Dave Ramsey has taught and encouraged millions to get out of debt and to achieve an improved financial situation through his “seven baby steps,” which are: (1) establish a $1,000 emergency fund; (2) pay off debt; (3) save three to six months of expenses; (4) invest 15 percent of income in pre-tax retirement funds; (5) plan for the funding of the college education of children; (6) pay off mortgage as soon as possible; (7) build wealth and give.
An alternative perspective to this approach might be:
- Create a larger initial emergency fund.
- Instead of paying off the smallest debts first, pay off the ones with the highest interest.
- A minimum of six months for expenses is needed, with twelve months more realistic.
- Take advantage of any 401k matching offered by employers.
- College may not be the right educational choice for everyone. Also, those who go to college should be responsible for a portion of education costs.
- Home ownership may not be appropriate for everyone. When buying a home, paying off a mortgage may be a higher priority than saving for college to reduce the amount of interest paid.
- Making money, saving money, and donating to charity should be the main focus.
For additional information on personal financial planning actions, click here.
- Have students survey others regarding their use of these personal financial planning suggestions.
- Have students obtain additional financial planning suggestions using online research.
- What do you believe are the most important actions that should be taken regarding wise personal financial planning?
- How would you communicate these financial planning actions to others?