- What's going on y'all?
Welcome back to channel wealth hacker labs.
As you can see, we have a another edition
of the wealth board and today we're talking
about one of my mentors, Dave Ramsey.
That's the man up here.
I've been a huge Dave Ramsey fan for quite some time.
This is not just because I live here in the Nashville area.
Dave Ramsey, his personal finance book,
Total Money Makeover, I think was
the first personal finance book that I ever read.
If it wasn't the first book I read
I know for a fact it was the first book
that I shared with many of my clients,
whenever I was a practicing financial advisor.
There was just so much practicality,
simplicity with that book and one of those things was
the baby steps which I'm talking about today.
So if you are a Dave Ramsey fan,
there is no reason to hate today because today
I am totally supporting the baby step.
Now there are a few things that I disagree
when it comes to some of Dave's opinions, Dave's advice
and if you want to know what those are,
well get better subscribe because that video
will be releasing soon.
So if you're a Dave Ramsey fan and you're curious,
or you're just curious, once again,
be sure to subscribe, hit that notification bell
so that you can see that next video whenever it drops.
But really quick, just talking about the baby steps.
I mean, the thing that I love about this is that
it's probably one of the most simplistic,
easy to follow steps that any body
really anybody can follow.
I mean, even a baby and this is why the baby steps work.
And I love step number one because there are
so many different ways you can do this,
but what baby step one is, quite simply is to save $1,000.
I love this because it's simple.
It's a nice round number and I've shared before
and if you're not familiar, there are plenty of stats
that share that like one third of Americans basically
don't have close to like thousand dollars,
there's tons of Americans don't have basically
have zero savings.
So to be able to save $1,000 into a checking
or savings account, like that's huge for many people,
and I will attest to this because
whenever I first read this,
I didn't even have a savings account,
I just had a checking account that was how I saved
and this is before I deployed to Iraq
and finally started investing into the Roth IRA
and all that good stuff.
But this gave me a milestone to go after
and like so it just gave me a nice, easy goal to follow
and I was able to knock that out and many
I don't know if it's millions, but I have to imagine
that several thousand hundred thousand people
have followed this one simple step
and just getting to that step is huge for many people.
All right baby step number two is pay off that debt.
Once again, how many Americans are struggling with debt?
When I read this book like I was one of them
I was used to this with both of my parents struggling
with that both my parents filed for bankruptcy
not once but twice.
So I know firsthand what debt means.
And for me, I had student loan debt,
I had credit card debt, I had co sign a credit card
for my girlfriend in college with a $10,000 limit.
Yes, I was insane.
So paying off debt being laser focused,
as I think Dave would say, in paying off that debt.
And one of the strategies that he talks about,
which is very popular is called
the snowball method or debt snowball.
And there is some controversy to this
because the Debt Snowball method basically says is
that you list out all your debts, which for many,
like that's a huge first step.
I mean, that was a step that I didn't even want to do
because I was in denial.
How much did I had and what the interest rate,
what that I was paying on that debt.
But with the Debt Snowball says is you list out
all your debts, and then you start paying the debt
with the smallest balance first.
Doesn't matter what the interest rates are.
So if you have a debt that is say $500,
and the interest rate is eight percent,
well, they would say if you've got a say $7,000 debt
that is 22% interest, then you want to go
after the $500 first.
You know if you're a mathematician,
or if you just looking at simple,
I mean, kind of get like which number is bigger,
maybe you think you want to tackle a $7,000 one first.
But what Dave says and I totally agree with this is that
if you start with the smallest one first
and you actually paid off,
you've got all your debts written down somewhere,
once you get done, then you can go
cross that sucker off.
And there is such a psychological win
when it comes to be able to knock out, knock out that debt,
erase that debt and know that you are now
on to the next step.
Like that is such a huge momentum boost
and is no different than having a to do list
and writing everything down,
which I do for myself every single day
and build a cross that off the list like man,
it just makes you feel so much good.
And that's why he talks about the debt snowball method.
So step one, save $1,000 step two, pay off debt.
Step number three is to build up that emergency fund
that rainy day fund.
And typically you want to shoot for three to six months
of your household expenses.
People don't have any savings,
so to get to $1,000 like that's such a huge milestone
so over and above that obviously for many people
that doesn't even cover their mortgage
and I mean if you got four kids like me
that doesn't cover your grocery bill, electricity bill.
So what the goal here is that we're getting that emergency
that thousand dollars there started,
now we're getting laser focused on paying that debt,
now we're going to start building up our emergency fund
so we have more cash on hand.
And I have like a bit of a twist on this.
I shared it in another video that I will talk about here.
But you know, just having that cash
not just for emergencies, but also like it
for investment opportunities.
All these will be readily available,
you don't want to tied this up in the stock market.
You know, we're looking at high yield, savings high yield,
checking for all of these.
So that is step three.
Moving on to Step four is we are investing
(singing)
we are investing 15% of our household income
and Dave is pretty specific here, he says for retirement.
So this is going into your 401K's and your ROTH IRAs.
You know, Dave talks a lot about mutual funds,
which is one of those things that
many people disagree with.
He also does talk about averaging 12% return on those funds,
that's another thing that we could talk about.
And just to kind of give you a bit of a teaser,
this is here, well, part of Step four,
which one talking about in the other video,
because Dave talks about with the 401k,
if you have access to that, and they have a match,
you want to get the free money first with that 401k match,
and then you go to the Roth IRA,
so that you can get your tax free money,
and I have several videos where I talked about the Roth IRA,
so be sure to check those out as well.
And then once you max out the Roth IRA
we go back to the 401k.
And it's simple advice, it worked for a lot of people.
I do have a different opinion on that.
So once again, little cliffhanger little teaser there,
be sure to subscribe so you can see what I have to share.
But this is step four so now we are investing 15%,
which I would also say is what I saw a lot working
with clients, they would invest and get their match,
and they'd be putting in their three percent
or five percent and they thought that they were good.
Like 15% is actually that's like your bar,
like you want to get least to that and the reality is that
you need to be saving more than that.
But once again, 15% will, that's where we want to get to,
that's what we want to work towards.
So step number five, if you're watching this,
you don't have kids, doesn't really apply to you,
but is investing in your kids education
or more specifically, college.
And this is something that we've been doing
for quite some time.
We have four kids right now, and still up in the air
like I was my both both my wife and I graduate from college
my wife actually has an MBA,
I don't, I just have the CFP designation,
I consider that my MBA
for the financial planning profession.
But with the kids college education plan,
you got the five to nine plan,
which is the most common plan.
And it's funny because, whenever I was younger,
I mean going to college was the thing to do.
And now, I don't know, like I'm not going to be
as terribly upset if my kids don't go to college.
I mean, I don't want them living at home
but that's one of the reasons I've been showing them
about entrepreneurship, side hustles,
how to generate passive income.
Basically, entrepreneurship style.
Can Jeff Rose talk today entrepreneurship style stuff
where man if they start a side hustle
and an online business when they're in high school
and it's generating good money,
then I don't know if you know college is necessary.
The beauty of the five to nine plan is that
let's say one goes to college and one doesn't,
we can always also, you can always transfer
all that money from one kid to the next.
So, right now we do have college education plans
for each of our kids and that is step number five.
Going on to Step number six
is paying off that home,
mortgage free.
And I like this.
Once again, it's another goal to work towards,
I don't know if it's something that I would put
so much emphasis on and yes, it's awesome
to have all of having no debt.
I mean, like you see people on the Dave Ramsey radio show
where they're screaming like their debt,
the debt free scream, whatever it's called.
- I'm debt freeeeeee!
- I mean, that's not a bad thing but I also recognize
that depending on when you lock your mortgage in,
if you've got a 30 year mortgage,
and it's four percent or three and a half percent
like I don't even know what ours is.
I think ours is like I bought three and a half
on a 30 year mortgage.
I don't know if I'm going to be so aggressive
to pay off such a low interest debt,
especially when you could invest that
but once again you got to know what you're doing.
So if you're just going to not pay it off
and you're going to start day trading
or buying cryptocurrency we don't even know
what cryptocurrency really is, then yes,
for a lot of people paying off that mortgage
makes a whole lot of sense.
And the last and final step
of Dave Ramsey's Baby steps,
Dave Ramsey baby steps is Give.
He also says build wealth.
I love this one.
I do wish that it would have been mentioned
more in the beginning but I get it,
just trying to simplify the whole step process.
And one of my wife's favorite things is giving.
We give to our church, we give to other charities,
other organizations, other nonprofits,
and we don't share a lot of that publicly,
but there are some that we would love to highlight
in the future because there are just
a lot of cool people doing a lot of cool things.
And one of the things that I love and,
I saw this hashtag on Twitter the other day,
and it was like, #rich people suck!
And I thought, wow, okay, tell me how you really feel.
And that's one of the things I wrestle with,
with being a multi millionaire
and knowing just the income in inequality that exists,
in US nowadays, but the reality is that,
I didn't win the lotto,
I didn't have a large inheritance.
I mean, everything that I have right now,
is because of what I have done.
Yes, there's been a lot of luck and Yes,
God has been on my side,
but one of the favorite quote I have
from another entrepreneur talking specifically
about baby step seven, and his quote was
"more money equals more impact."
And when I heard that it resonated with me so much,
because I recognize that, sure, I could make $100,000 a year
and my wife and I, we could budget
and we could cut our spending,
and I could stop buying Jordans
and all this camera gear and we would be totally fine.
But I also recognize that the amount of money that
I've been able to generate through online business
and through entrepreneurship and investing
that has allowed us to give so much more than
we ever could have.
I mean it's crazy that in one month
we're able to give more than
I could have given my first five years of working
and I say could have given because
we didn't have a lot back then,
we were living within our means and we still do.
I mean, we still have a surplus,
but this is one of the things
where I just have so much peace knowing that yeah,
there are a lot of rich people that may suck,
but they're also a lot of rich people that do
a lot of good things and I've just learned not to judge
any book by its cover and that's why
I just love wrapping up, baby step number seven.
Give give, build wealth, make more impact with the money,
you know, that God has blessed you with.
So that is Dave's baby steps.
I mean, it's quite simple,
I love just the the simplicity, I love to be able like,
hey, step one, I'm on step two, I'm on step three.
I mean, so many people will resonate,
with going through each step and be able to say,
yeah, I've made it here.
I'm on step four now and I'm getting ready to get
to my 15% investing and then I'm going
to my kids college education.
So like, there's just so many wins that people
can celebrate in this process.
So what do you think?
Have you followed Dave Ramsey's baby steps?
What do you think?
Do you think that it works?
How would you change it?
And if you are following what step are you on?
I just love to hear from wealth hacker nation
what do you guys think about this
and just what's going on with Dave Ramsey his baby steps?
And once again this is I'm a huge Dave Ramsey fan
so if you're not checked out any of his work,
Total Money Makeover first book I ever read
with him also have I'm looking at my bookshelf over here,
EntreLeadership, I have his him and his daughter's book
with what's called Investing for Your Kid's Future
And there's another one the Legacy Journey I believe,
so I have several of his books.
So I'm a huge Dave fan, love his advice
and just love what he's been able to do
for so many people.
Hope you enjoyed this.
Until next time, this is Jeff Rose and mind you
that it's your money, your life and only you
make it awesome.
Until next time.