A question I get alot is what do I think about Dave Ramsey's 7 baby steps!
Dave Ramsey is one of the world's biggest financial counsellors, and has helped millions of people get their finances right. I have plenty of respect for him and what he has done, so not for one minute am I going to slam him or shame him for his 7 baby steps to wealth...
I do however have a couple of very different thoughts, and based on my personal experience, I wanted to share my thoughts on his baby steps, and my differening opinion on how to build generational wealth, to decrease debt while gaining assets.
So here are Dave Ramsey's 7 Baby Steps, and my response with my personal 7 Big Steps to Generational Wealth.
Dave Ramsey's Baby Step 1. Save $1,000 for your starter emergency fund ---> This will cover unexpected life events you can't plan for.
My Big Step 1.
If you've ever been in a position where you have lost your job or a situation where you have needed to rely on your emergency fund, you know that having a $1000 emergency fund ain't going to cut it for long! Instead aiming at a down payment for a property is that becomes your emergency property is the key. Once you have purchased an cashflow producing investment, you can put that cash flow, aside. This makes that property cover your emergency fund, have an account for cash to go into while you are still working and living life.
Dave Ramsey's Baby Step 2. Pay Off All Your Debt (except your house)
My Big Step 2.
While I agree I also disagree and here's why!
Yes don't become a slave to bad debt, but please don't pay it all off as your next goal... I want you to let your assets pay off your liabilities... This means the properties that you purchase SHOULD have a purpose, for example, a house for your credit card debt, a house for your food, a house for your children's college fund!
Let your assets pay for your liabilities, create more equity in between!
Dave Ramsey's Baby Step 3. Save 3-6 months of expenses in a Fully Funded Emergency Fund
My Big Step 3.
If you can save 3-6 months worth of expenses you definitely have enough money to put a down payment on a property. Take that same mindset of saving 3-6 month worth of expenses and use that money to put on a down payment, then you would have something that can last forever. I actually bought enough assets that were going to passively make me enough money to take care of my lifestyle for the rest of my life. Not just for 3-6 months, I did it for the rest of my life! And if anything happened to me, that would take care of my children. It's about your lifestyle forever not just 3-6 months!!
Dave Ramsey'Baby Step 7. Build Wealth and Give
My Big Step 4.
Look, I've worked a 9 to 5 for over 20 years and I've seen people live by this, and at the end of their retirement, they still don't have enough. They run out!
Although it sounds good in theory, it's never enough... Why? Because with inflation, increased cost of living, your expenses will always be increasing!
Don't fall victim to the retirement dream! Let's start right now, invest in yourself, as opposed to taking that 10-15% and putting it in an IRA! Take that percentage and invest in long term, cashflow producing assets, and watch what these assets will do in the next 20 years.
Dave Ramsey's Baby Step 5. Save for your children's college fund
My Big Step 5.
I told you before I have a purpose for every property I purchase. When my children were born, I purchased a property for them and I let the net income from that property, fund their college fund. Yes save for your children's college fund, but be smart about it. Don't go work in a job every day or work 40 hours every single week just to fund your children tuition, make your money work for you. Take the money you have invested in property, use the positive cash flow to fund it that college fund. Let's be smart about this, It's time to make our money work for us!
Dave Ramsey's Baby Step 6. Pay off your home early
My Big Step 6.
Now look, I believe your home is a liability, not an asset, but it doesn't have to be...
YES, I still have debt on my home, but the income I receive from my income-producing assets pays the mortgage to that liability.. my home. If you pay off your home early, you're giving up your number one tax write off in other properties. If you have nearly paid off your house and are looking at investing you have to remember that your cheapest money comes from the equity in your home! You should refinance your home and use the money from your refinance to purchase your now income-producing properties, then let that take care of your home repayments!
Dave Ramsey's Baby Step 7. Build Wealth and Give
My Big Step 7.
How long will it take the average American to achieve the first 6 baby steps??? 15-20 years...? Why are you waiting until your last years left to build wealth and give? Let's be realistic! You don't have 15-20 years to wait to build wealth! Are you suppose to work 30 years of your life, and when you're old you can finally travel, see the world? I want the retirement dream now! Not in 20 years time! I want you to have an accelerated life!
If you wait to build the 7 baby steps you're only falling victim to the same thing many have already fallen victim to.
So let me remind you that Dave Ramsey is fantastic at helping people get out of debt , my focus isn't about getting out of debt, it's to get yourself out of bad debt all while building generational wealth! Dave says live like no one else, so you can live like someone else - you cant live like that for 30 years!