Having financial freedom is a goal that most people are trying to achieve in their lives.
Nobody likes living paycheck to paycheck and giving all of them just to pay bills.
The best way to start your journey towards financial freedom is to do your research about the best hacks and advice that are out there.
Today I want you to read about some of the greatest methods and tips by Dave Ramsey that can guide you in achieving your financial freedom.
Who is Dave Ramsey?
Dave Ramsey is a financial expert and America’s trusted voice on money and business. He is also a national radio personality with 16 million weekly listeners and an author of bestselling books such as The Total Money Makeover, Financial Peace, Complete Guide To Money, and others.
He started Ramsey Solutions in 1992 which turned into a multi-million dollar firm. There he shares what he’d learned after fighting back from bankruptcy, inspiring and providing counseling to help people achieve financial freedom.
One of his most well-known systems is known as “Dave Ramsey’s Baby Steps”.
The Baby Steps System
It’s a system where Dave Ramsey gives 7 “baby steps” to take to save for emergencies, pay off all your debt, and build wealth.
1. Save $1,000 for your emergency fund
One of the main keys to getting financial freedom is to be prepared for unexpected emergencies you cannot plan for.
So in his first step, he recommends that you save $1000 as fast as you can.
This emergency fund will cover those unexpected expenses and help you not fall into bigger debt.
Your goal is to become debt-free, not the other way around.
2. Pay off all debt (except the house) using The Debt Snowball
In his second step, he recommends paying off your credit cards, student loans, and cars.
He recommends using The Debt Snowball Method.
What is The Debt Snowball Method?
It’s when you list all of your debts except for your mortgage, put them in order from the smallest to the largest, and pay them off one by one.
You pay the smallest balance first, and when you’re done paying off that debt, you add the money you were paying to the minimum you’re paying for the next debt.
It’s up to you what method you choose to pay off your debt, the key is to get rid of it.
3. Save 3–6 months of expenses in a fully funded emergency fund
After you’ve paid off your debt, he recommends that you take that money you were throwing at your debt and invest it in your emergency fund.
That emergency fund should be able to cover 3-6 months of your expenses just in case you lose your job, or your car breaks down, or if unexpected events occur out of nowhere.
The idea is to protect yourself without getting back into debt.
4. Invest 15% of your household income in retirement
It’s very important that you save for your retirement after you’re done paying off your existing debt.
Dave Ramsey recommends that you take 15% of your income and start investing it into your retirement. (Invest more if you can, it’s even better).
5. Save for your children’s college fund
By step #4 you’ve paid off your debt, excluding the house, and started investing for your retirement.
Next, start saving for your children’s (or future children’s) college expenses.
529 college savings plans or ESAs (Education Savings Accounts) are highly recommended.
*A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.
6. Pay off your mortgage early
The only debt that you have now is your mortgage. And it’s a big one!
Did you know that mortgage balances are reaching a new high of $9.5 trillion, according to Experian data from the first quarter of 2019?
So in this step, you try to invest as much as you can in paying off your mortgage. Any extra money you put towards it could save you tens or even hundreds of thousands in interest.
So concentrate on paying it off as soon as you can.
If it sounds impossible with what you’re making right now, I would highly recommend checking side hustle ideas to make some extra income.
12 Best Online Jobs That Allow You To Travel Full-Time
10 Best Tips On How To Save Money Fast
7. Build Wealth and Give
I like this one.
Once you’re debt-free and financially stable, he insists that you keep building wealth and live generously.
You will be able to give to others and change their lives without worrying about your bills.
Help less fortunate individuals as much as you can.
Check out these beautiful customized checks!
Another great tip is to use The Envelope System.
What is The Envelope System?
The Envelope System is a great way to help you not overspend as we usually do.
By using this system, you track how much money you have in each budget category for the month by keeping money in envelopes.
What are the advantages?
- You keep track of how much you spend
- You can see your realistic budget
- Forces discipline
- You don’t overspend and stick to your budget
How To Use The Envelope System?
1. Think of the budget categories that need a cash envelope.
For example groceries, entertainment, restaurants, gifts, health care, pets, and so on.
2. Figure out your budget amount.
How much are you planning to spend on each of the categories? For example, if you’re planning to spend $300 on groceries this month, stick to it.
Also, create a realistic budget by using the Monthly Budget Worksheet. It will help you see how much you spend every month on different categories.
3. Create and fill cash envelopes for the budget categories.
For example, you decided to spend $300 on groceries. Once you get paid, you take those $300 from your paycheck and put the cash in the envelope, where you write out “Groceries”.
And do that with every category you have.
4. Spend only what you’ve put in each cash envelope.
It’s the most important step here. Stick to it!
Unsubscribe from Emails With Discount Offers
We all sign up for newsletters from different brands and stores. Which means we all receive all kinds of discounts and coupons.
Companies understand the consumers’ minds and psychology. They use different strategies for that, and one of the most popular is the principle of scarcity. That’s what it’s called in marketing.
“Last chance”, “Don’t miss out on the deal”, “Only 2 left in stock” and so on.
I’m the one who loves buying online and I know how it’s tempting to not buy anything from those “hot deals”.
You will notice that you will spend much less if you unsubscribe from such newsletters.
If you need something from that store, the best way is to sign up, use the code or coupon, and then unsubscribe.
Stop Eating Outside All The Time
Everybody loves eating delicious food, including me. But some people overspend on eating out, instead of cooking.
But if you think about it, cooking at home will not only save you money but also your health. Especially if you’re trying to lose weight.
Meal planning can be a game-changer for you if you’re trying to both save money and lose weight. It will help you stop impulse buying at the grocery store or getting takeout every night.
I recommend a great meal planning service that delivers a healthy, very budget-friendly meal plan straight to your inbox every week for only $5/month. But you save so much more after!
You’ll get a free 14-day trial by clicking here.
I hope these tips will give you a great start on your financial freedom journey.
What tips and hacks are you using to achieve your financial freedom?
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