updated October 23, 2022

If you never heard of Dave Ramsey, I would HIGHLY recommend you click here to learn more about his Baby Steps to help you start saving for emergencies, paying off debt for good, and building wealth.

My purpose of this next set of blog posts is to break down the first half of Dave Ramsey’s Baby Step program for you, in my own words.

Baby Step 1: Save $1,000 for your Starter Emergency Fund

This first step is CRUCIAL. Seriously, I can’t stress this enough. You never know what life will throw at you. You want to make sure you have at least some cash stored away for these situations. Some situations may not accept a credit card and will only accept cash. And if you don’t have at least $1,000 stored away for this, you may be out of luck.

If $1,000 seems like a lot to you, don’t feel like you need to do this overnight. Depending on your situation, you can slowly build up to $1,000. I would recommend keeping a separate high yield savings account for this money. This will give you a higher annual percentage yield compared to the traditional savings accounts, which will help your money grow. Plus, it will also not tempt you to transfer it back to your checking account to use for purchasing goods.

Once we were able to save at least $1,000, we made a decision to save more. We found that for our peace of mind, we liked having at least 6 months of living expenses in our emergency fund. Most people recommend closer to 3 months, but your situation is different from everyone else. Find what works for you. But you should have at least $1,000 in your starter emergency fund.

Baby Step 2: Pay Off All Debt (Except the House) Using the Debt Snowball

So, debt SUCKS. Hard. If you want to truly live financially free, you need to pay off your debt. This means cars, credit cards, student loans, and whatever other personal loans you may have.

There are a few methods of paying off debt that read in my post, 3 Methods to Pay Off Your Debt. Dave Ramsey advocates the Debt Snowball method – starting from the one with the lowest balance, to the highest balance. This strategy seems to be best psychologically speaking. This is because you’ll be paying off debts faster at the beginning, which may help you stay on track to the finish line.

You put all your extra money into the lowest balance, while you pay the minimum balance on your other debt. Once you’ve paid off that lowest balance debt – which will be insanely fast – you continue on to the next lowest, and continue until it’s all paid off.

Baby Step 3: Save 3–6 Months of Expenses in a Fully Funded Emergency Fund

Congrats on paying off your debt! Now use the money that you were paying off your debt with, and put it back in your high yield savings account where you keep the $1,000 you stored from Baby Step 1.

Once we saved $1,000, and paid off our debt, we liked having at least 6 months of living expenses in our emergency fund. Most people recommend closer to 3 months, but your situation is different from everyone else. Find what works for you.

Baby Step 4: Invest 15% of Your Household Income in Retirement

You have a solid emergency fund saved up. You are free of debt. Now we can start looking towards the future, and we’re going to start building your wealth!

Dave Ramsey recommends putting 15% of your gross income towards your retirement. If you can’t put that much, that’s okay! Put as much as you can towards your retirement. Because if you are still working your full time 9-5 job when you’re in your mid-60’s, it should be because you love you job and you are choosing to do it – and not because you feel like you have to in order to keep yourself financially afloat.

There are many options to putting money towards your retirement. Your employer may have a 401(k) plan that you can contribute your pre-tax dollars from each paycheck towards retirement. If you’re an independent contractor or run your own business, you can open up an individual retirement account, such as a Roth IRA, and contribute to that as well. You can also invest in low cost index funds for the long term wealth growth as well. There are many options – do your research and find what works best for you.

Conclusion

These first 4 steps are what got us into a much better financial situation than we were at just two years ago. In 2019, we overspent, carried debt, and knew very little about investing. In just two years, our emergency fund is fully funded in our high yield savings account, we have paid off our debt, we have a savings rate of anywhere between 40-50% each month, and we put that money towards our retirement funds and our low cost index funds.

If this makes you feel overwhelmed about your financial situation, read my blog post on 3 Ways to Recover from Financial Mistakes. We’re all human, we all make mistakes. But it’s about how we learn and recover from this mistakes, that will make our future bright!

In my next blog post, I will go over the second half of Dave Ramsey’s 7 Baby Steps – saving for your children’s college fund, paying off your mortgage early, and building your wealth and giving.

Note: I am not a certified financial advisor/planner or a certified financial analyst or a CPA or an accountant or a lawyer. Remember, I am an allied health professional, just like you! This website/blog is for entertainment and educational purposes only. Please consult with your financial advisor(s) regarding your personal finance, investment, and tax matters. 

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Many people have at least some form of debt. As allied health professionals, our primary debt tends to be our student loan debt. But we have other forms of debt as well – car loans, credit card debt, mortgages, maybe even a personal loan. Debt is debt, no matter what. But there are some strategies to paying off your debt.

Before you read on, I would encourage you to list out all of your debt – what type of debt, your balance, the APR, and the minimum monthly payment. Use this data to compare it to these debt payoff tactics and see what works best for you.

When you see all your debt laid out in one place, it can be overwhelming to figure out how to pay it all off. Here are 3 strategies to outlined by ChooseFI in their Debt 101 blog post:

1. Debt Avalanche

The Avalanche method has you pay off your debts starting from the one with the highest interest rate, to the lowest interest rate. This strategy seems to be the most effective one mathematically speaking, as it eliminates your heaviest interest debt first. Most often, credit card debt will have the highest interest.

So you put all your extra money into this highest interest debt, while you pay the minimum balance on your other debt. Then once you’ve paid off that highest interest debt – and you’ll be surprised at how fast you’ll pay that off – you continue on to the next highest, and continue until it’s all paid off.

This will be challenging at the forefront, especially when you’re hustling to get the first debt paid off. But remember that you are working towards the goal of financial independence, and how paying off debt can help you achieve whatever goals you may have once you’re financially independent.

2. Debt Snowball

The Snowball method has you pay off your debts starting from the one with the lowest balance, to the highest balance. This strategy seems to be best psychologically speaking, as you’ll be paying off debts faster at the beginning, which may help you stay on track to the finish line.

So you put all your extra money into the lowest balance, while you pay the minimum balance on your other debt. Then once you’ve paid off that lowest balance debt – which will be insanely fast – you continue on to the next lowest, and continue until it’s all paid off.

This strategy is great to help you mentally speaking – you’ll be so proud of yourself for paying off these debts quick at the start, and I hope this would help you continue to keep up with this momentum.

3. Debt Hybrid

As expected, this method combines the two methods. You start off using the Snowball method by paying your lowest balance debts first, then taking the rest of your debts and organizing it so you start paying off the highest interest rate debts next. This gives you the best of both worlds – that sense of accomplishment that you’re paying off debt, followed by the best way to pay off debt based on the math.

If all of this sounds confusing or overwhelming, this is where I’d love you to help you. Click here to schedule your FREE 20 minute consult with me, where we can figure out together a plan to help you pay off your debt, change your relationship with money, and help you reach your financial goals!

To read ChooseFI’s Debt 101 article, click here.

Note: I am not a certified financial advisor/planner or a certified financial analyst or a CPA or an accountant or a lawyer. Remember, I am an allied health professional, just like you! I am a fan of personal finance. I am not affiliated with ChooseFI, and I am not being reimbursed by ChooseFI to promote their website. I am merely a fan of their work, and I want to share it with you all in hopes to help you reach your financial goals.

Thanks for reading my latest blog post! I use affiliate links to keep this blog and its content free for you, so I would be so grateful for your support by clicking below!

• StudentLoanAdvice.com was created to help ease your anxiety and take charge of your future by providing answers for optimal student loan management. Click here to reach out today!

Many allied health professionals choose this route to help pay off student loan debt. Student loan debt is one of the heaviest, if not the heaviest portion of our debt as allied health professionals. I have even partnered with StudentLoanAdvice.com, a company that can help you manage your student loans, and I know is a topic that weighs heavily on allied health professionals’ minds. So today, I’m going to briefly go over the new changes to the Public Service Loan Forgiveness (PSLF) Program.

The PSLF Program “forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.”¹

Key word here is qualifying. I mean, they say it THREE times in the sentence.

But this is important, because most allied health professionals will go and work for a non-profit hospital or government position for years, only to find out that they don’t qualify for the PSLF program. Currently, only 5,500 people have actually managed to do it successfully – which means over 95% of people who applied for PSLF did not qualify and were not able to have their loans forgiven!² That’s because up until recently, the qualifications have been crazy specific, and it can get confusing to make sure you meet every. Single. Qualification.

So in general, the three biggest qualifications include:

1. A Federal William D. Ford Direct Loan
2. Enrolled in an Income-Driven Repayment (IDR) plan
3. Make 120 payments under the aforementioned IDR plan²

So these were incredibly specific qualifications. HOWEVER, looks like these qualifications are changing under the Biden administration. As of October 6, 2021, the U.S. Department of Education (ED) announced that for a limited time, due to the COVID-19 pandemic, borrowers may receive credit for past payments made on loans that would otherwise not qualify for PSLF.³

However, in order to benefit from this change, not only must you have full-time employment, but your student loans either need to be a Direct Loan, or have been consolidated into the Direct Loan Program, or consolidated into the Direct Loan Program by Oct. 31, 2022.

Let’s go over these new requirements in more detail, as outlined by the Federal Student Aid website:

1. Full-time employment.
   “You must have worked full-time for a qualifying employer when prior payments were made.”³ If you work(ed) a couple of qualifying part time jobs, for at minimum 30 hours a week, this will also count as full-time in this regard. Since the PSLF program began in October 2007, you can only receive credit for payments made after this date. It is required that you fill out a Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application (PSLF form) for any time period in which you are looking to receive additional qualifying payments.
2. Loan consolidation.
   Look into what federal student loans you currently have. If you have: “Federal Family Education Loan (FFEL) Program loans, Federal Perkins Loans, or other types of federal student loans that are not Direct Loans,”³ you absolutely NEED to consolidate those loans into the Direct Loan program no later than Oct. 31, 2022.

The difference between the past requirements and the current requirements are that you don’t have to be enrolled in the IDR plan – past payments under any payment plan count! And previously you needed to have 120 qualifying payments, now any past ineligible loan payments can count toward those 120 total payments.

What did NOT change was the type of employment: you still need to be employed by the government or a qualifying non-profit organization. You also still need to work full-time. And your loans need to be consolidated into a Direct Loan.

But remember, this is TEMPORARY. If you have student loans, you need to jump on this ASAP. Because before you know it, the year will go by, and you will want to make sure that you can take advantage of this before time runs out.

(wow, I used the word “qualifying” a whopping 9 times in this post… I guess 10, if you count me just using it in this sentence)

References:

1. Public Service Loan Forgiveness (PSLF). https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service
2. It Just Got Easier To Have Your Student Loans Forgiven, from Millennial Revolution. https://www.millennial-revolution.com/build/it-just-got-easier-to-have-your-student-loans-forgiven/?utm_source=rss&utm_medium=rss&utm_campaign=it-just-got-easier-to-have-your-student-loans-forgiven
3. Public Service Loan Forgiveness Limited Waiver Opportunity. https://studentaid.gov/announcements-events/pslf-limited-waiver

Note: I am not a certified financial advisor/planner or a certified financial analyst or a CPA or an accountant or a lawyer. Remember, I am an allied health professional, just like you!

Thanks for reading my latest blog post! I use affiliate links to keep this blog and its content free for you, so I would be so grateful for your support by clicking below!

• StudentLoanAdvice.com was created to help ease your anxiety and take charge of your future by providing answers for optimal student loan management. Click here to reach out today!