The complexities and challenges of modern living require that we develop and implement a robust strategy for managing our finances. Even with a good-paying job or a very profitable business, you can get into debt if you fail to manage your personal finance appropriately.
The onset and progression of the pandemic have particularly affected us, with researchers in the field of economics contending that financial stress is at an all-time high in America. This can be attributed to numerous layoffs and hiring freezes coupled with inflation.
Failure to implement an effective plan for your personal finance can have adverse implications. The most notable ones are a compulsion to purchase products and services that you can’t afford, unexpected expenses, and debt. Without appropriate support or coping strategies, it can feel impossible to keep your head above the water. We are, however, here to tell you that it is possible!
If you are having problems managing your personal finances, you can take comfort in the knowledge that you are not alone. Our goal is to ensure that our readers are free from financial stress by delivering insights from industry experts and individuals who have been in similar situations and were able to mitigate their personal finance issues by embracing strategic thinking and proactive action.
it’s also good to understand that financial stress can be caused by a number of things: debt, unexpected expenses, or a compulsion to make purchases that we can’t afford. Without the right coping strategies or support, it can feel impossible to get through. But it is possible. Here’s what to do.
Insights from Dave Ramsey
Nothing comforts us more than following the advice of people who have been in similar situations as ourselves and were somewhat able to navigate through the challenges and complexities. It even becomes more comforting when the person delivering these insights is a renowned expert in the subject matter under investigation. Your guess is correct! We are talking about none other than Dave Ramsey.
Dave Ramsey is a reputable expert and scholar in personal finance. He is the proponent of 7 Baby Steps and also the proud author of Take Money Makeover; from which you can learn more. Many people around the world have implemented Dave Ramsey’s 7 Baby Steps to take control of their personal finance and avoid debt.
However, you should be informed that the insights generated by Dave Ramsey will not necessarily work for everyone. People have different financial circumstances, so it is advisable to follow the advice that resonates well with your position.
For instance, the first step in Ramsey’s 7 Baby Steps constitutes saving a minimum of $1,0000 for your starter emergency fund. While this may sound like an easy target for some people, others may find it unreasonable.
The second step entails using the debt snowball method to pay off all your debts. According to Ramsey, this should not include your mortgage.
Thirdly, he recommends saving 3-6 months of your cumulative expenses in an emergency fund. Investing approximately 15% of your household income for retirement and old age should follow this.
The fifth step entails setting up a separate savings account for your children’s college. The 6th and 7th steps are promptly paying off your house and focusing on building wealth and philanthropy.
We have capitalized on the above insights from Dave Ramsey to deliver the steps you can implement to gain control of your personal finance. The proceeding recommendations expound on Dave Ramsey’s 7 Baby Steps. We are confident that after you have carefully reviewed and followed each of these steps, you will be able to get out of debt and secure a stable financial future for yourself and your household.
The first step of effectively managing your personal finances entails setting up a realistic and detailed budget. A budget is only good if you stick to it. This may sound cliché to many people, but when you sit down and think about it, you will realize that most of your income goes to unnecessary products and services, some of which you cannot afford.
Furthermore, if you have ever experienced financial stress, you are probably aware that it creates a vicious cycle. It compels you to desist from thinking about money and how to manage it because it is a stressful subject. The result is that you continue to live by the day through each moment while getting yourself deeper and deeper into debt. This ultimately generates more stress.
Even people who acknowledge the need for a budget typically make the mistake of setting unrealistic goals concerning how much extra income they will earn and how much they will save. Instead, you are advised to capitalize on your budget to describe how your finances work accurately. The first step to financial freedom is knowing how much money you have and the portion that you intend to save and use. Use this knowledge to develop a good budget and ensure that you abide to it like a loyal servant.
2. Establish an Emergency Fund
Emergencies such as unexpected hospital visits, home repairs, or personal issues can act as the proponents of debt. This usually occurs when you are faced with a sudden situation that requires instant money. You might have the cash at hand, but we are willing to bet that you were not planning to use it for emergency purposes.
Setting up an emergency fund does not necessarily mean that you expect the worst to happen soon. Instead, it reflects on your forward-thinking and your keen focus on ensuring that your financial stability is not negatively impacted in an emergency.
We are not asking you to go to the bank and deposit the entirety of $1,000 in your emergency fund. That would act as an emergency in its own way. We are advising you to set up a fixed amount from your wages for your emergency fund. This can be $50 per month or $100, depending on your income. An emergency fund might sound like a luxury, but you will be surprised at its potential of providing you with psychological security in the face of stressful events. We already have too much on our plates to deal with, and the last thing anyone needs is pressure and stress from the challenges that sudden emergencies generate.
3. Track your Progress
This is similar to evaluating how you have been performing financially after setting up a budget and an emergency fund. This step will enable you to highlight the areas you have excelled in and those that need to be readjusted. Tracking your progress is also essential in allowing you to make adjustments to your budget and your overall financial plan.
For instance, you might have decided to save $300 every month in your fixed savings account and $100 in your emergency fund, but you choose to up these figures because of your recent promotion at work. Tracking your progress will enable you to make these changes and ensure that your personal financial strategy operates effectively.
Everyone needs a robust plan for their financial needs to avoid getting into debt and suffering from financial stress. This article has expanded on Dave Ramsey’s 7 Baby Steps to deliver meaningful insights that are certain will assist you in your financial life in the future. The goal is to live a stress-free life based on strategic planning and proactive thinking.