My husband and I started our debt-free journey about 2 years ago right after we had our son. We have the goal of paying off all of our debt and setting up a better future for our family. We were able to take Dave Ramsey’s Financial Peace through our church. These are 8 things we learned about money by taking the course.
- Save a $1000 emergency fund. Unexpected expenses will come up, do you have cash to cover the next emergency that pops up?
- Create and follow a budget. Check out my post on how to create a budget.
- Pay off debt using the snowball method. List out your debts and start paying extra on the smallest debt, while only paying the minimum on the others. The goal is that you will pay off those smaller debts fast, then you can “snowball” the extra money to go towards the next smallest debt. By the time you get to your larger debts, you should have a nice sized snowball to knock those loans out.
- Live within your means and forget “keeping up with the Joneses.” The Joneses are the neighbors who have the nicest lawn and the newest cars and gadgets. The truth is, they are also broke. Keeping up with the Joneses will not fulfill you and will only cause setbacks with your debt-free journey.
- Have slush funds for the things you are saving for. A slush fund is a separate savings account for specific things. For example, we have a slush fund for the car insurance we pay every six months. Each month, I set $120 in our slush fund so that when our car insurance is due, we will have enough to pay it in full.
- After all debt (except mortgage) is paid, build a 3-6 month emergency fund. This would be your “fully funded” emergency fund to cover large unexpected expenses or to cover job loss.
- Contribute 15% of your pay to retirement once debt is paid off. Dave recommends temporarily stopping contributions to you retirement while you are paying off debt to focus all extra income to pay off debt quicker. The thought is that the quicker you can pay debt off, the sooner you can start contributing more to your retirement.
- Have a budget meeting each month. If you are married your budget meeting should be with your spouse to list out all of the income and expenses for the month. Think about any extra expenses you will need to cover such as birthdays, school functions, etc. “Give each dollar a name” so you know exactly where your money is going.
Do you follow Dave Ramsey?
Thank you for reading!