Have you ever got that personal finance 101 lessons so when you started to make your first income you knew exactly what to do?
Lucky you then!
For the others who didn’t have the money lessons let’s see 7 money baby steps of Dave Ramsey for real financial freedom. Otherwise, you will stay stuck in the zero-money game and this is literally no game at all.
Dave Ramsey has his financial Youtube channel and he shares a lot of personal finance wisdom.
I have listened to that guy! Yeah, I did. but not only this.
I started doing it. Applying these 7 money steps to get ahead with money management.
Step №1 Start an emergency fund
Here this is a really first realization and awakening from the financial darkness. Sounds dramatic? Yeah, maybe a little.
Here when you realize how easy it is to keep money in your hands.
Create a foundation for the emergency fund first. Put aside your first $1,000 towards your emergency and don’t touch this money. This is your fund for rainy days, in case you suddenly lose your job, in case of some illness, or a major repair is needed. The safety cushion is here.
This may to some take only 1 or 2 months. I am sure your salary is not that bad. You just need to stop certain bad habits.
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Step №2 Pay all your consumer debt apart from your mortgage
The best way is to start with the highest interest rate debt you have, not including your mortgage.
The mortgage will be managed later.
For now, let’s consider all your technology, cars, and what you currently have on credit. You are paying interest on all your consumer debt. The interest payment is extra money out of your pocket to the credit provider's pocket.
Start with the highest interest-rate and continue then scale down. And definitely don’t take any more new loans and credits.
So let’s keep this money in.
Put as much cash available as you have to repay your debt and become debt free!
Step №3 Build a fully funded emergency account
You already have your first $1,000 on the side. The full emergency account is usually built up to 6–10 months of your living expenses. So let’s top this amount up.
You are now fully equipped with actual cash in the account and don’t have any debt.
Doesn’t the air seem more fresh to you here?
This may take you additional few months. But you can do it.
Step №4 Retirement account
This is a sweet and short step to take. How do you want to have money in the future for retirement if you don’t put at least 15% of your net income aside?
So let’s put it now.
If you set it up as an automated payment from your account, you will not even notice that this has already been sent to your retirement account.
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Step №5 Save for your kids’ college
This is a specific step for those with a family. Your kids will need education so they can get ahead in life. Education is not the only way.
Since having a diploma and doing nothing in life will still generate nothing. Yet having an education will give your kids a wider perspective.
Setting up a saving account with money for schooling can be done with your traditional bank or online payment options such as Revolut or Wise.
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Step №6 Pay your home mortgage
Since you already have your savings and emergency money, now you have free money that is to be put towards your mortgage so your home repayment can be done in 20 years instead of 30 years.
Speed it up and try to aim for paying as close to $1,000 per month as you can.
Step №7 Here comes the Cherry on the cake! Build your wealth!
Here is when you set up for yourself ambitious financial goals for your life. You will get your money into investing or building and creating your own asset or business.
Wealth building is the process where you focus on obtaining assets that will generate cash for you.
Saving will make you a comfortable living and it is a way to keep yourself financially safe rather than get ahead financially.
Saving money on the side is also part of the wealth-building process since you need to keep cash in order to accumulate it and get your asset, however, focus on assets.
Assets come in the form of:
- physical assets such as mainly houses, apartments, boats, cars, trucks, land
- digital assets such as websites, Youtube channels, digital documents, videos, audios, logos, presentations, e-courses
To acquire an asset you need:
- to have the cash to buy it, or rent it
- perhaps you have another asset currently at hand and you can agree on the actual exchange of assets
- you can also create it (this relates mostly to digital assets if you don’t have substantial cash at hand)
Which step or steps you are going to take towards your financial freedom? Let me know if you get well on with them.
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See also now: Planners for life and finance
What’s a great way to see your personal finance, Dave!
Thank you a lot.
Indeed the financial content has great value if you not only read it but even more so apply it.
These are not miracles. Just great wisdom and financial freedom in your life without money struggles.
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