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4 money habits to help you have a wealthy year

January 2, 2013
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You don't listen to Dave Ramsey? What are you? Stupid?

4 money habits to help you have a wealthy year

I find that many people young, old, fat or thin have a problem when it comes to their personal finances.  If we could just get into the habit of learning self control, the world would be a better place.  A place filled with– loaded bank accounts and full gas tanks.  I personally think that everyone should have a monthly budget.  Know how much money you have coming in and how much money you have going out.  Don’t just say you can do it in your head. You need to see it visually!  Open up an excel spread sheet if you have to. You don’t have to live pay check to pay check.  If you are, you need to figure out a way to cut back on spending or get another source of income. Dave Ramsey has come up with “The Seven Baby Steps to Financial Freedom.” I’m not going to talk about all 7, but here are a few that I feel we can all benefit from:

Baby step 1: Start an emergency fund with $1000

“An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen.

This beginning emergency fund will keep life’s little Murphies from turning into new debt while you work off the old debt. If a real emergency happens, you can handle it with your emergency fund. No more borrowing. It’s time to break the cycle of debt!” http://www.daveramsey.com/new/baby-step-1/
This is def a must have.  It really comes in handy.  I remember when I wasn’t working and all I had left was my emergency fund so it definitely comes in handy.

Baby step 2: Pay off all of your debt using the snowball effect

List your debts, excluding the house, in order. The smallest balance should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first.

The point of the debt snowball is simply this: You need some quick wins in order to stay pumped up about getting out of debt! Paying off debt is not always about math. It’s about motivation. Personal finance is 20% head knowledge and 80% behavior. When you start knocking off the easier debts, you will see results and you will stay motivated to dump your debt. “ http://www.daveramsey.com/new/baby-step-2/
I agree with this especially when it comes to your credit card bills.  I know some people who have paid off all of their student loan debt as well but for me I don’t think paying it all off is the best choice.  I mean yes it would be great to knock off all of our student loan debt and then use the money you towards something else.  But I feel like how long is that going to take.  It could take years to pay it all off.  So the choice is up to you, which ever one you feel is best for your situation.

Baby step 3: 3-6 months of expenses in savings

“Once you complete the first two baby steps, you will have built serious momentum. But don’t start throwing all your “extra” money into investments quite yet. It’s time to build your full emergency fund. Ask yourself, “What would it take for me to live for three to six months if I lost my income?” Your answer to that question is how much you should save.

Use this money for emergencies only: incidents that would have a major impact on you and your family. Keep these savings in a money market account. Remember, this stash of money is not an investment; it is insurance you’re paying to yourself, a buffer between you and life.” http://www.daveramsey.com/new/baby-step-3/

Baby Step 4: Invest 15% of household income into Roth iras and pre-tax retirement

“When you reach this step, you’ll have no payments—except the house—and a fully funded emergency fund. Now it’s time to get serious about building wealth.

Dave suggests investing 15% of your household income into Roth IRAs and pre-tax retirement plans. Don’t invest more than that because the extra money will help you complete the next two steps: college savings and paying off your home early.

Why shouldn’t you invest less than 15%?  Some people choose to invest a small amount, if anything, because they want to get a child through school or pay off the home in a hurry. But the kids’ degrees won’t feed you at retirement, and if you throw all your money into your mortgage at this point, you’ll end up having to sell the house and buy the book 72 Ways to Prepare Alpo and Love It. Bad plan.” http://www.daveramsey.com/new/baby-step-4/

Here I’ve only listed 4 baby steps from Dave Ramsey but if you want the full list of steps feel free to check out his website: http://www.daveramsey.com/new/baby-steps/.

It’s a new year, which means a fresh start to your personal finances.  You can do it!  Even saving $20.00 each week will help you.  Don’t get discouraged.   I’m still learning to be better at managing my finances.  But like I mentioned earlier it’s 80% behavior. The sooner you start the better.  You can do it! Start working on your $1000 emergency fund and then go from there 🙂

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