7 Baby Steps to Financial Freedom

BY: - 2 May '17 | Money

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Whether you’ve read his books, listened to his audiobooks, or attended his Financial Peace University classes, you’ll never forget the blunt, in your face financial advice of financial guru Dave Ramsey. This man pulls no punches.

In Dave’s opinion, most of us are wimps who fail to man up or women up to take control of our own financial destiny. As he explains in his book, The Total Money Makeover, “You are the problem with your money. The financial channel or some late-night infomercial gimmick aren’t your answer; you are. You are the king of your future, and I have a plan.”

His plan for your financial success is relatively simple and summed up in seven baby steps. If you are willing to make the financial sacrifices that most people aren’t willing to make, Ramsey argues, later on you’ll be able to live a financially free and secure life that most people will envy.

Step One: Save $1000 as starter emergency fund.

Life happens. It throws you financial obstacles when you least expect them. Your car breaks down, your water heater stops working or your kid needs braces. That’s why Ramsey argues that, above all else, you need an emergency fund to protect you from life’s financial road bumps. Unfortunately, nearly 7 out of 10 Americans have less than $1000 in savings. But with a little effort you can create this necessary security blanket for life’s unexpected curveballs.

Step Two: Pay off all your debt as quickly as possible

Dave Ramsey hates debt and feels you should to.

“The reason I am so passionate about your getting rid of debt is that I have seen how many people make huge strides toward becoming a millionaire in the short time after they get rid of their payments.”

Ramsey suggests the debt snowball for attacking your debts. Make a list of all your debts in order of smallest to largest debt. Pay the minimum on all of your debts, but then use any extra money and apply it to the debt with the smallest balance. By dedicating extra money to the smallest debt, you can pay it off quickly, creating psychological wins that will motivate you to pay off additional debt. Once the smallest debt is paid off, use all extra money to pay off the next largest debt, and so on.

Step Three: Build your emergency fund to cover three to six month of expenses.

While $1000 should cover small bumps in the financial road, Ramsey wants to make sure you can weather the more severe financial storms as well. That’s why he advises that, once you tackle your debt, that you supersize your emergency fund to cover 3 to 6 months of expenses. This will help you deal with more severe financial catastrophes like a job loss or major illness.

Step Four: Invest 15% of you income into your retirement

Once you’ve taken care of the basics, Ramsey wants you to start looking toward the future and begin building wealth. Invest in your Roth IRA and other pre-tax retirement vehicles like your employer’s 401(k) or 403(b) plans.

Here is where I differ with Ramsey. While he suggests investing in mutual funds through your Roth or 401(k)/403(b) plan, evidence points to index funds being a much more financially prudent choice than actively managed mutual funds. I also suggest having a mix of bonds in your investing portfolio to help hedge against market downturns, especially as you near retirement age.

The key point where we agree, however, is that you must consistently invest a portion of your income into your Roth IRA or 401(k)/403(b) plan to secure a prosperous retirement.
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Step Five: Invest in college funds for your children

You must save for your child’s education. This should be easier once you have your major debts paid off and have built up a significant emergency fund. Notice that this step comes after taking care of your retirement. You can use an Educational Savings Account or 529 investment plan to prepare for that eventual day when your kid leaves the nest to purse higher education dreams.

Step Six: Pay off your home mortgage.

Dave is a big advocate of attacking your mortgage because of all the money you’ll save in interest charges. If you’re financially able, he even suggests switching from a 30 year mortgage to a 15 year mortgage. The move will give you financial peace of mind when you pay off your home years ahead of time and will save you thousands of dollars in interest.

Step Seven: Continue to build wealth but have fun and learn to give some of your money away

This is the pinnacle of Dave’s financial blueprint. At this stage, you’ll have the money you need to supercharge your investments and enough cash to be able to live like only others wish they could. But having all the money in the world is of no use if you don’t use some of your money to help others, whether it be family members or your favorite charities and causes.

Dave Ramsey’s baby steps plan consists of taking charge of your behavior and committing yourself to paying off debt so that you can build savings and investments. It requires sacrifice up front in order to reap the benefits down the road. Not everyone has the discipline to follow his plan, but if you do you’ll be handsomely rewarded.

To learn more about Dave Ramsey’s philosophy, read his book The Total Money Makeover or attend one of his Financial Peace University (fee required) classes, frequently offered at local churches.

About the author

Alonzo Peters wrote 298 articles on this blog.

Alonzo Peters is founder of MochaMoney.com, a personal finance website dedicated to helping Black America achieve financial independence.


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Iyanla Can’t Fix This: 5 Ways that YOU Can Get Your Financial Life in Order

BY: - 8 May '17 | Money

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If you haven’t seen the popular OWN TV show, Iyanla Fix My Life, where relationship expert Iyanla Vanzant teaches celebrities and everyday folks how to fix what’s broken in their lives, then you’ve been missing some good TV (especially this season.) Iyanla provides tough advice, but somehow I get the feeling that when the cameras turn off, her subjects are going to slip back into their broken ways. You see, the advice does not work if you don’t work.


The same is true for your finances. Many of you set financial goals or resolutions at the beginning of the year. And, we’re over a third of the way through the new year. Are you still keeping pace with your New Year’s resolutions?

Don’t worry, most of us jettisoned those back in February. But that’s not a reason to get discouraged. Pick yourself up, brush yourself off. We still have plenty of year left to make some serious financial progress. You just have to put in the work.

Consider these 5 tips that will help you get your financial life in order.

Determine your financial priorities.

If you don’t know where you’re going, any road will do. The problem with most Americans is that they have no financial focus. They lack financial priorities, so they’re easily distracted by financial diversions. The newest video game console, latest pair of designer shoes, or thoughts of renting a condo on the beach derail truly important financial goals.

That’s why creating short term, medium term, and long term goals is so important. Sit down with your partner and decide on what is financially important to both of you.

TIP: Write your financial goals on a piece of paper. Make a plan. Then commit to action.

Care less about what anyone else does.

Scan the cars of the physician’s parking lot where I work and you’ll find your share of Mercedes, BMW’s, and Audi’s, But one parking spot is always claimed by a 15 year old bright yellow pick-up truck. You’d think it odd for the prominent physician who owns this car to shun models more in line with his stature as a physician, but he could care less.

Click Here to Download a FREE Copy of the BMWK Generational Wealth Pledge for Black Families!

Instead of wasting his money on a depreciating asset like a car, I’m sure he’s using his money to purchase assets (rental real estate, stocks, bonds, businesses) that will make him even more money. He is less concerned about keeping up with the Joneses and more concerned about building his wealth. And so should you.

TIP: Drop the need to impress, and instead concentrate on improving your own net worth.

Understand that saving is contagious.

Businessman and philanthropist W. Clement Stone once warned, “If you cannot save money, the seeds of greatness are not in you.” If you can not save a piece of what you earn, then you’ll never be financially successful. It’s that simple.

But people make every excuse in the world as to why they can not save. In essence, however, they’re actually making every excuse in the world as to why they can not be financially successful.

Here’s the secret, start off small. I have a friend who decided to place just $25 of every paycheck into her workplace 401K plan. Due to the company match her small contribution has turned into over $2500 in just two years. And her success has made her eager to save even more. You see, savings is contagious. The more you save the more you’ll want to save.

TIP: Pay yourself first by saving a portion of your income, even if it’s only a few dollars a week. As time goes by, the momentum to save even more will build.

Eliminate bad habits.

Your habits could be costing you plenty, sabotaging your chances for financial freedom in the process. Smoking, eating out, playing the lotto, and drinking bottled water are just a few of the seemingly innocent vices that could be robbing you blind.

Determining the cost of these bad money habits may provide the motivation you need to discard them from your life completely. Eliminating one cup of coffee a day, for instance, could save you $985 a year.

TIP: Here’s a worthwhile exercise. Go over to Lending Tree and use their Bad Habit Calculator to see how much 15 common bad money habits could be costing you each and every year. The answer just might surprise you.

You can only cut expenses so much. Learn to build diverse income streams.

While cutting costs is important to getting your financial house in order, you can only cut expenses so much. In addition to cutting expenses, you must learn how to make more money. You must learn how to create new revenue streams.

A common understanding is that the average millionaire has seven streams of revenue. While I’m not suggesting that you go out and find seven ways to make more money, consider just one or two and focus on them for the rest of the year.

Perhaps you’re good at math or WordPress. Could you tutor someone to help them learn these skills? Do you have closets full of junk? Could you sell it on Ebay or Amazon? Maybe you’ve always had an idea for a side hustle but never put your plan into motion.

TIP: Take inventory of your talents and put those talents to use creating additional revenue for you and your family.

One of the best way’s to get started with the tips above is to check out our hit film, Generation One: The Search For Black Wealth where nation’s top financial experts weigh in not only on how Blacks fell behind, but surefire strategies families can implement to begin building a strong financial legacy for generations to come.

BMWK, what can you do now to make sure that the rest of 2017 will bring you financial success?

About the author

Alonzo Peters wrote 298 articles on this blog.

Alonzo Peters is founder of MochaMoney.com, a personal finance website dedicated to helping Black America achieve financial independence.


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