Tips on how to start getting out of debt
Does this sound familiar to you?
1. We can’t afford that!
2. From where we going to get the money?
3. How we going to pay for that bill?
4. This is an emergency and we don’t have that money!
5. There’s to many bills… how can I pay all of them?
6. The kids start Collage soon…How we are going to pay for it?
7. Finally, I’m retiring!!! But I don’t have saved enough money!!!
This are some questions that people ask them self every single day and is not easy to live like that. They are dealing with debt and sometimes get the best of them and they just need a help, guidance and support. I have some tips for you if you are one of those people struggling with debt. I will start asking: Do you know Dave Ramsey? He is a businessman, author, financial broadcaster, television personality, and motivational speaker. He is the creator of a plan the he calls “The 7 Baby Steps” where he teaches people to help them live debt-free and build wealth. This is an amazing start point for every person that wants to change their financial life and live without debt and stress. Here are the 7 baby steps:
- Save $1,000 to start an emergency fund– this is for those emergency situations that we don’t expect to happen. He said that is better to have them in a saving account so there no risk that we used the if we have them in our regular checking account. Remember to do your homework and verify if this is possible for you with your debt situation.
Pay off all debt using the debt snowball method– This method is to start get rid of 1 by 1 of your debts. You will start making a list of all in order from small to large debt balance except your mortgage. Then make your minimum payment plus a little more in that first debt on your list and the minimum payment in the rest of the list. At the moment that you get rid of that first debt in your list move to the next one. At the end you will be free of debt…keep going !!! Don’t forget to do your homework and see if these steps are something that you can do.
Save 3 to 6 months of expenses for emergencies– You need to have a solid budget and realize that life can bring surprises at any moment and is better to be prepare. Start doing this saving the same way that you did the first step but keep this one in a separate checking account. Remember you will do this little by little and that depends on your incomes too. Don’t forget to do your homework and see if this step is something that you can work in your life.
Invest 15% of your household income into Roth IRAs and pre-tax retirement funds– The cost of life changes every year and is important to be prepare for your retirement. He recommends to start investing in your 401K and if your job doesn’t have that option start with a Roth IRA. Do your homework and verify what works better for you and if it is viable in your life.
Save for your children’s college fund– When you less expected your kids are ready for collage…but are you ready for those expenses? Ramsey recommend to use 2 options (depends your incomes). They are the 529 Collage Saving Plans or ESAs (Education Saving Accounts). Do your homework and verify witch one is better for you and if it is something that you can do.
Pay off your home early– He recommends to do a bigger payment each month (doesn’t matter the amount) that will help. Another of his recommendations is to refinancing for a less year’s loan mortgage. Do your homework and verify what’s better for you.
Build wealth and give – Ramsey said that at the point that you reach your financial freedom is the moment to continue with your good habits of debt free is time to set goals so you can live a better life and enjoy.
Don’t forget that these steps are not created by me and they are just some tips that I learn from Dave Ramsey and I thought that maybe they can help to start a debt free life.