The 7 Baby Steps To Financial Freedom

This is the plan I was talking about that we are trying to apply in our life, the 7 baby steps by Dave Ramsey. I use to listent to a lot...


This is the plan I was talking about that we are trying to apply in our life, the 7 baby steps by Dave Ramsey. I use to listent to a lot of financial advisers and it was always very difficult to follow their advice that I thought something was wrong with me.

But with Dave Ramsey's baby steps, we were able to follow a very distinct plan. The best thing about this is that you don't really have to follow it step by step as you can always customize it to what works.

For example, for now we don't have kids so I don't really have to think about the college fund. So here's how I modified the 7 baby steps to fit our life and our needs.

1. Save $1000

So since I'm in the Philippines, I will convert the $1,000 to Philippine pesos. The exchange rate now is around 47 pesos so let's just round it off to 50 pesos so we will have to save 50,000 for the first step.

I believe the purpose of having the first $1,000 is to make sure that you have something that you can use in cases of emergency.

2. Pay Off Debt

So the next step is paying off debt. For this step there is a particular way of paying get through the snowball method. This means that you start paying off the smallest debt down to the biggest. This will allow you to have small victories along the way that will create momentum.

Particularly for us we don't really have a huge amount of debt but we do have payments that we need to make every month.

3. 3 to 6 months worth of Emergency Fund

After you've paid off all of your debt then you will have to start building your 3 to 6 months worth of emergency fund. This means that the emergency fund is worth six months your salary.

This emergency fund is really for major life-changing events for example like a loss of job or somebody getting sick so this is where you get the money to help you get by. But as much as possible the emergency fund will simply be used for emergencies. So it would be easy to build this much amount for your emergency fund because this is in the assumption that you've already paid off all your debts.

4. 15% Invest for Retirement

Now it's time to take care of retirement. 15% of your total monthly income should be invested to some sort of retirement fund or an insurance policy.

There so many insurance companies that are offering great policies for retirement. It would be best to talk to different companies and see what works for you and what you're comfortable with in terms of the payments.

5. Kid's College Fund

Personally we don't have kids and I'm not sure if we're going to have any, not that we don't want it we are simply waiting on God's go signal. But for those who have children, you still have time to build your kid's college fund.

The best thing in the Philippines is that college education is not as expensive as it is in America. But since we also have inflation and the unstable economy then it would be best to start saving for your kids education. But for us since we're still a little bit far from this step we'll see how it goes.

6. Pay Off Home

Now this is the stuff that I didn't quite agree at first because I thought that buying a home should be the priority in the early stages of your marriage. But it also makes sense that  a 30 year mortgage would be impractical.

So the goal is to save up for a down payment for the house if not more than that so that there's no 30 year mortgage.

7. Give

Lastly, the ultimate goal in financial freedom is to be able to give back to your loved ones and to others the blessings that you have received. I absolutely agree that it would be challenging to help others when you  are struggling to make ends meet.

It's not impossible but you can give so much more if you have more than enough to help others.

So these are the steps to Financial Freedom according to Dave Ramsey and we are trying to follow the steps. This may not work for everyone or for every couple but at least there's a start point especially if you're like us who were very confused of what to do a first. Of course these steps are not absolute and once again you can always modify it to whatever works for you.

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