Tackle Baby Steps 1–3 in order-put all your focus and energy on one financial goal at a time. With your income freed up from debt payments, you’ll be able to throw that 15% at your retirement without blinking an eye. When you reach Baby Step 4, start putting 15% of your household income into tax-advantaged retirement accounts, like your 401(k) at work or Roth IRAs. It’s like trying to fill a bucket with water when there’s a hole on the bottom-it just doesn’t work.īy building a debt-free foundation and stashing a good chunk of savings in the bank, you’re setting yourself up to build wealth the right way. And as long as it’s tied up in monthly debt payments, you can’t build wealth. Here’s the deal-your income is your most important wealth-building tool. Step 7: Build wealth and give generously!.Step 5: Save for your kids’ college fund.Step 4: Invest 15% of your household income in retirement.Step 3: Save 3–6 months of expenses in a fully funded emergency fund.Step 2: Pay off all debt (except the house) using the debt snowball.Step 1: Save $1,000 for your starter emergency fund.If you’re new to the 7 Baby Steps, no problem! Simply put, it’s a plan millions of people have followed to get out of debt and start building wealth for retirement. That means saving $1,000 for a starter emergency fund, paying off all your debt except your mortgage using the debt snowball method, and then saving a fully funded emergency fund of 3–6 months of expenses. Before you start investing, you need to work your way through the first three of Ramsey’s 7 Baby Steps.
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