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The Importance of Dave Ramsey's Baby Step #1
A Thousand Dollars is a lot of money, isn't it?
In Dave Ramsey's "The Total Money Makeover", the first of his seven "Baby Steps" is to save "$1000 cash as a starter emergency fund." Many people have never even had a thousand dollars in a savings account. The reason this is so important is so that during baby step #2, when you'll be paying of all debt but the house, you don't want to run into an issue if the alternator in your car goes out. The emergency fund will prevent you from going further into debt, because the only way to get out of debt is to stop borrowing money. If you're living paycheck to paycheck, like most Americans, you are probably saying "where am I going to come up with $1000?" Well, I have some great ideas that I have used in my "Total Money Makeover". If you can get your first $1000 emergency fund, it will give you momentum as you move into your debt snowball(Baby Step #2).
Here are my expense reducing and money generating ideas...
The Total Money Makeover
Decrease your household expenses
One of the easiest ways to stretch your paycheck and end up with money at the end of the month is to reduce your household expenses. Make a list of all of your monthly expenses (which you have to do in order to make your budget for your total money makeover). You should be able to see a few easy changes immediately. Here's my list of changes to help you out:
- Cut cable bill by reducing channels, or completely getting rid of it and watching video online. We save $62 a month by not having cable. We pay $8 each for Netflix and HuluPlus, and $79 a year for Amazon Prime.
- if you have a cell phone you should not be paying for a land line, save about $25 a month.
- if you are not under a cellphone contract, look for cheaper service or prepaid service like Straighttalk or Net10.
- Plan your meals for the week and only go to the grocery store once a week to minimize impulse buying.
- Adjust your thermostat up a few degrees in summer and down a few degrees in winter. We save an average of $40 a month since doing this. If you do not have a programmable Thermostat than get one (you should be able to get a decent one for less than $50)
- Stop buying your morning latte. Go for the free stuff at work, or buy coffee and brew it at home.
- Quit going out to dinner And lunch. Brown bag it to work.
- Cancel your gym membership-you can work out for free At home.
If anyone reading this can think of other great ways to reduce monthly expenses, please comment.
Do you have a monthly budget?
Sell everything, including the kitchen sink!
You might want to keep the kitchen sink, but you should be selling everything you can, including your time. The first thing you can do to get more money coming in is to see if your boss will let you work overtime. If they will, great, but you still should sell everything you can. If your boss won't let you work overtime, then try to get a part time job waiting tables or delivering pizza. My boss lets me work overtime, so I didn't have tIme to get another job. Here's some examples of what I do (or have done) to get some extra cash flowing into my checking account:
- Go through every room in your house and sell anything you haven't used or worn in the last year. You will be surprised with what you'll find, and with what people will pay. Once you have all of your items to sell, create an eBay account (if you don't already have one) and start listing. If you have questions about eBay, you can search on Hubpages and watch tutorials on the eBay website as well.
- Items that are too big for you to ship, like furniture, can be sold on Craigslist to local buyers. I have sold tires, televisions, vehicles, baby clothes and many other things on Craigslist.
- Deliver newspapers or phone books.
- Babysitting jobs.
- Craigslist can also be used to find work, whether it be a part time job, helping someone move, special events, or anything in between. I have scored a couple weekend cash jobs on Craigslist.
- Offer to do yard work for older neighbors. You can help them out and make a few bucks.
- Sell old jewelry and any silver or gold that you have to a gold and silver exchange. I was surprised at how much we got paid for our old jewelry that was broken, or that we didn't like anymore.
- If you still have time to make more money after all of these, you can sign up for "get paid to" sites like cash crate, fusion cash and others who pay you for completing surveys, watching videos, and signing up for stuff. You won't make a ton with these, so I would save them for last, but I have made a few hundred bucks over the last couple years on these types of sites.
Again, if anyone reading this has other legitimate ways to make a buck, please comment.
Benefits of cutting monthly expenses
$62 a month
Electric & Gas bill
$40 a month
Landline phone bill
$25 a month
$127 a month
Stay motivated and you will succeed
Most people that I have talked to that have gone through, or are in the process of their Total Money Makeover, have gotten past step one in a month or so. Sometimes it will take longer, but if you focus and stay committed, I am confident that most people can get their $1000 emergency fund in place a lot sooner than they ever thought possible. When my wife and I accomplished that, we felt like we could do anything because neither of us had ever had that much in the bank that wasn't waiting to be paid out to someone else! This is why I think Baby Step #1 is so important. If you don't already have either of Dave Ramsey's books to the right, you should get them. If you do have them, then do what my wife and I do- we lend them to our friends as much as we can. Pass the word "Debt is dumb!"