Without having focussed financial goals, the money one has can “get away from them”, and just continue to “sit in the bank, earning very little interest”. On a video posted on The Ramsey Show – Highlights YouTube channel in 2016 Dave Ramsey urged his viewers to have “a mission or assignment” for every pound they have.
Michael, 41, from New York called into the Ramsey Show to ask Dave what he should do with the $65,000 (around £48,324.25) sitting in his savings account.
The personal finance guru teaches his clients the ‘Baby Steps’ as a guide to follow to way to potentially create sustainable wealth, and to ensure each pound has an assignment and is being put to intentional use.
The first step he teaches is to have $1,000(around £743.51) saved, which Michael has.
Then he teaches people to become debt free other than their home.
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
With around $1,500 (around £1,115.48) left to pay, Dave urged Michael to “write a cheque today and pay that off”.
Step three is to have an emergency fund in place for a “rainy day”.
He said: “This should be three to six months of expenses.
“You obviously live on less than your income because you’ve saved money.”
With an annual income of $92,000 (around £68,385.90), Dave suggested that Michael set aside 20-30 thousand in a separate savings account that is easily accessible as “insurance against life”.
After this step Michael should still have around $30,000 (around £22,303.65) of “unassigned” money.
Baby step number four is putting away 15 percent of one’s annual income for retirement.
Dave suggests that Michael should be putting approximately $14,000 (around £10,402.77) away each year into pension vehicles that can grow his money.
The next step applies to parents, stating they should save towards their school tuition but Michael doesn’t have children so he can skip this step.
Moreover, the sixth step is paying off one’s house early and own their home.
Michael owes around $135,000 (around £100,293.46) on his house so Dave suggested he uses his remaining $30,000 (around £22,287.43) towards that after the car is paid off and the emergency fund has been set aside.
He said: “Any found money out of your budget, I’d do a calculation to see how quick you can get your house paid off.
“You could get it paid off in two or three years with the way you’re going.
“You’d be 45, sitting on a paid for condo, an emergency fund, no debt and at that point maybe $500,000 invested for retirement.
“You’re rocking man, you’re well on your way to becoming a millionaire.”
Baby step number seven is maxing one’s pension vehicles as much as possible and investing.
Once all the steps are competed, he suggested that people should become “outrageously generous”.
The happiest, wealthy people are the ones that are generous, he explained.
Source: Read Full Article