If you’ve never heard of Dave Ramsey, he is a finance author, spokesperson, and radio host. He gives personal finance advice, and all of it is based on his 7 baby step principles.
Ramsey’s 7 Baby Steps are as follows:
- Save $1,000 for your starter emergency fund
- Pay off all debt (except the house) using the debt snowball method
- Save 3-6 months of expenses in a fully funded emergency fund
- Invest 15% of your household income in retirement
- Save for your children’s college fund
- Pay off your home early
- Build wealth and give
I have LOVED using these baby steps in my personal finance journey. Right now, I am on Baby Step 5, where I am saving for my children’s college fund.
I completely believe in this method, and I believe it can be slightly modified to use in your business finances as well!
How to modify Ramsey’s Baby Steps for Business
If I were to modify Ramsey’s baby steps to apply to business finances instead of personal finances, here is how I would do it:
- Save $1000 for your starter emergency fund
- Be sure to put this in a separate account so you don’t “accidentally” use it. Save this as quickly as you can (hopefully in 3 months.)
- Pay off all debt (except mortgage) using the debt snowball method
- The “debt snowball” method means that you pay off your debts from smallest to largest, regardless of interest rates. Then once one is paid off, you use that money to put toward the next one.
- Save 3-6 months of expenses in a fully funded emergency fund
- Figure up how much you spend on necessary expenses each month (ask your bookkeeper for an average of your expenses on your P&L for the past 3 months). Add this money to the initial $1000 you saved. This will take longer to do, maybe a year or more.
- Invest 15% of your take-home income in retirement
- If you’re eligible, use a Roth IRA to invest your after-tax dollars. Don’t forget to invest in your future!
- Pay off mortgage early
- If you have a mortgage on a business property, use this step to pay it off early. Say goodbye to all that money you pay in interest each month! 🙂
- Build wealth and give
- Your business can be a HUGE source of blessing for your community and the WORLD. Take care of your business first, and use the overflow to take care of others! Give your employees bonuses!
If you need help figuring out your monthly expenses, sign up to get a free review of your books! 🙂 We can help you out for no charge! 🙂