January Money Diet – Baby Steps and Resources

Take baby steps during the January Money Diet

It’s Day #16 of the January Money Diet, and we’ve officially crossed the halfway mark! How has this spending break been going for you so far? Has it been harder or easier than you expected? We have such a great group this year, and I have SO enjoyed getting to know you and read your comments.

Good Money Books

We’ve been focusing a lot on how we manage our money, and I wanted to share two books that have been instrumental to me in developing new money habits. You can probably get either of these books at your local library.

The first book that helped me is “The Millionaire Next Door,” by Thomas J. Stanley and William D. Danko. The authors’ research and findings about wealthy people is utterly fascinating, and for me it opened my eyes to the fact that most people who enjoy financial freedom don’t spend a lot trying to impress other people. They drive reliable cars, for example, and make careful spending decisions about major purchases. They build real wealth, and tend not to fritter their money away.

The second book is “The Total Money Makeover” by Dave Ramsey. Dave is the founder of Financial Peace University, and I remember the first time I heard that phrase I took a deep breath and felt calmer. Financial peace…what a wonderful concept. I found his book to be both practical and inspiring.

Dave Ramsey’s 7 Baby Steps

As you’ve probably gathered by reading this blog, I like things that are simple. That’s probably why Dave Ramsey’s 7 Baby Steps appealed to me so much. Here are the steps he recommends taking to achieve financial peace, in this order:

Baby Step 1: $1,000 to start an emergency fund

Baby Step 2: Pay off all debt using the Debt Snowball

Baby Step 3: 3 to 6 months of expenses in savings

Baby Step 4: Invest 15% of household income into Roth IRAs and tax-advantaged retirement accounts

Baby Step 5: College funding for children

Baby Step 6: Pay off your house early

Baby Step 7: Build wealth and give!

Eliza’s Tiny Baby Steps

I would humbly like to add two steps to Dave’s. Here they are:

Tiny Baby Step 0.5:  Fund an emergency account with $100

Tiny Baby Step 2.5:  Begin a Vacation account (if you ask me, this is just as important as a retirement account!) and a Freedom account for large annual expenses, at an inconvenient credit union or bank with FDIC-insured accounts.

How About You?

Do you agree with these steps? If so, which step are you currently working on? (I’m currently trying to tackle Step #4.)

Do you have any of your own steps or tips for achieving financial stability to add to the list? And finally, do you have any good money books to recommend for solid financial advice?

Have a happy weekend, and I’ll have a new challenge for you on Monday.

Hugs,

The signature for Eliza Cross

P.S. You could win a deluxe Happy Simple Living gift box by participating in the January Money Diet. The box includes a $25 Barnes & Noble gift card, $25 cash, pantry staples like bean soup mix and organic quinoa, signed copies of three of my cookbooks, homesteading supplies like soap, candles and eco-friendly cleaning supplies, and much more.

At the end of January I’ll choose one winner from among everyone who comments–someone who has participated in this 31-day challenge with heart and soul and achieved good results. Good luck!

Photo:  RSPCA WOAW

 

About Eliza Cross

Eliza Cross is a full-time writer and the author of a dozen books about food and home design. She has been blogging about simplicity and sustainable living since 2006.

22 comments to January Money Diet – Baby Steps and Resources

  • Another fun book that has inspired me over the years is: Your Money or Your Life. It is old, but can still really open your mind.

  • Linda – thank you for that suggestion. I’ve added “Your Money Or Your Life” to my reading list! xo

  • Bethany

    I think a lot of people get overwhelmed at that $1000 emergency fund and thing they’ll never get there, so I encourage people to save by using the spare change method. Every bit of change I have goes in a jar. I’m signed up for Keep the Change so my bank account automatically rounds up any charge to the nearest dollar and deposits it into savings. And every time I don’t buy a work lunch when I normally would, I put that unspent money into my savings account. It adds up fast! I’m still working my way up to 15% retirement savings though – every time I get a raise I up my number by that same amount.

  • Hi Eliza,

    I love the Millionaire Next Door. I read it probably twenty years ago and just recently lent it to one of my clients, the daughter of a high-net-worth individual, because her spending was out of control.

    Thanks for your insightful posts!

  • Annette

    Just starting on all of this myself. . .love this post!

  • I’m with Linda – YMOYL really did it for me. The kicker was the exercise where you calculate your “real hourly wage” – totally horrifying!

  • Kimberly

    I am on babystep 3. Lost my job over 3 years which is frustrating that I can’t find another. Trying to do anything I can to make money.I am doing well with this no spending month and am going to try to make it a no spend year. We want a house with land and need to save a lot of money for that to happen.

    • Jennifer

      How awesome to be on Babystep 3 without having a steady income for 3 years! Way to go! Keep it up and look forward to that home with land 🙂

  • Lynn Louise

    Those books sound interesting and helpful. I am going to ask at the local library if they have them. I am loving this whole January Budget process. It really makes a person think about how spending (or not spending) money impacts our lives. I have gotten so many things done around the house (cleaning, sewing, organizing)because of all the helpful emails from Eliza. I wish it could continue all year too. Yesterday I went to the local Target and was pulled into the aisles that still have left over Christmas decorations and paper/bows marked down by 90%. I first thought “wow what a deal, 90% off, I gotta have this stuff!” But then I remembered this process and all the things I have been doing to be mindful of money. And I thought to myself “I already have all this stuff in excess up in our attic already. Why do I need more. Just because it is 90% off?” I left that store empty handed and happy knowing that I hadn’t wasted money on something that I didn’t need. I won’t miss the stuff I didn’t buy. But the money I saved will be used for the things that we really need. Taking the time to think about what I wasn’t buying made a big difference in how I felt about my hard earned money.

  • Lisa

    The Millionaire Next Door is a great book and I tell my college-age daughter all the time about how that book depicts her grandparents (my parents). They are cheap, not even thrifty, but cheap, and they are millionaires. While I have not read the book by Dave Ramsey, we have met all the steps, with step seven being buying real estate (hunting land). However, four years ago we went back down to one full time income and one part time, and now need to start back on steps 3 & 4. This blog is really keeping my mindful of evaluating each purchase I make to make sure it is purposeful and needed. Thank you!

  • Jennifer

    I have a confession. I went to Costco today and spent $153, all on groceries. I know we are allowed to buy food but I have been doing SO good eating up things in my pantry and freezer. I am promising not to go crazy like this for the rest of the month. I am actually having a blast doing this!

    I also have to admit that I am having a rough time right now with my relationship with money from a biblical perspective. I’m trying trust and rely on God and not my own means. I am finding the temptation for excess to be getting better everyday and finding more room in my life for happiness instead of things. A vacation account or retirement account isn’t going to do me any good if I drop dead tomorrow, yet I also want to be a good steward and technically have something similar sitting in an office escrow account. Oh so torn!

    I am tempted to start a funeral account that would be there for my kiddos but I am just not quite convinced how much to go beyond that. It seems kind of hard to have $8000 sitting in a bank account when there is so much good it could be doing in the lives of others. Such a journey but I am enjoying it and I will get there!

    I do have Step 5 done! (Which is thanks to my husband but such a relief for 6 children who will probably all decide not to go anyway!) I really would be excited to have Step 6 crossed off. What a big chunk to be able to use else where 🙂

  • Laura

    Oh man, I’m doing things totally backwards then! We have the 3 month savings account that I’ve refused to dip into to pay off our debt, and I just sent in the paperwork for our kids college funds, but still haven’t paid off our own student loans. Well, we paid off one of them, I will just use that payment to pay off our last one faster. Any other advice for me about how to get out of doing this backwards? Haha! By the way, I’ve been inspired this month to reschedule my hair appointment. It’s a small thing but I’ll save a little extra this month by letting my hair grow out just a little longer before I get it cut. 🙂

  • Steve

    I like the idea of the separate vacation account. I always used money from savings and it’ll help me be realistic about where I can afford to go.

  • Beth

    Great idea on the vacation account. I take my daughter on a trip each year and having the money saved in advance will make it even more enjoyable. I’ve set up an account today! Started Financial Peace at the beginning of the year and am excited to finally get the debt paid off. Thank you for your thoughtful and inspiring posts!

  • Tricia

    Some great ideas. I’m currently working on step 0.5 (emergency fund) and working on step 2 (paying down debt with snowball plan). Also have step 2.5 (vacation fund) started, especially as we have started to make reservations for a summer vacation. Our plan for step 6 (pay off mortgage early) is to sell the house/farm and move to an area that is less expensive to live in as well investing in green/eco-friendly options that are self sustaining for the new, smaller house.

  • Leslie Fielding

    I am loving this money diet! I especially like the idea about a vacation fund, that is something my family desperately needs. So far this month (and its’ only the 19th!!) I have $418 more in my bank account than I did last month at this time. I have been able to stick with it much better than I thought I would. Eating out was killing us! Now I find my kids LOVE to help make dinner – who knew?? I was cheating them out of some great family time and losing money too!

  • Catherine Godfrey

    Money diet going very well. We are currently working on Baby Step 1, but I like Eliza’s baby steps. I let my student loan get behind several months back & honestly for no good reason. My payment is really low & great interest rate I got it completely caught up this month. I went through a phase where I didn’t want anymore bills. LOL. I’ve learned some much in just a few short weeks.

  • Cindy

    Another good money book is called Money: Master the Game: 7 Simple Steps to Financial Freedom by Tony Robbins. It’s been on the NY Times bestsellers list since it was published in November.
    I agree with the baby steps listed, except 6. I’m not sure about paying the house off early. My financial adviser has said it could go either way for me. I’m going to ask him again when I meet with him in a couple of weeks and am also going to ask my accountant what exact impact it makes on my taxes to have that home interest deduction.

  • Lyn

    Loved Your Money or Your Life and The Millionaire Next Door. I am one of those people who never learned how to manage a budget because I never really had to – there was always someone there to bail me out – my parents, my grandmothers. Now, as I approach 50, I am paying attention. My kids have been my inspiration. I really want to model responsible decision-making for them, something we haven’t really done in terms of budgeting. We have ‘robbed Peter to pay Paul’ and now have too large a home equity loan. We are working hard to chip away at it. This month feels particularly productive in this arena. So cool.

  • Lisa F

    The first books that I read were: Your Money Or Your Life, Tightwad Gazette series and Dave Ramseys books. They were all helpful but the “baby steps” were beneficial! We eliminated all debt but the house and it felt amazing! We hope to be debt free within 5 years.

    As for extra steps, we added a Christmas savings account, after our fully funded emergency account. That was the best decision for our family.

  • Lisa F,

    I read Tightwad Gazette also! It was very inspiring. Sounds like you are on a great trajectory for improving your spending/building your net worth.

    Keep up the great work!

    Best,
    Laura

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