Our Financial Plan | Following Dave Ramsey

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Recently, we have been working on improving our family's financial well-being. The system that we are currently following is the Total Money Makeover by Dave Ramsey. In this blog post, I will go over the "Baby Steps" and how we plan to execute them.

01. Emergency Fund | Save $1,000.00 

Dave Ramsey recommends saving $1000 in an initial emergency fund in case life happens. Since we are a larger family, we plan on saving $2000. 

Our plan is to aggressively save the first $1000 and then incorporate the second $1000 into the budget afterward to make up the other $1000.

02. Debt Payoff | Debt Payoff

In the Total Money Makeover, Dave recommends tackling debts using the snowball method. The Debt Snowball Method essentially lists all your debts lowest to highest, then pays off your lowest debts first, then rolls that money into the next debt until it's all paid. The exception to this is that you do not include your mortgage, which comes later in the system.

For our debt snowball, we are still in the midst of figuring out all of our debts and organizing them from smallest to largest.

03. Emergency Fund | Building an Emergency Fund

In this step, Dave recommends saving 3-6 months' worth of expenses in case life happens. 

Our plan here is to save 6-12 months' worth of expenses because, again, we are a larger family. Currently, that number is around $18,000-$36,000 in savings.

04. Retirement Saving | Saving for Retirement

Invest 15% of income for retirement. Currently, I invest in the stock market, and I also have a 401K and a Roth IRA that I regularly contribute to. 

Our plan is to get to a place where we invest upwards of 20% of our income into our retirement.

05. College Savings | Children's College Fund

Regarding college savings, Dave recommended saving for your child's college. He even advised age 8 is an ideal start time (in so many words). 

Currently, we are looking to open a college fund for our oldest child since they would be around that age and want to save for the others. For the time being, note that the "hold off" age is until they turn 8. In which case, we hope to have at least near the end of Step 2.

06. Pay Off House | Pay Off Mortgage Aggressively

By this baby step, one should be debt-free except for the mortgage. This dynamic should then free up income that can be reallocated towards aggressively paying off the home mortgage. 

Since we do not own/mortgage a home, and we hope to follow Dave's advice around a home with 100% cash, or at least as close to 100% cash as possible. Our thought process is, we did all this to get out of debt. Let's do what we can to not get back in it.

07. Save More and Give | Build More Wealth

By this last step, the individual should be 100% debt-free. In which case, they should shift their attention to building and maintaining their wealth, along with giving back to their communities and those in need. Dave does preach, though, to not lend money to family and friends with the thought of being repaid because it can lead to an imbalance in relationships.

Once we have reached this step, we plan to increase our giving and investing percentages.

Money Envelopes

For our personal budgeting method, we are turning to The Money Envelope System. I am excited to begin working on our finances, and I can't wait to share our progress with you as time goes on.