"Debt is dumb, cash is king and the paid off home mortgage has taken the place of the BMW as the status symbol of choice."
A couple weeks ago in one of my Daily Worth emails a mention was given to Dave Ramsey and his Snowball debt plan. I decided to look into what this was about and discovered he does a daily radio show that anyone can listen to online. I'm always open to financial advice so I thought I'd give it a listen. Since then I've been listening daily. I am hooked on hearing the advice he gives live callers about their money situations, along with the occasional "We're debt free" screams.
He's a little unconventional and at first I disagreed with much of his advice. After a few days he started to make sense. His main goal is to get people off of their dependence on credit cards, pay off the mortgage and begin to build a good retirement plan. He developed a simple plan to meet these goals called his Baby Steps program. It's a simple enough process anyone can do at any income level. You can read about all of the steps on his website but here's an outline:
Baby Step 1: $1,000 to start an emergency fund
Baby Step 2: Pay off all debt using the Debt Snowball
Baby Step 3: 3-6 Months living in savings
Baby Step 4: Invest 15% of household income into Roth IRA's and pre-tax retirement
Baby Step 5: College fund for children
Baby Step 6: Pay off home early
Baby Step 7: Build wealth and give
These certainly don't have to be done one step at a time. Many callers say they are working on 2 or 3 at a time. Personally I'd be a little nervous about only having $1,000 in my savings while I work on paying off all of my debts. A unexpected car repair or hospital visit could easily be more than that, but for some people that's more money than they've ever had in their savings.
Listening to Dave has given me a new motivation and a new strategy to work towards my goals of being debt free (something I've been working on ever since my student loans kicked in). Hopefully it can do the same for you. Listen to his radio show here. Weekdays live from 1pm-4pm central or his archives at any time.
*Update (July 26) : Dave just put up a link on Facebook to his Getting Started Guide. A series of 6 emails will help anyone who is not sure where to start.