each
individual situation. The important thing is to start saving 15% of your income.
5) Invest in a College Fund for Your Kids – Use a 529 or ESA plan to save for
your kid’s education.
6) Pay Off Your Home Early – Could you imagine the feeling
of walking onto your front lawn knowing you own your home and land? This is the
step we are working on now, and I think about that feeling all the time. This
step is to be completed as you are completing 4 & 5 (if you have the available
7) Build Wealth and Give – in my post “The 5 Most Important Things To
Teach Your Kids About Money”, I listed giving as #4. Whether you give to your
church, charity, or someone in need it is so important to teach the principle of
giving to our children. You don’t have to wait until all the steps are complete
to give, but this is the step when you really step-up the giving. Get involved
with a cause you are passionate about and give to make a difference.
If this post
has piqued your interest, I would highly recommend Dave’s book “The Total Money
Makeover”. He explains the “Baby Steps” in more depth and also a Zero-Based
Budget, which is the biggest key to completing the baby steps. Here is a link to