Here is the basic plan, in a nutshell. (BS means Baby Step, not that other BS thing).
BS1 - Get current (if you are behind on any bills) and then get $1000 in an account somewhere ASAP as a 'Baby Emergency Fund' - hereafter known as a BEF. This is simply Murphy repellent. If something does go wrong (your A/C goes out, a tire on the car blows - whatever) you can pay for it IN CASH and not add to your debt.
BS2 - Pay off all debt using the Debt Snowball - List out all of your bills from lowest to highest, pay only the minimums on all but the lowest and start hammering away on it. You will want to add any extra income each month to the lowest payment to get rid of it as quickly as possible. This can give you a nice jump start, in that you will see your debts actually disappearing fairly quickly. After you have paid off the lowest debt, add its minimum payment (plus the extra cash) to the next debt in the list and start on it. That is the snowball part - as the snowball gets rolling, it picks up more and more money to really hammer away at the debt.
BS3 - Three to six months of expenses in savings. This is the Fully Funded Emergency Fund (FFEF). With this amount in savings, you can weather almost any storm Murphy hits you with.
BS4 - Invest 15 percent of household income into Roth IRAs and pre-tax retirement - this is where it gets interesting, because now you have no debt (other than perhaps your house) and you will start building wealth rapidly.
BS5 - College funding for children (if you have any). This can be a combination of things (529 plans, regular mutual funds etc) and will be happening at the same time as BS4.
BS6 - Pay off home early. Anything extra you have after your investment and college funding goes towards paying the house off. I mean, who doesn't want to own a house outright? Can you say 'no payments!!!'?
BS7 - Build wealth and give! This is where the rubber meets the road. Now that you have your retirement well in hand, you can start making money in other ways and giving some of it away to family, friends, charities etc.
BS8 - Invest in mutual funds and real estate - this really goes (in my mind) with #7. This is just part of the build wealth section.You can find out more about this one at Dave's website - http://www.daveramsey.com and they also have a forum: http://www.mytotalmoneymakeover.com
This is our family's story about growing up, acting our wage and becoming debt free.
3 comments:
Ok! I have a goal! For the last month my 19 year old worked out a budget for me that really has worked! Couple that with the $1000 idea. . .I'll be on a roll! Thanks, Keith! I noticed there is nothing in your plan about dating well? Shouldn't that be part of my grocery bill cuts?
That's awesome Toni, get that BEF in place and keep Murphy at bay!
As to the dating part...well, we both know that I am no help in that area. :)
sofar all thogh i have not read it it is really really long
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