One important note here: You’ll be working on Baby Steps 4, 5 and 6 at the same time, but you’ll start them in this order. Otherwise, it’s time to start researching and stashing away cash for your kids to further their education. No kids? Kids fully grown and out of the house? You can skip this step and move on to the next. Pro tip: If you’re ready for Baby Step 4, plug your numbers into our Retirement Calculator to see if you’re on track with your investments.īaby Step 5: Save for Your Children’s College Fund Note: If your employer offers a Roth 401(k) and you like the investment options, you can invest your whole 15% there. If you hit the max and still haven’t reached 15% of your income, go back to your 401(k) and contribute the rest there! Then open a Roth IRA and max out your contributions. When you start this step, first look into your employer’s 401(k), if you have one, and invest up to the match. And you don’t want that for you either! In Baby Step 4, it’s time to start preparing for your future by investing 15% of your gross household income into retirement accounts.īudget every dollar, every month. But that kind of thinking will leave you working for the rest of your life. (I know, right?) So, keep those money-saving habits going and build your savings into a fully funded emergency fund.īaby Step 4: Invest 15% of Your Household Income in Retirementįor some people, retirement can seem like tomorrow’s problem. You started brewing your own coffee at home-and even like it better. You downloaded so many money-saving apps, you have to delete photos of your puppy weekly for storage. How: You’re already in a pattern of saving. Two-income households can go for three.) Save up that amount and store it in a high-interest savings or money market account with check-writing privileges so you can get to it if you need to. (If you’re a one-income household, aim for six months of expenses. Figure out how much money you’d need to live for three to six months if your regular income went away. Now, you’re going to build up that emergency savings fund so it’s strong enough to stand up to bigger problems, like job loss. It’s not forever, and when you’re living free from debt, you’ll look back and see the work was totally worth it.īaby Step 3: Save 3–6 Months of Expenses in a Fully Funded Emergency Fund In fact, really challenge yourself and see just how thrifty you can get while you’re on this step. How: Remember those money-saving tricks from Baby Step 1? Use those, and then put all that extra cash toward paying off your debt. Pay off one debt at a time from smallest to largest, building your momentum until you’re debt-free. Now it’s time to attack debt with a vengeance using the debt snowball method. You’ve got $1,000 saved up so you can use that money instead of going deeper into debt when an emergency hits. You want to thrive-and the thriving starts here. Pick a few and start saving up now.īaby Step 2: Pay Off All Debt (Except the House) Using the Debt Snowballĭebt’s good for one thing and one thing only: holding you back. The ways to earn or save $1,000 are nearly endless. Try selling stuff, clipping coupons, saying no to extra expenses, planning your meals, eating out less, using or selling old gift cards, and downloading money-saving apps. It just takes a little focus and some hard work. You can save $1,000 quicker than you think-really. How: Start saving more money and spending less. Your washing machine won’t live to spin again. Your kid busts his chin and needs stiches from the ER. Your car’s catalytic converter gives out. 1That means 68% of them are borrowing, selling or going into debt when life happens. Only 32% of Americans say they can pay cash for a $400 emergency. But how do you climb a mountain? One (baby) step at a time.īaby Step 1: Save $1,000 for Your Starter Emergency Fund You might feel overwhelmed, like you’re staring up at a mountain of hard work. If you want to do better, be better, and live better with money, you might not know where to start. The 7 Baby Steps are the proven plan to paying off debt, saving money, and building wealth. We’ll bring the budget part in at the end, but first let’s learn how to get ahead with money in just 7 Baby Steps. You can too! You need a budget and the Baby Steps. Listen, I love spending money, and thankfully I can do that and still reach my money goals.
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