I, for one, am a fan of the guy. His program has helped me payoff my credit card, auto loan and in a year or so, my remaining note (a pool). For Yoel: History has shown us that 95% of all 5-year periods in the stock market have made money. 100% of all 10-year periods have made money (this is to include the Great Depression. Further, the stock market, on average, earns 12% a year. My own portfolio (which is all mutual funds -I don’t invest in single stocks) is right about 13%, and there are so many that earn more than that.

For everyone else, We live in america. Land of the Free, home of the microwave. Most people want what they want now! They don’t want to have to wait for anything. Delayed gratification is really a sign of maturity (something I am only now acknowledging -at 34). Children do what feels good (instant gratification). Adults make a plan and work it.

As mentioned before, the baby steps (of which I am on #2 -as mentioned before) are a guide to true financial peace. $1,000 in the bank might be a daunting task (especially if you are just out of college with a rather low paying job). In that situation, perhaps $500 is more appropriate. The idea is that you want to have an umbrella, in case it rains. You start by putting $1000 (or $500, if you have lower income) in an account, and earmark it for emergencies, then when the car needs tires, or there is a leaky faucet, etc) you go there for the money to repair, and not to the Credit Card.

Step 2, the debt snowball is, as mentioned before, about behavior modification and quick wins, as much as it is about erradicating the debt. Basically, you order the debts from smallest to largest -by balance owed, not interest rate (unless 2 debts have similar balances, then you would put the lower of the 2 rates first). There are a number of people who say that you order the debts from highest rate to lowest, but that will not provide you quick wins. (Lets face it, if you diet for 6 months and see no real progress, there is a good chance you won’t continue). Besides, as Ramsey says, It is not about the math, if we could do math, we would not be in this mess anyway. After you ordered the debts, you pay minimums on all but the smallest. The smallest one you attack with a vengence (all moneys you can scrape together). Once it is payed off, you attack the next, with the same philosphy. The idea is that as the snowball rolls over, it continues to amass more snow. By the time you get to the last one, you’ve likely freed up so much money (in payments that used to go to other things) that it will likely not be around very long at all.

Baby Step 3 has you finishing off the emergency fund. Really, this is not as difficult now, as all the other payments are now gone (thus they don’t affect your monthly budget any more). Additionally, when figuring out how much to put away, many opt to not include discretionary items in that figure (cable tv, eating out, etc). The idea is that if there is an emergency, we are probably worried a whole lot more about just surviving that we are about having cable tv. As mentioned previously, with all those other bills gone and, possibly incidentals and a mortgage left, that number is probably less than you think.

Baby step 4: ( oh that I would one day be there) says its time to start really planning ahead… Retirement. in Baby step 4 you put 15% of your income (pre-tax, preferably) in good growth-stock mutual funds. If your company offers matching-contribution 401k’s do that too, but don’t do you 15% in the company portfolio.

Baby step 5: kid’s college. Because you, have no more consumer debt, because you have 3-6 months of expenses in a fairly liquid acount (think Money Market, with check writing privileges), because you are putting 15% of your income to retirement, you will likely be able to do baby step 5 at the same time. There are tax laws concerning where you can put money and how much you can contribute (given income, etc).

Baby step 6: Pay off the house. To do this puts you in a very elite group. Less than 2% of all americans own their home (free and clear).

Baby step 7: Give like know one else, save like know one else, LIVE LIKE NO ONE ELSE.

What is wrong with this advise? first, were can your invest to receive yearly12% return on your investment every year for 18 years, with Berni Madoff? the S&P for the last 10 years did not produced any profit at all, and very low percentage by mutual funds.

I have send my 3 children to college while earning less $100.000 a year and few years they were all in college at the same time, how did I do that? first, you take two year, prior of sending your first child to college, and learning how the FASFA application works in order to get the low EFC, position your child assets and yours to get the highest and as many grants which the school financial officer decide to meet the gap between your EFC and the school total amount they came up with for the year education cost, the balance to be in subsidized loans.
Your children should not own a car or credit cards, work part time jobs while attending college.
For 15 years I have advised friends and family and help them to use my system that cut their expenses by at least 70% I have managed to send my 3 children to college by paying not more then 10% of total of their education

And totally aside from any expectations or hopes you may have of being rich someday, debt freedom is *freedom*. You might want to travel, to be a stay at home parent, to help your siblings or parents, to work in a nonprofit or for a church…the less debts you have, the more freedom you have to choose what to do with your life.

Any of us could put together this list– the hard part is the discipline and patience to really make it happen.

Once those bills are paid off, you’ll have an extra $500 per month to do what you want. At that rate, it won’t take all that long to build up your emergency fund and then once that’s in place, you can start contributing 15% toward retirement.

If you try to do all the steps at once, you’ll never get anywhere. That’s why these are baby STEPS. You have to complete a step before moving on to the next one.

Get your $1,000 together fast. Then, get to work on your debt. Pay it off as fast as you can. You’ll free up a ton of your income and you’ll really start to make progress.

Trust me. Next month, I’ll turn 24. I just paid off my car and now I’m 100% debt-free. My husband and I (on a modest income, for sure) are now going to have anywhere from $1,200 – $1,500 or more per MONTH to save for a house.