The importance of a Plan

​The reason Dave Ramsey's plan works for so many people is the fact that it's an actual plan. It's simple, it allows you to focus and plan. For those of you not familiar with his plan, it consists of seven baby steps as follows:
​
1. Save a $1,000 Emergency Fund
2. Pay off all consumer debt (any debt except your mortgage) from smallest to largest
3. Build your emergency fund to 3-6 months of expenses
4. Put 15% into retirement funds
5. Put something towards kids college (if you have any and want to contribute to their college)
6. Pay off your house
7. Build wealth and give

During the first three steps you focus ONLY on the step you are on and because of the laser focus on one goal at a time, you really get momentum and feel the wins as you save money or pay off debt. It feels good, as if you are suddenly making huge strides in improving your life and finances. 

As you move up to baby step 4/5/6 you start to do them all at once, but you still have laser focus, as you set your retirement/college contributions on autopilot and then try and kill the mortgage. 

Whether you follow Dave's plan or a different plan, I really think that having A PLAN is key to financial success. You need to know where your money is going and you need to pre-plan where you want future income to go. 

I was reminded of how important this was today. We found out we may be receiving a small lump sum of money from an inheritance. For one hot second, we were like "SWEET! We can buy X and Y and Z!" We then came back to our senses and were like, "OK, so that will go towards the truck payoff. We will then be two months ahead on that and can move onto paying off our mortgage that much faster."

Because we already had a plan. We had already agreed that any extra money we have right now goes toward the truck and that after that we will be moving on to our plan to pay off the house in two years.

As excited as I was for a moment to splurge on some stuff we don't really need, here I am a few hours later even more excited to hit our goals that much faster. We're winning, we're staying focused, because we have a plan and it protects us from ourselves when we get distracted. 

---