One of things we’re proud of is the opportunity to be one of Dave Ramsey’s Endorsed Local Providers. It’s because we believe in practicing good stewardship and recommending the best advice to our clients in order to secure their financial future. Building a future with your finances is similar to the process of building a home, you have to do it in the proper order and one step at a time. You wouldn’t put the roof on a home before you have the foundation and the same is true with your money. You can get where you want to be from where are right now with the proper baby steps. Dave Ramsey lists 7 Baby Steps to take control of your money. Take a look!
1. Save $1000 to Start an Emergency Fund
Having an emergency fund is important for those unexpected moments in life. Misfortune never happens when it’s convenient and having that little bit extra in the bank will go a long way in helping you feel more secure. You never know when you’ll need a little bit of cash for an emergency so start saving now and discipline yourself not to spend it unless it’s absolutely necessary.
2. Pay Off All Debt but the House
List all your debts (other than your house) in order. The smallest balance should be at the top followed by the next smallest all the way to the largest expense. You shouldn’t concern yourself with interest rates unless you find two debts with similar payoffs. In that case, you’ll want to list the higher interest rate debt first.
3. Save 3 to 6 Months of Expenses in Savings
This is the next step after saving the initial $1000 dollars for your emergency fund. You’ll want to start saving until you have 3-66 months’ worth of emergency savings. Sit down and calculate exactly what you’ll need to live for 3-6 months (most people will find that it’s between $10,000-15,000) and start saving little by little to help protect yourself against life’s bigger surprises like the loss of a job.
4. Invest 15% of Household Income into Retirement
Now that you have your savings in order, it’s time to start thinking about retirement. Since you no longer have any payments and you have a solid emergency fund, begin putting 15% towards the retirement of your dreams. Between 401(k), Roth IRA, and a Traditional IRA, you have a lot of options to consider. Find the fit that’s right for you and begin carefully investing for your future.
5. Start Saving Now for Child College Funds
The expense of college continues to rise and if you’re not careful, it will sneak up on you. Start saving now so that you’re ahead or at least well on your way by the time your children graduate from high school. Two smart ways to save for your kids’ college are a 529 savings fund or an ESA (education savings account(. These are both tax-advantages savings vehicles that allow you to set aside money for your kids’ college expenses.
6. Pay Off Your Home Early
It takes the average family five to seven years to pay their home off early. Having no mortgage to worry about enables you to live life with a great deal of freedom and confidence knowing there is no large debt tied to your future. Apply any extra money at the end of the month to paying your home off early, you’ll get out of debt quicker and will save thousands in interest fees.
7. Build Wealth and Give
This is the last step and by far the the most fun. At this point you can afford to live and give like you’ve dreamed of doing. Build wealth, give generously and leave an inheritance to help those you love. It’s a great gift to yourself and others. Our team of certified public accountants can help with your estates and trust planning.
To learn more about how this can help you and your family, contact one of certified public accountants today at our offices in Joplin, MO.