Dave Ramsey's 7 Baby step to Financial Freedom
Hello Steemians,
A personal finance classic, Dave ramsey is a TV personality specialising in Personal Finance, he has been featured on Oprah, 60 minutes and many more.
He wrote numerous personal finance books and is pretty much a star of personal finance. Dave Ramsey has a very well known program the 7 Baby steps to financial peace and it is followed by thousands of people, this program helped so many people get out of debt and also become financially independent so it has a proven track record.
What are the 7 baby steps
- Save $1000 as fast as possible, to create a first win and also to have a little buffer in case of any emergency.
- Pay down your debt, make a list of all the money you owe, from the smallest amount to the largest debt (except your mortgage), and take on the first on the list. Create a bare bone budget and pay the minimum where you need to and put everything that you can towards paying down your debt. After dealing with the first debt, deal with the second always paying the maximum you can. This will create a debt snowball, at first you will pay small amounts to your smaller debts but once you reduce all the smaller debts you will be able to relocate all the money you now have available to the bigger debts which will help you pay them faster.
- Finish the emergency fund, now that your debts are dealt with you will be able to aggressively save for an emergency fund. Remember between 3-6 months of expenses.
- Save for retirement: If before saving 15% of your income could seem difficult now with no debts you will be able to add this section to your budget with ease.
- Save for college, if you have kids start saving for their college. Students loans are like walking around with stones in your shoes. You try to get a college education to get a better life, but by taking a loan you put a lot of pressure on yourself.
- Pay off the house: What can be said, at this stage it is your last debt
- Built wealth and give it away,final baby step, you need to keep your budget and use the money that is available to build wealth which means investing and support charity.
Basically it’s a guideline to give a frame to people, as I said a lot of people follow this guideline and it seem to work very well, you could find thousands of people getting out of debt with the “Debt snowball”
Does it work for everyone ?
The simple answer is no, the thing about personal finance is that it is personal, this plan is a great baseline of things to take into consideration but it falls short on other instances.
- Saving a $1000 is really not enough in case of emergency and if you are going to spend the next years paying down your debt having so little on the side is risky. Having a well funded emergency fund should always be the 1st step it will provide you with a real layer of security.
- This plan is not targeted to most non-americans, for most of us in regards to our debts we have to pay the fee and it is the same month in month out, it will not be possible to pay more or less.
- Saving only 15% for retirement is not going to be enough when you retire. Also there is no mention of the company match retirement plans. Free money is free money so you should take it as soon as possible to accumulate money faster and not delay months of years to be finished to pay off debt.
- Save for College: again this is not a big issue in many European countries (not in the UK) so this step might not be necessary if you live in a place where Education is free. Also some people do not want children.
- Pay off the house: same issue than with the other debts, maybe the loan taken does not allow people to increase their house repayment.
There’s also lot of reference of God and religion in it and some people might be left uneasy about it
I don’t want to seem like I don’t think this is a great program, it is, I just think it does not matches everyone circumstances and it is retty much targeted for the American market.
Are you following Dave Ramsey’s 7 baby steps ? Which Baby step are you on ?
Elise