Indian version of Dave Ramsey’s 7 baby steps for financial success

Let me start by saying that I’m not a financial advisor nor an expert at this. But from what I understood, basic financial knowledge is not a rocket science and is essential for everyone.

Dave Ramsey is a well known financial advisor in the US and has helped numerous people achieve financial independence. His 7 baby steps are widely adopted among people around the world. Here is the Indian version of it.

1. Save ₹25,000 for Your Starter Emergency Fund

Dave Ramsey recommends to save $1000, which is around ₹72,000. But when considering PPP rate (purchasing parity power), it is approximately ₹25,000. That means something you purchase with $1000 in U.S will need only around ₹25,000 in India.

2. Pay Off Your Debts Except Home Loan

3. Save 6 Months Expenses for Emergency Fund

Make sure to save it where it is easily accessible. Lot of experts suggests to save this in a separate bank account or in liquid funds.

eg: If your monthly expenses is ₹25000, then save 1.5L in your emergency fund.

4. Invest 15% of Your Household Income in Retirement

You can save your retirement fund in

  • EPF
  • NPS
  • PPF
  • Mutual Funds
  • Stocks

Saving in EPF,NPS or ELSS mutual funds will also give you a tax benefit.

5. Save for Your Children’s College Fund

6. Pay Off Your Home Loan Early

7. Build Wealth and Give

My thoughts

  • A runway fund: An additional 1-3 months expenses in your primary bank account. This will make sure you don’t run out of budget and never have to touch your emergency fund for basic needs.
  • Saving for house: If you don’t have a house, it is better to save for at least the down payment. I would recommend doing this after step 4.
  • Retirement fund reliability: If you are just 25, saving 15% should be more than enough for your retirement but that might not be the case if you are already 40 or 50. In either case, make sure to do the math.

Like I said, I’m not a financial expert but I would be happy to help and provide small pointers for your financial success in case if you need help. You can DM me on twitter.

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