The Seven Baby Steps
As I have noted is several previous posts I have been reading Dave Ramsey's 'Total Money Makeover'. In this book and on his web site he lists what he call's seven baby steps to financial peace. I will on occasion post updates on my personal progress and journey to along this path. The up's and down's and personal feelings as to whether this is a valuable plan to follow or not in my opinion along the way to freedom from the debt monster.
Baby Step 1. $1,000 to start an emergency fund - This fund is for emergency that life throws our way, such as the water pump goes out on the car or the dryer goes out. This is not to be used for vacations or wants. When I started on Dave Ramsey's program I had already been working hard for months to get out of debt and was over paying on several credit cards but I did not have an emergency fund so I dropped back to making just minimum payments on all credit cards so I could put $1,000 into an emergency fund which took a little over a month. Then went back to paying extra on the credit cards.
Baby Step 2. Paying off all Debt using the Debt Snowball - List all debts in order from smallest to highest. Pay the minimum amount due on all but the smallest and pay the maximum you can on that one. Once it is payed off apply that to the next smallest amount and so on until all debt is payed off. Provided no major emergency's come up I will be out of debt by the end of 2010. It is at that point I will be ready to start step 3.
Baby Step 3. 3 to 6 months of expenses in savings - You need to have 3 to 6 months in savings in case of emergency. Again a trip to Cancun is not an emergency or in my case a 4 star hotel at Comic Con is not an emergency. I will be ready so to start this step and I look forward to the peace it will bring to my life.
I will cover Steps 4 - 7 later when I'm ready to hit those steps but if you want more information on these steps know then please head on over to Dave Ramsey's Web Site for more information.
Baby Step 1. $1,000 to start an emergency fund - This fund is for emergency that life throws our way, such as the water pump goes out on the car or the dryer goes out. This is not to be used for vacations or wants. When I started on Dave Ramsey's program I had already been working hard for months to get out of debt and was over paying on several credit cards but I did not have an emergency fund so I dropped back to making just minimum payments on all credit cards so I could put $1,000 into an emergency fund which took a little over a month. Then went back to paying extra on the credit cards.
Baby Step 2. Paying off all Debt using the Debt Snowball - List all debts in order from smallest to highest. Pay the minimum amount due on all but the smallest and pay the maximum you can on that one. Once it is payed off apply that to the next smallest amount and so on until all debt is payed off. Provided no major emergency's come up I will be out of debt by the end of 2010. It is at that point I will be ready to start step 3.
Baby Step 3. 3 to 6 months of expenses in savings - You need to have 3 to 6 months in savings in case of emergency. Again a trip to Cancun is not an emergency or in my case a 4 star hotel at Comic Con is not an emergency. I will be ready so to start this step and I look forward to the peace it will bring to my life.
I will cover Steps 4 - 7 later when I'm ready to hit those steps but if you want more information on these steps know then please head on over to Dave Ramsey's Web Site for more information.
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