In case you haven’t noticed, I have a bit of a disagreement with Dave Ramsey. You can read Part 1 and Part 2, if you so choose, or you can pick up with the steps I’m addressing today!
Baby Step 5
By this point, you should have already started Baby Step 4—investing 15% of your income—before saving for college. Whether you are saving for you or your child to go to college, you need to start now. Learn more
Novel idea, really, but I won’t be paying for my child’s education. I have been working so hard to correct for my financial mistakes, so you really think that I would blindly give my child enough money for a college education? While college has it’s perks, it has become a substitute for hard work and smarts. Parents wanting their children to get ahead enroll those who have no business being there, and very few are actually prepared for college, much less the workforce. If my daughter chooses to go to college, I am perfectly willing to help her prepare and let her live at home while in college, but I will NOT be paying for her college.
What I will do I teach my daughter from day 1 how to handle her finances. From her first birthday money, she will learn to pay herself first, always give to God, and splurge a little when the situation calls for it. With some hard work, my daughter will pay for her own college and graduate debt-free.
Baby Step 6
Now it’s time to begin chunking all of your extra money toward the mortgage. You are getting closer to realizing the dream of a life with no house payments. Learn more
Good plan! This is where it gets fun! However, this may not be your path. Maybe you have no desire to rent out your current house, or are close to retirement and paying off the mortgage is right for you. We will be 26 when we reach this stage so we have a slightly different plan. We bought our house for a bargain ($40,000 for a house that just appraised out at $125,000 and will rent for $1,500 per month…oh yeah!) and intend to rent it out in 3-5 years (whenever we get out of all other debt and can afford to buy another :-). Thus, I consider our mortgage a business expense and am not really concerned with paying it off. Plus, our interest rate is 3.75%, and I can certainly beat that investing the extra money I would pay towards the mortgage!
Baby Step 7
It’s time to build wealth and give like never before. Leave an inheritance for future generations, and bless others now with your excess. It’s really the only way to live! Learn more
100% agree and I love that the Baby Steps end with this! One of the best things the Big Guy and I have done has been donate to charitable causes. For us, this includes our church, the church camp that we met at and a couple of other causes close to our heart. This is the fun part! For us, this involves developing 3-4 rental properties, blogging income, and possibly a yard business as passive income streams. At this point, life is about putting your money to work for you in the most efficient manner possible. Too often, personal finance blogs place the emphasis entirely on building wealth, rather than what good you can do with the wealth you’ve built or the time you now have free because of your wealth.
What do you think of Dave Ramsey’s Baby Steps? Have they worked for you? What step are you in?