Turbo Tax

Friday, January 1, 2010

2010 - Financial Plan for All

The New Year is now here!  Are you ready to work on the goals you decided to work on this year.

Let's talk a bit about your finances.  Do you have a Baby Step #1 funded?  In case you don't know Baby Step #1 is $1000 in the bank for a starter emergency fund.  If you don't have your starter emergency fund you could use the money you save from Eat from the Pantry Challenge to help fund it.  You want to get this money in the bank as quickly as possible, it will keep you from running back into debt WHEN an emergency happens.  And yes, it's WHEN not IF. 

If you've never read it before, I challenge you to read The Total Money Makeover during January.  Dave Ramsey is not your typical financial guru.  He is very motivating and interesting to read.  Leave me a comment when you've finished either telling me how he motivated you or what great revelation you've had.  It would help others to hear your comments as well as me.

For Baby Step #2 you pay off all your debts except your house using the debt snowball.  Use Gazelle Intensity and get it done as quickly as you possibly can, selling stuff, getting an extra job, and living on "beans and rice, rice and beans".  Or for those of us who use coupons, we live on the freebies from our double coupons!!!

Next comes Baby Step #3 -  Now take your starter emergency fund and build it up to 3-6 months of Expenses.  You do this with the same Gazelle Intensity as above.  Once you have an emergency fund in place, you have a buffer between you and life.  You now have an umbrella for a rainy day.

Now you can breathe.  The next steps you want to continue to move in the right direction, but you can slow down and there's no longer a need to be intense.

Baby Step #4 is putting 15% of your income into retirement, Roth IRAs and pretax retirement.  You do this before kids college because kids have the option of working through school and getting scholarships to go through college without debt, but you don't have many options for retirement.  And as Dave says don't depend on Social InSecurity for your old age!

Baby Step #5 is where you start funding college for your children.  ESAs are a wonderful way to save.

Baby Step #6 - Pay off the house early.  You're putting 15% away into retirement, college is taken care of, now every penny you have left gets thrown on the house.  The average person doing the Dave Ramsey plan takes 8 years to pay off their house!!! This means some do it faster and some are a bit slower.

Baby Step #7 - Build wealth and give like no one else!

I hope this encourages you and helps you to have a reason to save if you have your eye on the prize.  I'll have a how-to coupon course very soon.  I need to decide how to organize it best and then I'll get right to it.


Jodi aka One Blessed Mama said...

We love Dave Ramsey. We had number 1 done and then I got into a car accident and it flew out the window and now we are trying to rebuild it.

I cannot wait to get back on track.

Are you participating in the Eat From Your Pantry Challenge?

Lori @ Couponomic Stimulus Package said...

Yep, I'm participating on the Eat from your Pantry challenge. If you click on the link above it'll take you to my post about it.

I know it's disheartening to use up your Baby Emergency fund, but remember at least you had the money and didn't have to take out more debt!

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