Long-term investing completes Ramsey Baby Steps.
Once you’ve completed the initial three Baby Steps in the Ramsey plan, it’s time to focus on building long-term wealth. Baby Step #4 involves contributing 15% of your household income before taxes to retirement accounts. Begin by maximizing your employer’s contribution to your 401(k), then move on to your Roth IRA. Any remaining funds should be invested in a traditional work-sponsored tax-deferred plan. Allocate your investment portfolio equally into four types of mutual funds: international, growth, aggressive growth, and growth and income. Seek guidance from an investment advisor, but remember that time is your biggest asset when it comes to investing.
While working on Baby Step #4, also tackle Baby Step #5 by starting your kids’ college fund using either a 529 college savings plan or an Education Savings Account (ESA). Remember that your retirement plan always comes first, and it’s okay if your kids’ fund isn’t completely full or if you decide to skip it altogether.
Simultaneously with Baby Steps #4 and #5, also work on Baby Step #6: paying off your home mortgage. Allocate any remaining funds after your retirement and kids’ funds to your house payments. This will save you time and interest, and most millionaires pay off their homes in an average of just over 11 years.
Finally, after completing Baby Steps #1 to 6, you reach Baby Step #7: sharing your wealth with others. Enjoy your hard-earned money by taking your family on vacations or treating someone to coffee.
