The first few rules before the 7 baby steps for financial peace are, 1) Never spend more than you earn. And  2) Be intentional with where your money is going by having a written monthly spending plan.

If you are earning £2000 a month, then make sure you never spend more than £2000 a month and be intentional where ever pound is being spent.

Inside that £2000 example, you should pay yourself first 10% to save as a golden rule for building wealth. Over time you can increase your percentage to build wealth faster. 

So let’s get into the 7 baby steps for financial peace, bear in mind, these steps are from the best selling book by Dave Ramsey, The Total Money Makeover.

1) Save a starter emergency fund of £500 – £1000

The reason it’s vital to have an emergency fund is simple, If you have an emergency like the car breaks down then without one you will end up using a credit card to help you out or lending money from somewhere.  (Money Tip, Never use credit cards, personal debt is bad.)

You need to save this emergency starter fund as fast as possible, sell things you don’t need, get some extra hours in, what ever it takes, build that emergency fund to keep you at bay from the money sharks who are money hungry.

2) PAY off all debt with the snowball effect, Smallest to largest. 

If you have Debt, most people do so don’t beat yourself up, you’re just normal and normal when money is concerned usually means poor. (the reason being is the lack of financial education being taught to kids and adults alike).

Dave Ramsey teaches the debt snowball, he says being in debt is more about behaviour than a math problem so by using the debt snowball, it’s the fastest encouragement to keep on track. 

How it works is you put your debts in order, smallest to largest regardless of the interest rate, pay the minimum on everyone but the smallest debt and then attack the smallest debt with intensity. Then once it is paid you take that money and roll it onto the next one until they’re all paid.

What happens is that by paying off one you gain huge encouragement and also you now have a little extra money to roll onto the next one.   

Once you become debt free, except the house payment, you now have extra cash to save for retirement and/or a better standard of living. 

3) Save up to a fully funded emergency fund of 3-6 months of expenses

Have you seen the incessant day-time tv adverts advertising your escape from money worries, they prey on the vulnerable to take out these high fee loans to get themselves out of trouble which is kind of strange, as it just piles on more trouble. I wonder if they love making a profit from poor folk. yep, they do and it down right makes me angry. 

So the key is to have a fully funded emergency fund, your very own, in the shit, need some money fast solution. I mean real emergencies, not I need to pay for that trip to Paris, emergency. You know unexpected emergencies like when the car breaks down, the boiler goes, the fridge packs up etc. This is when you can dip into your emergency fund and pay for it without no penalty, in interest payments.

So with our £2000 example, save £6000 to £12000 in a fully funded emergency fund. Please note, this might take time to save that amount but now you have no debts, except the house, you should have extra income to boost this process.

An added note is if you feel that you may have a change of job or a baby on the way, you may go to a 1 income household, then saving extra months is a good idea to keep you at peace.

Final note on your emergency fund, keep it in a separate easy access account so you can quickly get it in an emergency.

(Dave Ramseys recommend that you do baby steps 4,5 & 6 together in his game plan)

4) Invest 15% of your household income for retirement

Your future self will thank you for being smart and saving for your retirement, I know it feels like ages away and it is, yet I’m sure it will arrive quicker than we think.

The thing with starting early to save 15% or more for retirement is that time will compound your money and the actually fact of you starting early will do most of the savings for you. 

It’s amazing how years of compounding savings and investing will grow your nest egg. 

The sooner you start invest, the easier and better off you will be.

I invest in a multi-asset allocation fund using a Vanguard Isa and allow it to do its magic. I’ve done many mistakes like investing in individual stocks which is a very risky game and not recommended.

Investing in an Index fund, (a fund that mimics a market) like the FTSE’s 100 or the S & P 500, you’re sure to win, the key is to invest with PCA, pound cost averaging, keep investing monthly and not selling out when the markets have a wobble or crash. Easier said than done.

All investing should be for long-term, 5-30 years as there are plenty of market corrections and wobbles, over 10-20 years though, markets are genuinely up.

Check out to learn more on money investing, Pete Matthew, founder of meaningful money has a course called, which I took to simply learn to process for successful multi-asset allocation investing.

5) Save for a child University Costs.

If you’re from the UK, your child’s university cost is on an after study taxable payment. When they earn over £25000, they pay an extra 9% in tax to pay for their university cost.

You can save for their living costs but really, the UK system, it’s not wise paying for university costs up front as it is a tax rather than an actual loan that needs to be paid back.

Check out Martin Lewis on the UK system for children going to university. 

If you’re from the US, then please follow Dave Ramsey’s advice on saving for college and showing your child how to go through college without any student loans. The cost of education in American is mind blowing and there are ways to avoid and go through college without acquiring $10’s of thousands of dollars in student loans debt.

6) Pay off the House

There’s no such thing as good debt, especially personal debt. The lender slave is to the borrower.

Our house mortgage is usually the biggest debt we’ll carry and with this anchor, especially if we’ve borrowed to the maximum, we feel trapped into the monthly payments thus possibly working longer in a job or stuck in a job we dislike because of the debt.

I believe that a house repayment should never be over 20% of your monthly household income, if you go over, say 30/40/50% of your income, you will be house poor. Meaning your house is sucking up too much of your income and making it harder to achieve all the other things that give you financial peace. 

There are ways to pay off your mortgage is quick time. 

Let’s say you’re on a 25-year mortgage, with a monthly repayment, Let’s say it a £1000 monthly mortgage and £650 is in interest and £350 is paying down the principle. By double paying your monthly principal, so £350 x 2, every month, you will pay off the mortgage in 12 and half years rather than 25 years.

Another less aggressive way is paying your mortgage every 2 weeks rather than monthly. By doing this, you’ll pay an extra month a year and cut roughly about 4-5 years off your mortgage term, Ask your bank if you can do this, you won’t even feel the pinch. 

Or you could just pay an extra 10% a year if you are strict enough to save and not spend it on some fancy designer bag or new sports car. 

Being mortgage free gives you the peace of mind that you and your family have a home that nobody can take away from you. 

Plus it will turn into an asset in later life if you decide to downsize and use some of the money for retirement. (with this in mind, never take an equity release remortgage, It’s just another way the money sharks will get money out of you)

Having no mortgage, it’s a win, win in every sense of the word to be mortgage free.

7) Build Wealth, Live and give like no one else. 

What’s the main point of all these baby steps? To give you financial security and financial peace for sure, yet what comes next is truly life rewarding. 

Building wealth so you become financially free is every person right. By investing wisely, in the likes of a Vanguard index fund or having some fully paid for rentals for cash flow, you allow, not only for you to be financially free, then, you can live like no one else & give like no one else – (Dave Ramsey saying).

Giving is living!

Whether it’s your time or being generous with money, helping worthy causes to make our world a better place is priceless. I firmly believe in each of us, there is the greatness to do good. By following the 7 baby steps for financial peace, you have the means to do so.

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