Financial Peace University: Baby Step 1
The classes pursuing financial peace have just begun. Have you taken part in the first session conducted last week? If yes, I hope you enjoyed and learned a lot! If not, well, we will provide you with a supplemental reading. Any person who would like to be financially at peace needs to sit on a wisely planned budget every day. These times when we are going through a rough patch of economic recession and businesses shutting down temporarily, a tight organization on our finances is very important; it will be our key to success and survival.
BABY STEP 1
Baby Step 1 is the most important and hardest step of all. In here, you must get to decide if you’re all in and whether you will walk through the end of the steps or not. Every decision you make is relevant because it dictates the future of your outcomes. Either your decision will make you or break you. There are no in-betweens. To flow smoothly, you must be firmly established first that you are 100% committed to taking this path towards financial freedom. It is a theory founded by Dave Ramsey that has already changed millions of lives up to date. As he has said, “You must do something different if you want different things” and “If you live like no one else now, later you can live and give like no one else.”
Change is hard, but possible. Remember this: there is no chance to win if you’re not willing to pay a price to win. After all, we control our own destiny.
BABY STEP 1A: Save $1,000 for a Starter Emergency Fund
Baby steps are called ‘baby’ steps for a reason, but we cannot belittle it for every step is a step towards the goal. The first step is the easiest but may be hard for some. You will need a starter emergency fund of $1,000. If you come to think about it, it only requires you at least a thousand bucks, but sixty-nine percent of Americans share the same story of not having at least this amount of money in their savings account. If you are one of these, it’s okay, you can always begin and start afresh. To know how to save up $1,000, you may read this article: Top 30 Tips and Tricks to Save Up to $1,000.
BABY STEP 1B: Budget
Budgeting will help you attain these goals. For most families, especially for the starting ones, they learned this the hard way. One very important factor is to think money is relational meaning, it needs to be discussed and talked through. Couples must be able to agree to a certain budget for their family. Single people or students should learn and do this too. Or, you can talk about things with a friend who is good with money or have him/her look over your budget with you. Otherwise, you will always run out of money.
Rachel has also classified two types of people on budgeting:
- The Nerds- the people who enjoy doing the budget
- The Free Spirits- they feel controlled by the budget
Both add value to the work. The free spirits give life and fun to the nerds, and the latter helps the other one not go broke. No one is above the other, they are just of different approaches. To work out the differences, she advises that people must go through a ‘Budget Committee Meeting’. In here, you will meet with your spouse to discuss next month’s budget. Follow the rules below for a smoother talk:
RULES FOR NERDS:
- Create the budget because you are good.
- Thank and appreciate the free spirit for coming to the meeting.
- Show the budget to your spouse, then be quiet.
RULES FOR FREE SPIRITS:
- First, you must come to the meeting.
- Never use the phrase “Whatever you want to do, it’s all going to be fine.”
- Have an opinion. You must make a necessary change to the budget.
- After the meeting, stick to the final plan, then see how it works. You’ll realize one thing: that budget gives you control you never thought you had.
- Repeat the steps again one-month before the next month you will make a budget for.
- Your budget needs to be zero-based meaning, Budget: Income – Expenses = 0
- Budget becomes better when it starts by giving, especially if you are a couple. It makes you a better person. Create the habit of living your life with an open hand.
- Save money. If you have debt, collect your $1,000 starter emergency fund as fast as you can. Further, cut back on your savings to pay all your loans.
- If you have never tried before, she has advised to give it 3 months to develop a rhythm.
- Your third priority should be spending. And by this, you must always take care of your family first. Follow these 4 walls, namely food, utilities, shelter, and transportation.
As Rachel has said: “Budget does not limit your freedom—it gives you freedom. It gives you permission to spend. It is going to completely change the way you handle money.”
You can do it! You can finish Baby Step 1. Do not quit.