One of the best financial resources I have found is Dave Ramsey’s Financial Peace University. A number of year’s ago I noticed our local Bank offering classes. Not being the most social person, I decided to buy the “Home Study” course instead of attending a community class. After watching the courses and letting the principles marinate for a couple weeks I knew it was the way to get out of debt and have financial peace. I thought it was such a good class that I flew to Nashville and was certified as a workplace trainer so I could start teaching our teammates at work about it. After facilitating classes at work and in the community I was asked by a family in our community to look at their financial situation and give them some advice and direction. I soon found out that they were deep in debt and I empathized with them and felt their stress to the point that I was sick to my stomach that night and could not sleep. After hearing their story I felt inadequate for the task so I flew to Nashville again and became certified as a Financial Coach/Counselor. So I have definitely drunk the Ramsey Kool-Aid.
The reason I like Dave Ramsey’s course so much is because it is just common sense laid out in a step by step methodology. You only worry about the step you are on and put all your focus on that step. Sometimes when you don’t know where to focus you don’t have as powerful an impact. The baby steps are:
Baby Step 1
$1,000 to start an Emergency Fund
An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen.
Baby Step 2
Pay off all debt using the Debt Snowball
List your debts, excluding the house, in order. The smallest balance should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first.
Baby Step 3
3 to 6 months of expenses in savings
Once you complete the first two baby steps, you will have built serious momentum. But don’t start throwing all your “extra” money into investments quite yet. It’s time to build your full emergency fund.
Baby Step 4
Invest 15% of household income into Roth IRAs and pre-tax retirement
When you reach this step, you’ll have no payments—except the house—and a fully funded emergency fund. Now it’s time to get serious about building wealth.
Baby Step 5
College funding for children
By this point, you should have already started Baby Step 4—investing 15% of your income—before saving for college. Whether you are saving for you or your child to go to college, you need to start now.
Baby Step 6
Pay off home early
Now it’s time to begin chunking all of your extra money toward the mortgage. You are getting closer to realizing the dream of a life with no house payments.
Baby Step 7
Build wealth and give!
It’s time to build wealth and give like never before. Leave an inheritance for future generations, and bless others now with your excess. It’s really the only way to live!
The baby steps work!
They have worked for me and my family and I have seen them work for others as well! If you want to get to a better financial place go to a Financial Peace University course and start applying the principles immediately. It’s not easy, but it is worth it! You have to have some discipline but Dave will help you get motivated to make those choices. It really works! But as Dave says, it is a crock pot not a microwave.
The coolest part, and I think the part that is sometimes overlooked is baby step 7, build wealth and give. The premise is that we are trying to become Christlike during our time on this earth. Jesus was a giver, he gave his love and his life to us. To become like him we too must become unselfish and giving. Baby step 7 helps us focus our energy and attention on others so we can become more like Him. We take care of ourselves and our families so we are in a position to help others. We don’t become greedy rich people we become selfless givers that are in a position to readily help whenever He places people in our path. It is like the parable of the talents. We each are given time, talents, abilities, and wealth. We are stewards over each of those aspects of our lives. The goal is to be wise stewards and to use our blessings to help others. I think that is why I love the Financial Peace courses so much. At their core the steps help you to become self sufficient so you can quit focusing on your debt and start focusing on others. It’s hard to focus outwards when we are fighting tooth and nail just to survive.
To learn more go to www.daveramsey.com.