Over the past year I have been focused on my financial freedom. I have been following Dave Ramsey’s Total Money Makeover to do this.

I recently saw a billboard for Dave Ramsey and it said “Act Your Wage”. I laugh every time I see this, but it is so true. Our nation is in debt. Most everyone is in debt of some sort. I don’t want to be a statistic in that. So, I’m trying to take the steps now while I’m young to have financial freedom when I’m older.

So, I’ve decided to share with all of you the great things I’ve been learning and the steps I’ve been taking to become debt free and eventually–financially secure and wealthy.

Before even THINKING about getting rid of debt, Ramsey suggests obtaining a very basic emergency fund.

Baby Step 1: Save $1,000 as a Starter Emergency Fund

It is going to rain. You need a rainy day fund. Money magazine states that 78 % percent of us will have a major negative event in a given ten-year period of time. Car blows up. Transmission goes out. Get a pay cut. Anything can happen. So, what do you do about it?

Well, unfortunately, many Americans turn to their credit cards in times of emergencies and only worse their financial situation. Not a good idea.

This emergency fund isn’t for buying things–those heels will NEVER count as an emergency, I’m sorry. It’s not for going on vacation. No cheating.

A small start to having your emergency fund is to save $1,000 in cash FAST. Stop everything and focus.

Twist and wring out your budget, work extra hours, sell something, have a garage sale, but quickly get your $1,000.

• When you do get your $1,000, HIDE IT. If you keep the money handy, it will get spent. You can put it into savings account, but make sure that it’s not part of your overdraft protection.
• If you already have $1,000 bucks–great. If it’s in a retirement plan, get it out. If it’s in the stocks, get it out. If it’s in a savings bond, get it ou.

And what if you are on step 2 (getting rid of debt) and an emergency happens. Stop working on getting down your debt until you have that $1,000 dollars replenished again. Otherwise, you will gradually do away with this small buffer and be back to old habits of borrowing money for real emergencies.

I know this step is very simplistic. For some people, this is an instantaneous step, for others it’s the first time they’ve had enough control over their money to save it. Whichever category you fit into, pat yourself on the back for starting this first step to becoming financially secure.

Each week I post this series, I’ll also discuss common Money Myths so we can all start to expand our financial knowledge. B/c like having a healthy weight, 80 % of financial freedom is behavior, and 20 % is knowledge.

Money Myth 1: By co-signing a loan, I am helping a friend or relative.

Truth: Be ready to repay the loan; the bank wants a co-signer for a reason, which is that they don’t expect the friend or relative to pay.

The lender requires a co-signer b/c there is a very high statistical chance that the applicant won’t pay. So why do we appoint ourselves as the generous helper to override the judgement of an industry that is foaming at the mouth to lend money, and yet has deemed our friend or relative as someone looking for a place to fall, or at least a loan default looking for a new home.

We enter this situation on emotion. We “know” they will pay us back b/c we “know” them. Wrong. Parents co-sign for a young couple to buy a home. Why do they need a co-signer? B/c they can’t afford it. Parents co-sign for a teenager to buy a car. Why would parents do this? “So he can learn to be responsible.” No, what the teenager is learned is, if you can’t pay for something, buy it anyway.

So moral of the story: DON’T co-sign a loan. Most likely, your credit will be damaged and you will end up paying. Not always, but chances are good.

Do you have your rainy day fund?

Do you like this idea on doing a series on money/budget/debt/etc?