Dave Ramsey: Balance Giving and Saving Money

Kenzie in Utah writes in for the question of the day. She and her husband have been recently married and are currently debt-free. They together make well over 100K a year and, by all accounts, are doing very well. Following the life advice of the 7 Baby-Steps for success, she has gotten into giving back to others. They give pretty substantially out of their income, but now they would like to get a house of their own. How are they to balance giving and saving for their dream home?

The team suggests not making donations based on emotions to start. Many organizations looking for donations know how to tug at the right heartstrings to get you to donate to them. This could lead to giving to every person with a clipboard and a cause. Balancing this out and offering to give less will be the next step. It’s ok to put it away for yourself, and important you do not want to be the one who needs donations when you go overboard. Owning a house is a bigger deal than renting as you have to take care of everything yourself. Heaven forbid something happens, and you didn’t prepare.

It will always be a balancing act. Give when you can, but do not overdo it. Being a man of faith, Dave understands giving to the church and recommends always falling back on that if your heart and faith say you must give to something.
 

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Dave Ramsey’s 7 Babysteps For Success

• Baby Step #1 Save 1000

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  In this first step, your goal is to save $1,000 as fast as you can. Your emergency fund will cover those unexpected life events you can't plan for. And there are plenty of them. You don’t want to dig a deeper hole while you’re trying to work your way out of debt!

• Baby Step #2 Pay Off All Debt (Except the House) Using the Debt Snowball

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  Next, it’s time to pay off the cars, the credit cards and the student loans. Start by listing all of your debts except for your mortgage. Put them in order by balance from smallest to largest—regardless of interest rate. Pay minimum payments on everything but the little one. Attack that one with a vengeance. Once it's gone, take that payment and put it toward the second-smallest debt, making minimum payments on the rest. That's what's called the debt snowball method, and you’ll use it to knock out your debts one by one.

• Baby Step #3 Save 3–6 Months of Expenses in a Fully Funded Emergency Fund

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  You’ve paid off your debt! Don’t slow down now. Take that money you were throwing at your debt and build a fully funded emergency fund that covers 3–6 months of your expenses. This will protect you against life’s bigger surprises, like the loss of a job or your car breaking down, without slipping back into debt.
• Baby Step #4 Invest

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  It's time to get serious about retirement—no matter your age. Take 15% of your gross household income and start investing it into your retirement. Start with your company’s 401(k) plan and invest up to the full employer match. Then invest the rest into Roth IRAs—one for you and one for your spouse (if you’re married).

• Teach Your Kids Financial Responsibility

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• Baby Step #6 Pay Off Your Home

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  Now, bring it all home. Baby Step 6 is the big dog! Your mortgage is the only thing between you and complete freedom from debt. Can you imagine your life with no house payment? Any extra money you can put toward your mortgage could save you tens (or even hundreds) of thousands of dollars in interest.
• Baby Step #7 Build Wealth and Give

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  You know what people with no debt can do? Anything they want! The last step is the most fun. You can live and give like no one else. Keep building wealth and become outrageously generous, all while leaving an inheritance for your kids and their kids. Now that's what we call leaving a legacy!

 

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