Day 4 - Transition Day

          In order to avoid becoming a blog strictly about Dave Ramsey and his principles, today's topic is about transition. I will be giving a brief rundown of the remaining steps in Dave's method to financial freedom and then moving on to new topics and other ways that you can get ahead with money. I felt that it would be better to avoid any kind of issues with basically becoming a blog that says the same thing as Dave Ramsey. He has a blog for that. So, here are the remaining baby steps.
           Once you have saved your $1000 emergency fund, Dave says to attack your debt using his "debt snowball" method. This is a method that involves paying your debts from smallest to largest. You would essentially make a list of all of your debts not including your home and arrange them from smallest to largest. Pay minimum payments on all debts other than the smallest debt. The smallest debt should have everything you can afford to pay thrown at it until it is paid off. According to Dave and many who have used this method, this will give you a quick victory and keep you motivated to keep going. It has worked for a lot of people so apparently he has something here.
           After all of your debts have been paid off, it is time to build up a full emergency savings fund. This is basically 4-6 months worth of expenses in a savings account so that you are covered in the event of any life-changing emergency situation. Once it is fully funded, you can now move on to investing. Dave recommends investing 15% of your income into fully funding a Roth IRA every year and the remaining amount into growth-stock mutual funds. This is a very fool-proof method of investing to build a very nice retirement. The Roth IRA will allow your savings and your interest earnings to grow tax-free. This is because the money you put into the account is after-tax income and therefore has already been taxed by the government. The big advantage to this account is that your interest gains are also tax-free. WOW! That is all I need to know to know that the Roth IRA is definitely a retirement must. The growth-stock mutual fund is a very safe way to invest in the stock market without having to do all the research to build your own portfolio. According to Dave, this will return you at least 8-12% over the long-term (meaning by the time you retire, don't expect this money to come quickly). The key is to remain consistent in your contributions and let compound interest be your best friend. Let your money work for you.
         After you have invested 15% of your income, you can begin to save for college. If you don't have kids and don't plan to have any, this step can be skipped. However, if you do have kids, look into a 529 account or an ESA (Education Savings Account). The funds can only be used for educational expenses, but if that is clearly the goal for the account, then no big deal.
        Once you've checked off this baby step, it's time to move on to paying off the house as quickly as possible. Hopefully if you've made it to this step, you do own a home because you would have built up the financial freedom to easily afford one. Throw everything you can at your mortgage payment until you see that balance go to 0 and shout out that your debt free! That's what Dave recommends. He even invites people to his radio studio in Nashville at his headquarters to do the debt-free scream. If you use his method to get debt free, it's a good idea to let his team know and they would probably love to hear your story and might even invite you for a visit to be on the radio show for your own scream.
         Now, according to Dave, the most important part of the journey begins in the last baby step. Now that you're debt free, have all of your savings and investments in line, and are living a financially free life; it's time to give back! Start to build up your wealth and GIVE! This could be to a charity, your church, someone you know. The idea is to share your wealth with others. Dave always says, no one has ever gone broke from giving. This is definitely true. Not only do you appreciate what you already have when you give some of it away, but it makes you realize just how good it feels to help someone other than yourself. Our society usually focuses on self-improvement, self-worth, self-everything. It can be very refreshing to have the feeling of helping someone else. It will bring a smile to your face every time to experience their joy when someone cares enough to give them something without expecting anything in return.
        So, in closing, now that we've covered the baby steps, it's time to move on to other topics in personal finance. Check out my next entry. I'll be doing some research in the mean time to come up with some good future ideas for posts that are relevant to today's financial atmosphere. This could include things like: cryptocurrencies, online banks, mobile payments, and other tech revolutions that are changing the landscape of banking and how we store our money. Thanks for taking the time to read again today. Hope everyone has a great weekend. Don't buy anything today. Haha. Unless of course it will return you more money than you spent in the future. Remember.....Mind Over Money.