11 Baby Steps to Financial Freedom

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Dear friends,

It’s hard to believe we have just three days remaining in the January Money Diet. You’ve been such a wonderful, caring, generous group of dieters, and I have SO enjoyed getting to know you.

As this spending break winds down, these are some steps you may want to consider this year and beyond. These steps are my variation of Dave Ramsey’s 7 Baby Steps.

In a perfect world our money should be a source of good things, and not a source of worry or stress.

Step 1: Give what makes you happy.

As we explored on the very first day of the January Money Diet, there’s a beautiful, mysterious paradox between giving and receiving. The more we give, the happier we are and the more abundant our lives become.

Step 2: Learn everything you can about finances, investments and the stock market, and read a great money book (or two).

Here are a couple of books that have inspired me develop better money habits:

Your Money or Your Life” by Vicki Robin and Joe Dominguez was recommended by a former JMD participant, and it quickly became my favorite financial book. Through a series of essays and questions, the authors challenge us to delve deep into our spending habits and consider what we might be sacrificing by our lifestyle choices. Their message of money mindfulness resonates with me so much.

The Millionaire Next Door” by Thomas J. Stanley and William D. Danko opened my eyes to the fact that most people who enjoy financial freedom generally don’t waste money trying to impress other people. They drive reliable cars, for example, and make careful spending decisions about major purchases. They build real wealth, and tend not to fritter their money away.

Step 3: Start an emergency fund and build the balance to $100. This will be the beginning of the end of money worries.

Step 4: Start a separate Freedom Account to accumulate money for large annual bills like HOA fees or homeowner’s insurance. Save 1/12th of the total amount needed each month.

Step 5: Fund your emergency account with $1,000.

Step 6: Start a separate savings account for a vacation fund. Having money set aside for a relaxing break is the best, and will eliminate the temptation to put vacation expenses on credit cards.

Step 7: Pay off your credit cards, lines of credit, student loans and other unsecured debts.

Step 8: Build 3 to 6 months of expenses in savings.

Concurrent Steps 9, 10 and 11

These steps will vary depending on your age and priorities.

9,10,11: Invest in a tax-advantaged retirement account, automatically contributing a percentage of your income that fits your future goals.

9, 10, 11: Pay down — until you pay off — the principal balance of any home equity loans and your home mortgage.

9, 10, 11: Save for your children’s college education.

How About You?

Which step are you currently working on?

Do you have any of your own tips for achieving financial stability to add to the list? Do you have any other good money books to recommend for solid financial advice? We’d love to hear your thoughts over at the Money Diet Community Facebook Group.

You’ll hear from me tomorrow with a weekend challenge to help you continue your good JMD progress throughout the year.

Best always,

Signature for Eliza Cross

P.S. For more information about setting up individual savings (and why I’m a fan of credit unions) check out “Save More Money This Year.”

P.S. If you use Pinterest to save articles and ideas, here’s a handy pin:

11 baby steps to financial freedom

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