Dave Ramsey Total Money Makeover

Famous Quotes: “If you will live like no one else, later you can live like no one else.” “Stop spending money you don’t have, on things you don’t need, to impress people you don’t like.” “Act your wage.” “A budget is people telling their money where to go instead of wondering where it went.”

The Cash Envelope System Literally use labeled envelopes to separate your income into budget categories What is in the envelope is all you can use for the entire month. Once it runs out, no more spending in that category! It is way harder to spend cash than it is to swipe a credit/debit card Tips: Account for every penny (Zero Based Budget) Budget realistically Leave the plastic cards at home Let yourself have some fun

Baby Step 1: Save $1000 Emergency Fund What constitutes an emergency? Why start here? You don’t want to stop your debt reducing momentum that you will gain in the next step in order to pay for something unexpected. Once you get it, hide it – make it harder to get to so you aren’t tempted to use it frivolously Keep it liquid How long will it take you to save?

Baby Step 2: The Debt Snowball Identify your debts List in order from smallest to largest (except your home) Behavior modification over math Pay the minimum payment to stay current on all debts except the smallest. Every extra dollar you have should go to the smallest debt. Proceed up the ladder Become debt free except your home Don’t borrow any more money! Note: If something comes up and you use your $1000 Emergency Fund, you should stop the debt snowfall, and rebuild your emergency fund. Then pick back up on making the extra payments.

Baby Step 3: Finish the Emergency Fund A fully funded emergency fund covers three to six months of expenses Utilize the project to really understand how much money that is Keep it liquid Make it hard to access but not impossible Look at how much risk your family would be in if you or your spouse lost their job to determine how many months you need to save for Turn crises into inconvenience – Image being able to pay for a hospital bill or new air conditioner in cash

Baby Step 4: Invest 15% of Income in Retirement Invest 15% of before-tax gross income annually toward retirement Don’t include company match in that 15% Mutual Funds/IRAs How much you need at retirement depends on the lifestyle you want in retirement.

Baby Step 5: Save for College Educational Savings Account (ESA) – grows tax free when used for higher education If you invested $2000 from birth to age eighteen in prepaid tuition, that would purchase $72,000 but through an ESA in mutual funds averaging 12 percent you would have $126,000! 529 Plan “flexible” – allows you to move your investment around periodically within a certain brand name of mutual funds What if your kids are already in high school? Work study programs Scholarships Work

Baby Step 6: Pay off your Home Mortgage What would it feel like to not have a mortgage payment each month? Don’t have a house but want one? Make a 100% Down Payment! “The grass will feel different under your feet when you own it.”

Baby Step 7: Build Wealth Invest Have Fun Give Back