Financial Peace University: LESSON ONE
I've been going to classes to teach me how to get out of debt and save money. This class is taught by Dave Ramsey (through DVD class sessions). It is called Financial Peace University. I've been to four classes already, so I am a little behind in blogging about it, but I wanted to start. Here are the important things I learned from this first lesson:
Dave Ramsey has seven baby steps to follow. This lesson focused on baby step one and three:
BABY STEP 1: $1000 in an emergency fund
In this step you must build up your savings to $1000 and then use all the rest of your extra income (after paying expenses) to pay down debt. The thousand is for emergencies like unexpected car maintenance expenses, or home repair... not for unexpected pizza needs. This $1000 is your beginner emergency fund. Dave Ramsey said: Unexpected things happen -- expect them. This emergency fund will cover these unexpected things as you pay off your debt.
BABY STEP 3: Three to six months expenses in savings
Once your debt is paid off (which is baby step two...the focus of another lesson), your next step is to build up your real emergency fund to three to six months of your expenses. This emergency fund is for if you lose your job you will be able to still pay your expenses. This is NOT an investment. It is insurance.
LESSONS LEARNED:
So after this class was over, I promptly set aside $1000 for my baby-step-one emergency fund. I also decided it was stupid to try to save money when I am paying on credit cards. If I had the money to pay off the cards, why did I not? I liked having the savings in the bank, but then I didn't realize how much I was paying in interest. Because I had enough in savings to pay off my card, I decided to do that. I am now credit card debt free. YAY!!
One thing Dave Ramsey said is one of the quickest ways to make 13 to 18% in interest is to pay off your credit cards. You will be able to keep all that money instead of giving it to the cc companies. Very smart.
2 comments:
Wow. This sounds so cool. Seriously. Those are great words of advice. I'm definitely going to show them to Brian. Great Words of Wisdom. Thank you for sharing.
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