Dave Ramsey’s Baby Steps: Part Two

Dave Ramsey, one of the most well-known money experts has been providing insightful and informative money information to consumers struggling with debt. After losing everything himself, he founded a company that helps other prevent following the same path towards debt.

One of Dave’s key strategies for helping people manage their finances is his “Baby Steps” regimen. There are 7 Baby Steps that are geared to help you begin your journey towards financial peace.

In our previous article, we covered the first half of the Baby Step program. For this article, we will cover the final half of the Baby Steps and how you can use them to turn your financial life around.

5. Save for your children’s college.
There is no better way to start saving for college than to start saving early. Too many families put off savings until college is imminent. While you can borrow money for college, the more you save the better savings amount you have for the future, preventing the need for student or personal loans. Look into a 529 plan where you can invest your money without penalty of federal income tax.

6. Pay off your home early.
One of the best ways to invest in your future if by paying off your home earlier than loan stipulates. By owning your own home, you can save a lot of money each month without having to pay a mortgage note, which can be put into you retirement funds or savings account. You will also benefit from not having to pay extra in interest payments.

7. Build wealth and give. Invest in mutual funds and real estate.
The final step in Dave’s plan is two-fold. First, building wealth is now achievable because your retirement if being regularly funded, your kid’s college fund is paid for, you no longer have to pay a mortgage, and you have a tidy savings account for the future and for emergencies. The extra cash you have is money to play with. Using that extra cash can now be invested into real estate and mutual funds. Real estate will help you retain an alternative source of income in addition to your normal paycheck.

The second part of the step is about giving. Tithing is something that Ramsey advocates and recommends you distribute 10% of your income. Personal choice will come into play for people in this step. Whether you prefer to give your percentage to your church, your local homeless shelter, the community food pantry, animal rescue, or any number of causes around the world. It seems that it really doesn’t matter much who you give the money to, it is the point that you do give. Ramsey mentions giving throughout all of the Baby Steps. In the beginning, when cash is low, you may start giving something other than money, such as your time as a volunteer, which is often appreciated and needed even more than cash.