Wednesday, February 1, 2012

Dave Ramseying My Finances - Session One

  I mentioned in the post before this that a friend is helping me with my finances by going thru Dave Ramsey's plan.  Well, I decided to share with you the bits and pieces I jot down from those sessions.  I took a trusty notebook and pencil over with me to write down things that I deem important.

  Please note that I will not put things up here that are not available already for free on Dave Ramsey's website.

  Session # 1

Baby Steps (These 7 baby steps - if consistently practiced- will leave you debt free)

1 - Have $1,000 emergency fund in a Money Market Account

2- Pay off all debt that you have except for your home

3 - Have 3-6 months expenses in savings (you will add this money into your emergency fund after you get your emergency fund up to $1,000)

4 - Invest 15% of your total income into Roth IRA's and Pre-Tax retirement

5- Begin a college fund for your children

6 - Pay off your home early

7- Build wealth and give (this is when your investments bring in more money for you than your job does).

  Completing all these steps should take between 15-20 years.  When I heard this I was like, "Oh No!!"  But that really isn't that long a time.

  Next came the list of things that you should be saving for:

  1- Emergencies

  2 - Purchases (should pay all purchases in cash)

  3 - Wealth Building (investment)

  One thing that really stood out to me as my friend was going thru the lesson with me was that all this requires DISCIPLINE!!!!!  This is something we all need more of and is the key to making this plan work.

  Something else that we went over was that if you have a 401K, you should STOP adding money to it until you get all of your bills paid off.  At first this suggestion was foreign to me and I was very nervous but the more I thought about it, the more it made since.  401K's continue to grow (since they're based on stocks) or lose so whether I stop adding money for a few years or not, it's still going to go up or down.

  Towards the end of the session, my friend printed out this Quickie Budget which I filled out.  Then she pointed me to the very very advanced budget that she wanted me to have completed by our next session.  Both budget forms are at the link. 

  So, that's what I learned in my first session.  I hope this has given you some ideas and resources to begin your own finance plan.

  Let me know your ideas, comments, concerns,etc.!!



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