Rise & Grind - Money Talk
MONEY: the dreaded 5 letter word. You may love it or hate it. Whether you're brand new to managing personal finance or a cash wizard, we are sharing some simple, but effective ways to give your wallet some love.
Dave Ramsey, a money superstar, earned his fame rightfully so. He's helped millions of people get on their financial feet through his 7 Baby Steps program. Ramsey's method has broken down money barriers to simplify and give folks hope to see the light at the end of the tunnel.
Baby Step 1: Save $1,000 for your stater emergency fund.
In this first step, your goal is to save $1,000 as fast as you can. Your emergency fund will cover those unexpected life events you can't plan for. And there are plenty of them. You don’t want to dig a deeper hole while you’re trying to work your way out of debt!
Baby Step 2: Pay off all debt (except the house) using the debt snowball.
Next, it’s time to pay off the cars, the credit cards, and your student loans. Start by listing all of your debts except for your mortgage. Put them in order by balance from smallest to largest—regardless of interest rate. This is called the debt snowball method, and you’ll use it to knock out your debts one by one.
Baby Step 3: Save 3-6 months of expenses in a fully funded emergency fund.
You’ve paid off your debt! Don’t slow down now. Take that money you were throwing at your debt and build a fully funded emergency fund that covers 3–6 months of your expenses. This will protect you against life’s bigger surprises, like the loss of a job or your car breaking down, without slipping back into debt.
Baby Step 4: Invest 15% of your household income in retirement.
It's time to get serious about retirement—no matter your age. Take 15% of your gross household income and start investing it into your retirement. Start with your company’s 401(k) plan and receive the full employer match. Invest the rest into Roth IRAs—one for you and one for your spouse (if you’re married).
Baby Step 5: Save for your children's college fund.
By this step, you've paid off all debts (except the house) and started saving for retirement. Next, it's time to save for your children’s college expenses (that is, if they make it through Algebra II and Chemistry unscathed). We recommend 529 college savings plans or ESAs (Education Savings Accounts).
Baby Step 6: Pay off your home early.
Now, bring it all home. Baby Step 6 is the big dog! Your mortgage is the only thing between you and complete freedom from debt. Can you imagine your life with no house payment? Any extra money you can put toward your mortgage could save you tens (or even hundreds) of thousands in interest.
Baby Step 7: Build wealth & give.
You know what people with no debt can do? Anything they want! The last step is the most fun. You can live and give like no one else! Keep building wealth and become insanely generous. Leave an inheritance for your kids and their kids. Now, that's what we call leaving a legacy!
Source: Dave Ramsey, daveramsey.com, Total Money Makeover By Dave Ramsey
TODDLERS/PRESCHOOLERS
Don’t think it’s too early to talk to toddlers and preschoolers about money! You obviously can’t go into depth about the nuances of investing, but you can still start teaching basic concepts. Keep it simple and introduce the basic idea that we need money to buy items at the store.
- Teach them to wait: patience is key to investing, savings and not going into debt
- Let them use cash to make small purchases: give them a dollar or two and let them pick out something to buy (possibly with your help)
- Play pretend shopping: a fun way to teach the lessons of money, exchanging a product for money and beginnings of counting
- Show and teach different bills & coins: talk about the different shapes and values
- Talk about how people make money: relate this is parents jobs and people you know, like your family doctor
- Give them a piggy bank: let them save some of those coins and bills in a bank, don't forget to take the money out and use it for something they choose like an ice cream shop visit
ELEMENTARY AGE
- Start an allowance: in order to learn how to manage money, kids need to learn how to earn money first
- Let them shop with their own money: this is a great learning opportunity for teaching wants vs. needs, comparison shopping, cost differences between brands, sizes and sales
- Open a savings account: start a savings account young and have them contribute a portion of their money to it, take them to the bank often so they can make deposits and see the whole process
- Explain the basics of a budget: a great starting point is savings, spending and giving
PRE-TEENS
- Start exploring career interests: begin the conversations revolving around job requirements, possibilities and interests
- Take the budget to the next level: help them set up a savings plan for an expensive purchase
- Teach content and gratitude: the earlier you can instill this the better, especially when a friend has the latest and greatest
- Explain the importance of giving back: teach and show by example how to share time, talent and resources to help others
TEENS
- Get them working: a first job will teach them more about responsibility and accountability then most other things
- Teach them how to manage bank accounts
- Discuss credit and how to build it responsibly
- Discuss debt & credit cards: this includes the dangers of interest and fees
- Prepare for college or post high school plans together: this includes setting up a budget, including living expenses
Sources:
Source: The Ways to Wealth