Ramsey explains that although he was a successful real estate agent who owned over $2 million in real estate, he was also up to his ears in debt. When the real estate market began to sink, he found himself in real trouble. Using his situation and others he came across in his second career as a financial counselor for people struggling with debt, he gives several steps for turning your finances around and getting them on healthy footing.
1) Build up an emergency fund of $1,000. This is very important because it will prevent you from having to use credit for those inevitable emergencies like the broken water heater I just replaced (with cash from my own emergency fund). All your extra money must go to this fund until it reaches $1,000. That means paying just the minimum amounts on your credit cards and other debts.
2) Put all your extra money toward eliminating your debts. We've already talked about budgets or spending plans. You have to decide what is reasonable for your situation, but once you do, stick to it. Use the debt snowball, explained in the book, to accelerate debt repayment. In simple terms, debt snowballing is paying off your smallest bill first, then adding the amount you were paying for that bill to your next bill. By the time you get to the bigger bills, you will be paying far more than the minimum amount, allowing you to pay it off more quickly. This system really works!
3) Build up savings equal to 3-6 months of your family's expenses. This will give you a safety net should your family's wage earner ever become disabled or unemployed, or should some other major financial setback occur. This should give you a tremendous amount of security, knowing that your family will not be devastated or thrown into poverty by the unexpected twists and turns of life.
There are a total of 7 steps to financial peace given in Ramsey's book. I encourage you to read the book. It just may change your life and give you some much-deserved financial peace. You can purchase the book through Amazon.com by clicking
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