The Total Money Makeover By Dave Ramsey Part Two

Posted on May 15, 2007
Filed Under Your Finances |

Here is the guts of the book - 7 Baby Steps to Financial Freedom

Step One: Set up a $1,000 Emergency Fund

Step Two: Pay off all debt using the “Debt Snowball” method (except the house)

Step Three: Build up your Emergency Fund to be able to cover 3 - 6 months expenses.

Step Four: Invest 15% of Gross Household Income for retirement

Step Five: Start up a college fund for your children

Step Six: Pay off your home mortgage early

Step Seven: Build wealth (through Mutual Funds and Real Estate) and give!

So which step are you on?

We are on Step Three - to build an Emergency Fund from $1,000 to 6 months expenses. Dave suggests that those who are self-employed build their fund to 6 month expenses due to the flucuation of regular work and the risk of injury and illness to the business.We did our sums and 6 months expenses seems like a lot of money to be sitting there so we are going to aim for 3 months.

It seems a bit funny to build up a fund that will sit there for emergencies when we are trying to save for a deposit on a house - but it after reading Dave Ramsey’s book it is starting to make sense to have such a fund. I can just imagine good ol’ Murphey turing up (you know Murphey’s law) and all sorts of unexpected bills could arise once we had committed ourselves to a high mortgage!

Happy Saving!

Rachel Larkin

Comments

4 Responses to “The Total Money Makeover By Dave Ramsey Part Two”

  1. Becky on May 21st, 2007 5:01 pm

    Hey Rachel! All great advice — thanks for encouraging — you are all-ways inspiring! :)
    Blessings!
    Becky

  2. Donna Scott on May 27th, 2007 1:42 am

    Rachel, me and my husband were just talking about Dave Ramsey the other day. We are on a plan to be debt free in 3 years. Great advice and timely too!

    Blessings,
    Donna Scott

  3. Deanne on June 5th, 2007 1:09 am

    Thank you for this great list, Rachel. I have yet to read this book, but have heard wonderful things about it…and now that I have read what you wrote on the steps…I definitely must have it on my “to buy” list…
    For years, we have followed a modified Larry Burkett system, but found it too narrow at times to fit our budget needs (for example when health care costs became 40% of our income and his chart recommendations was 15%…UGH!
    It is definitely time for a money makeover for us!
    Love Deanne

  4. joie on June 20th, 2007 5:10 am

    Thanks for sharing parts of his book…we’ve been using parts of Larry Burkett and parts of Crown Financial…so we’d be on step 2 of this one, but we’re going to pay our house off in about 1 1/2 years (that’s over 6 months early) and have already started a mutual fund…started it years ago and it’s just gathering interest now. Plan to be completely out of debt this year or next…I’ll have to try to get this book from the library and see what other things I can do to help speed things up. Good luck on your journey to being debt free. G-d Bless, joie

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