Now comes the fun part. You get to build wealth and give! If you’re not accustomed to building wealth, this article will give you some practical areas where you can invest and some great ideas for giving stuff away!
Dave Ramsey’s 7 Baby Steps
- Step 1: Save up $1,000 to start your emergency fund.
- Step 2: Pay off all non-mortgage debt using the debt snowball.
- Step 3: Save up 3 to 6 months of expenses to complete your emergency fund.
- Step 4: Invest 15% of household income into Roth IRAs and pre-tax retirement accounts.
- Step 5: Work on college funding for children.
- Step 6: Pay off your mortgage early.
- Step 7: Build wealth and give!
If you’re on Baby Step 7, you’ve come a long way! At this point, you should have paid off all your debt (house and all), built a solid emergency fund, are contributing 15% of your income into retirement, and are planning for your child’s college education. Wow! You’re REALLY come a long way!
But now what? You’re raking in the dough and don’t know what to do with it! According to Dave, money is good for three things . . . .
After years of studying, teaching, and even preaching on this subject across America, I can find only three good uses for money. Money is good for FUN. Money is good to INVEST. And money is good to GIVE. Most anything else you find to do with it doesn’t represent good mental and spiritual health on your part. – The Total Money Makeover
Have Fun Like No One Else
Dave makes it clear that now is the time to have some fun. You’ve done an excellent job at building your financial health! Why feel guilty for spending money?
Having fun can be difficult for some people who have spent so many years trying to save as much money as possible. Dave reminds us that once we are wealthy, going on cruises and buying expensive clothing really don’t affect our cash position that much. Indeed, we should use money for fun. You’ve lived like no one else so that now you can LIVE LIKE NO ONE ELSE!
Invest Like No One Else
To grow and maintain wealth, it is important to keep on investing BEYOND your retirement investments. Surround yourself with knowledgable people to ensure your success.
Dave invests in two main categories:
- The Stock Market: Dave asserts that you can make 12% annual return on your investments if you diversify within mutual funds. See Baby Step 4 for a template of how to invest properly.
- Real Estate: Dave also buys rental properties with cash (never mortgaging). He looks for killer deals and has a lot of faith in the necessity of shelter in the market.
Beware of risky single stock investments. Volatility is your enemy in this game. Instead, seek out sound and steady investments. The reward is almost sure-fire in the end.
Give Like No One Else
Dave tells a great story of a secret santa who gave away money in an extraordinary way:
USA Today has followed a guy who calls himself Secret Santa at Christmas for several years. Secret Santa walks the streets around Chritmastime and gives away $100 bills. Nothing required, nothing expected. Sometimes he gives to people in need, and other times he just gives. Every year he gives away around $25,000 in $100 bills. He started this tradition years ago in his hometown of Kansas City and has moved out across America. He gave in New York after 9/11 and in the Virginia/Washington, D.C., area after the sniper attacks. He just walks around and hands people $100 bills. He gets some fabulous reactions and hears some wonderful stories. – The Total Money Makeover
Isn’t that inspiring? There are so many ways to give, you can be really creative about it! Try giving your waitperson a $100 bill at the restaurant. Help out a friend in need with a generous, anonymous gift. There is something so innately good about giving, it’s sure to be worth your hard work to achieve financial freedom.
Only The Beginning
I’m convinced that after we all move through the Baby Steps, we’ll only have just begun our journey. There is so much to do and accomplish for this hurting world. Money is one factor in this journey. Let’s trust in God throughout the process, and we’ll reach our destination.
How have Dave’s 7 Baby Steps helped you? Where are you at in your journey?
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