Here is a summary of the steps they recommend:
Step 1: Making Peace with the Past
How Much Have You Earned in Your Life?
This step involves looking into your past and figuring out exactly how much money has come into your life. Luckily my husband and I just received our Social Security statements. Combined, my husband and I have earned a total of $1,258,094.00! wow!
What Have You Got to Show for It?
This step involves figuring out your net worth. List all of your assets and subtract all of your liabilities. This will give you your net worth. My family's net worth is currently $393,500.00. This turns out to be 31% of our lifetime earnings! Much better than I had anticipated.
Step 2: Being in the Present - Tracking Your Life Energy
How Much Are You Trading Your Life Energy For?
The book asserts that "money is something we choose to trade our life energy for". "Our life energy is our allotment of time here on earth, the hours of precious life available to us. When we go to our jobs we are trading our life energy for money." Quite a profound idea! So, the first part of this step is to figure out the actual time and money that is required for you to maintain your job, and compute your real hourly wage. Basically you figure out exactly how many hours per week you give to your job, including work hours, travel time, getting ready time, decompressing time, work entertaining time, etc. Then you figure out exactly how much money you are bringing home each week after you subtract the cost of your commute, the cost of your work clothing, the (extra) cost for lunch or convenience food that working may cost you, etc.
For my husband, the computations look like this:
HOURS
work hours per week: 50
travel hours per week: 10
time buying work clothing per week: .5
decompressing from work time per week: 5
business travel time per week: 1
TOTAL Work Hours: 66.5
WAGES:
work wages (minus taxes) per week: $1,800.00
gas per week: $50
car wear and tear per week: $20
work clothing & shoes per week: $10
coffee at work per week: $5
extra lunch money per week: $20
paid lawn care: $6
business travel expenses: $2
work cell phone: $1
TOTAL actual Wages: $1,686.00
So, my husband's real hourly wage works out to be $23.50 per hour.
Keep track of every cent that comes into or goes out of your life.
This is the step that I am currently working on. I tried to do this several months ago and found it to be a real challenge, but I am going to give it another try.
I will keep you posted on the steps as I complete them.
This seems to be a good program to follow while you are doing Dave Ramsey's Baby Steps. Especially since I will be in BS2 for quite a while!
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