You can get there....follow the baby steps!

Everyone,
As you may have noticed, I'm a big fan of Dave Ramsey and his teachings on finances. He pushes what he called the 7 Baby Steps. These are not rocket science, they are common sense steps to getting out of debt and building wealth that should be taught to everyone while still in high school (in my opinion). A quick overview of each step follows. For more details, get his book "The Total Money Makeover" or check out his site at http://www.daveramsey.com .

Baby Steps:

#1: $1000 in a baby emergency fund. Put $1000 away for those emergencies that come up.
Things like the car breaking down or the furnace going out. Christmas gifts are not
emergencies. You know they're coming and can plan for those.

#2: Pay off all your debt starting with the smallest debt first. This is regardless of interest rate.
The idea is that you pay off the smallest one first while making minimums on all the rest,
once the smallest is paid off (using any/all extra money you have.....have a yard sale if you
need to) then you take the money you were putting toward the smallest and then all you can
toward the next smallest and so forth. This creates what Dave calls the "Debt Snowball". It
can be very powerful, however, you have to work hard to come up with extra money
however you can to get it going and get traction. Once it gets going, it really gets going
usually. You must stayed focused though.

#3: Now that you've paid off all your debt (except your house) you need to put away 3 to 6
months of expenses away into a fully funded emergency fund. This gives you a buffer
against bad things that can happen so that you don't have to stress out. Even if you lose your
job, imagine how much more "peace" you'll have if you know you have 3 to 6 months of
expenses in the bank. You've got time to look for a new job and not have to freak out!

#4: Steps #4 and #5 start at the same time if you have kids, otherwise you start #4 and #6 at
the same time. Step #4 is to start putting 15% of your PRE-TAX income into retirement.
The recommendation is put in as much as you need to in order to get company matching in
your 401(k). After that, put the max. you can into a Roth IRA. The remainder of your
15% needs to go into good growth mutual funds. Dave says if you look hard enough, you can
find plenty that are making 12%.....might be tough now, but you can always ask an
investment professional to help you find them.

#5: Put money away into a college fund for the kids. Take advantage of any 529 programs or
other state based plans to help put away money.

#6: Pay off your house early. Now that you have no debt and you're putting away for retirement
and the kids college, you now throw everything you can toward paying off the house early.
In most cases, this can be done within 10 years if you didn't take on more house than you
should.

#7: Build wealth and give!!! Imagine what it would be like to have no bills and no mortgage!!!
Imagine how much you could put back for retirement (can you say retire early!?) and how
much you'd have to just give?! Giving feels soooo good. My favorite story was about a guy
that had gotten to this level and gave his church $50,000 to give away to the community
at Christmas. His one request was that it be given away a $100 bill at a time. Imagine
walking up to someone right before Christmas and just giving them $100!! You can get
there.....

Here is a link to a downloadable version of the Baby Steps.

http://www.daveramsey.com/media/pdf/fpu_babysteps.pdf

Good luck!!!
Jamie