I am like you on a mission to get rich. I still believe in get rich quick and looking a way to do it. But at the same time I am trying to get my finances in order. I read Total Money Makeover by Dave Ramsey several times. And every time I read it I must admit: “God, he is so right!!!”.
Just to summarize his book, I will list here the things everyone should do to get out of debt and get rich. He calls them “baby steps”.
Before you start with baby steps you should start make plans for next month budget. Plan and write down every expense you might have and stick to it afterwards. No more borrowing money, you can spend only the amount you have planned. Do not use credit cards anymore.
When you started making written budgets, the first step is to establish a $1000 dollars emergency fund. This was an essential step for me. Before I made my emergency fund, I had to use my credit card every time something breaks in the house, or when my car needs repair, or unexpected wedding happens where I needed to bring an expensive gift. When you have such fund, these things does not stress you so much, and the best thing is that you pay them out of your money, you do not need to borrow money and pay interest later.
After you established your emergency fund, you will feel more encouraged to get out of any debt you have. Dave suggests his snowball method. List all your debts from small ones to big ones. Pay first the smallest. It will give you the victory feel. Then, next month, start paying off the next debt by transferring funds that paid off the smallest debt and also assign funds for that particular debt. And so on, pay off every debt you have, one by one. It is called snowball because you start with a low payment and as you go along it gets higher and higher.
The next step is to expand your emergency fund to 3 to 6 months of expenses. That way you will secure yourself for unexpected loss of job and some other things that may happen.
Step four is to invest 15% of your income to some retirement accounts. I am not from USA so I do not understand completely this step and all different accounts they have, but I got the point.
Step five is to start saving for your children’s college. It is a big thing when you could go through life without a student loan.
Then, if you have home mortgage, you should pay it off now. I did not say earlier, that in step two, you should pay off all your debts except home mortgage because it is a big loan and it is hard to achieve in step 2.
And the final step is to continue to build your wealth. At this stage of your financial recovery, your money is working harder than you are. Your money is working for you through interest and other investments. Now you can treat yourself until you get to the final phase when you will want to give money in order to help other people.
I am still in step 2, but I am progressing very well and I should proceed with step 3 in about six months. So if I do not find a way to become rich quick, I am sure that I am going to become rich anyway.