2011 is gonna be my year! Now that my divorce is done finally, I can buy a home, focus on my music and my work, and maybe even find a new guy worthy of my attentions. It's a little intimidating, knowing my life is going to change so much this year - I've been in limbo for much of the time since the separation. Now it's time to move forward into my sunny future!
Check out Dave Ramsey's stuff for paying down your debt. You can listen to his radio show archives on the internet. He also has books. But the core of his programs is a very simple stepwise approach:
Baby Step 1 $1,000 Emergency Fund
An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen.
Baby Step 2 Pay off all debt using the Debt Snowball
List your debts, excluding the house, in order. The smallest balance should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first. (NOTE: He picks this order, rather than highest interest rate first, because he figures people get encouraged by paying off the smaller ones and it helps them stick to the plan better)
Baby Step 3 3 to 6 months of expenses in savings
Once you complete the first two baby steps, you will have built serious momentum. But don’t start throwing all your “extra” money into investments quite yet. It’s time to build your full emergency fund. Ask yourself, “What would it take for me to live for three to six months if I lost my income?” Your answer to that question is how much you should save.
Baby Step 4 Invest 15% of household income into Roth IRAs and pre-tax retirement
When you reach this step, you’ll have no payments—except the house—and a fully funded emergency fund. Now it’s time to get serious about building wealth.
Dave suggests investing 15% of your household income into Roth IRAs and pre-tax retirement plans. Don’t invest more than that because the extra money will help you complete the next two steps: college savings and paying off your home early.
Baby Step 5 College funding for children
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.
Baby Step 6 Pay off your house early
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.
As you attack this last debt, you will gain momentum much like you did back in the second step of the debt snowball. Remember, having absolutely no payments is totally within your reach!
Baby Step 7 Build wealth and give!
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!
Ramsey has some really good ideas. Fortunately my financial house is the one area that is in really good shape. However, I have big plans for the rest of my life in 2011. In fact if I am still stuck here in limboland going nowhere fast this time next year, somebody please slap me upside the head and tell me to wake the h*ll up!!!! 2011 is THE year for positive changes!!!
