Recently, a few miles from where I live, a house was sold for a minor sum of money after sitting vacant for years. The buyer, instead of choosing to live in the property, had the house bulldozed to the ground. Now this doesn’t seem like that uncommon of a thing to have happen to a property. After all, you have to make way for new construction, right?
The irony of the situation, however, is that it was new construction the buyer had leveled…well, at least it was new 7 years ago when they started building this beautiful, upper six-figure mansion of a house on a perfect, 5-acre corner lot of country land. No one had ever lived in that house. The original owner/builder only managed to get it about 75% completed.
It was really sad to watch that property deteriorate over the years as it sat there neglected and exposed to the elements…windows breaking, drywall rotting, basement flooding, weeds growing…and I don’t know why they were unable to finish it. It could have been the bad economy, increase in construction costs, a job transfer or layoff, a family sickness or some other series of unfortunate events.
For whatever the reason, life happened to these people, the costs were too great and the house was never finished. It makes you wonder how much planning actually took place in the beginning of the house building process. They obviously did not account for all the costs (risks, economic scenarios, personal events) that might be associated with a project of this magnitude. Maybe a better-formulated plan would have seen this house through to completion.
Starting the Journey
All of us start our financial journey somewhere. Some start with more, some with less. Regardless of where we start, everyone needs a plan to be successful. This is the main idea of Luke 14:28.
The builder counted the costs of the project before he began in order to insure the projects completion. In our minds we probably all know the importance of having certain guidelines to follow.
However, most people don’t really know what a good plan looks like. We piece together things from here and there. We see progress, have a few victories and then take two steps backwards because of a poor decision. Our success with money is marginal at best. This mediocre money management brings frustration and discouragement, and we regretfully become resigned to the fact that we will never reach our financial dreams.
Finding a Plan
Maybe at this point you have asked yourself: “So what does a good plan look like?” I was asking this question to myself several years ago when my wife introduced me to Dave Ramsey’s radio show. Many of you have listened to Dave for years and know his story. (For more about Dave’s personal story click here: http://www.daveramsey.com/company/about-dave/). Something about his teaching and advice clicked in my mind, especially his concept of having a plan to follow. I love plans and Dave’s “Baby Steps” concept was just what I was looking for.
The seven Baby Steps are designed to help you eliminate debt and build wealth using a stepping stone strategy that allows you to experience success a little at a time. In essence, they serve as guardrails to keep you focused and on track in your financial journey. A brief summary of each step is seen below:
Step #1: Save $1,000 to start an emergency fund to help with unexpected life events
Step #2: Pay off all your debt (except the house), from the smallest amount to largest, regardless of the interest rate
Step #3: Build up three to six months of expenses in a traditional savings account
Step #4: Invest 15% of your household income into Roth IRAs or a pre-tax retirement account
Step #5: Start college funding for children
Step #6: Pay off the house early
Step #7: Build wealth and give generously
There is a lot more information about these steps and how they work in conjunction with one another at Dave Ramsey’s website. (For example, steps 1, 2, and 3 happen in order – chronologically, while steps 4, 5, and 6 happen together – concurrently – at the same time.) You can click here for more details about the baby steps: http://www.daveramsey.com/new/baby-steps/.
And for the ultimate experience in how these steps can work for you, I suggest attending an FPU (Financial Peace University) class near you. The experience will change your life. Click here for more info on FPU: http://www.daveramsey.com/fpu/home/.
Plans are essential to successful money management and the one I showed above is the best I have seen. But as Curley from the movie City Slickers would say, you still have to figure out the “one thing” in order to make this plan successful. (to be continued…)