As the years pass, the price of goods keeps rising while our yearly income stays steady. In 1990, a gallon of milk was only $2.15; almost three decades later and that same gallon of milk rings up for $3.86. In comparison, our average home loan is $222,261 (more than I have made in my entire lifetime); yet 30 years ago individuals could purchase a mansion for nearly $128,732. With this information in mind, it is crucial to save as much of your yearly income as possible for living expenses, the unforeseen, and retirement.
According to budget Buddha, Dave Ramsey, the first step in saving is to put $1,000 into a separate checking account for emergencies only. Such emergencies include a leak in the roof, house fire, flat car tire, or health concerns. For some, this step could be as simple as moving money from one account into another. For others it is a bit more strenuous. On behalf of individuals, like myself, that do not have two pennies to rub together, saving $1,000 requires selling unnecessary goods online, offering to do yardwork or clean houses, and the most obvious, picking up more hours at work. Whatever obstacles you may have to overcome, depositing one thousand dollars is the beginning of the millionaire journey.
2.Pay Off All Debt
Once you have acquired $1,000, the next step to savvy savings is paying off all debt. The easiest way to go about this is by creating a list of all outstanding debt from smallest to largest. In doing so, you will be list-free before the zombie apocalypse hits.
3.Put Aside 3-6 Months of Savings
After celebrating the joy of being debt free, the succeeding step is to stash away enough money to live off of for 3-6 months in the event that one is laid off. Although this amount is different for all of us, the average total is $10,000 to $15,000. Yet again, this lump sum should be put into a separate checking account, and only touched in an emergency event.
In order to retire by the median age of 67, individuals should start putting 15% of their gross household income into a 401K, IRA, or mutual fund. By starting to invest a mere couple hundred a month in your 20’s, folks will have millions later on down the road. I don’t know about you, but I would love to retire before the age of 67 and explore the world with my significant other and future dog. So I guess the real question is, what do YOU want to do once you retire?
To learn more about Dave Ramsey’s budgeting techniques, check out his homepage at http://www.daveramsey.com/home/
- Rebekah Portner