Dave Ramsey’s Baby Step 7 – Build Wealth and Give

I’ve written extensively about Dave Ramsey’s baby steps here on Money Q&A. You can see my overview of Dave Ramsey’s baby steps system in his book, The Total Money Makeover. There are seven baby steps that you should follow in order that will lead you to financial peace that he discusses in his book which is one of the Top Ten Personal Finance Books of all time that you should be reading. In this blog post, we discuss baby step 7. Dave Ramsey’s baby steps are…

Baby Step 1 – $1,000 Emergency Fund
Baby Step 2 – Pay Off All Of Your Debt With A Debt Snowball
Baby Step 3 – Fully Fund Your Emergency Fund
Baby Step 4 – Save 15% Of Your Income For Retirement
Baby Step 5 – Save For Your Children’s College Education
Baby Step 6 – Pay Off Your Mortgage Early
Baby Step 7 – Build Wealth And Give

The seventh and final baby step in Dave Ramsey’s The Total Money Makeover is to build wealth and give. Here’s a breakdown of baby step 7.

Dave Ramsey’s Baby Step 7 – Build Wealth and Give

Winston Churchill once said, “We make a living by what we get, but we make a life by what we give.” In other words, trying to make money so we can get by and afford the things we need and want is a normal part of living, but for a truly meaningful life, giving to others can be transformative.

The point of building wealth isn’t just to stockpile enormous amounts of money for your own benefit. Instead, building wealth should incorporate more charitable giving to help you leave a positive legacy in your community and the world at large.

Nobody will remember much about your investments when you pass away, but many people will remember how you donated time and money to needy individuals and organizations. I’ve also talked multiple times about why I’m a big fan of giving back to your alma mater. 

If this sounds like a legacy you’d like to leave behind, here are a few tips for building wealth and giving back to others who truly need it:

Giving Brings Happiness

Did you know that Harvard University researchers found that money can buy happiness? Interestingly enough, this psychological study found that increased rates of happiness were expressed primarily by folks who had given money to others, rather than using that money on themselves.

Even instances of giving as little as $5 to someone else showed a small boost of happiness and well-being for the giver, which means that giving money to others who need us could be a win-win situation.

If you feel inspired to give back as Dave Ramsey discusses in baby step 7, there are countless ways for you to get involved in your community. Whether it’s delivering meals on wheels or organizing a fundraiser with friends, finding creative ways to help the people around us is an excellent way of helping our own sense of well-being.

It’s also important to keep in mind that one of the best ways to improve our own financial situation is by boosting economic growth in our local communities. So consider ditching pay-it-forward schemes like buying coffee for the person behind you at Starbucks and instead support local entrepreneurs who are trying their hand at opening businesses in your community.

The bottom line is that if you want to feel happier and lead a more fulfilling life, consider ditching the old adage of “He who dies with the most toys wins” and instead focus on building wealth by giving back.

Find Charities to Support

Baby step 7 talks about giving money away too. Donating to charities is one of the many gifts that keep on giving. Not only can you access the psychological (increased happiness) and financial benefits (tax deductions), but you’ll also be leaving a positive legacy with some of your most cherished causes.

Whether you want to support education by donating to your alma mater, improve the quality of life for animals in need by donating to wildlife protection organizations or local animal shelters, or finance scholarships for lower-income children in your community to attend college, there are thousands of different charities that could use your help.

To determine which charities are the most legitimate and helpful for the recipients of their items and services, be sure to research different organizations on Charity Navigator before making a sizable donation. This website rates charities based on their financial efficiency (e.g., does more donation money go towards charity administrators or actual people, animals, and environments in need?), transparency, and accountability (e.g., do they publish records of their donations and administrator pay?), and available programs. 

Writing a Will

Baby step 7 talks about taking care of your family after you’re gone. Make sure that you have a will. You want to ensure that your heirs distribute your wealth exactly how you want. Many people seem to think they don’t need a last will and testament, but this legal document is crucial for ensuring your money is distributed exactly as you want it to be after your passing. With this document, you’ll be able to determine who will execute your will, rather than letting the courts decide.

Another advantage is that you can specify who gets what of your personal property and real estate holdings, which ensures you can give the highest value items and properties to people who you believe truly deserve them.

Trust & Will is a modern, online solution, and a trusted brand for the digital-first customer who wants to create an estate plan (last wills, trusts, etc.). Trust & Will helps people create a customized plan, including all of the necessary documents in as little as 10 minutes. With plans starting at $39, Trust & Will has something to help everyone with their estate planning needs. 

Writing a will can prevent a lot of hassle for your family and the deceased estate lawyer, as it can act as the instructions you leave to distribute your assets. The lawyer can follow your wishes as long as they are legally binding and not contested. Failure to provide a will can affect your loved ones and the distribution of your assets and wealth. You can read more on the importance of a will and why you need one below.

Why You Need a Will

You need a last will and testament as discussed in baby step 7 because it helps to ensure that your wishes are carried out. A last will and testament is a document that lets you specify who should inherit what from you after you die, as well as what charitable donations or other bequests you want to make.

This document also names one or more individuals (the executor) to carry out the provisions of the will, such as identifying your heirs and distributing your property according to your instructions. It’s important for everyone, not just those with substantial assets, to have some kind of estate plan in place. Otherwise, state law can dictate how any assets left behind after death are distributed and potentially who will take care of your minor children.

If there is no valid will at the time of your death, then intestacy laws of the state where you live will determine who gets what. These laws may not necessarily give your property to those who you would want to inherit it, such as close family members and friends. For this reason, a last will and testament that meets all the legal requirements is one of the most important documents that an individual can have in his or her estate plan.

A last will and testament can also help you reduce your tax liability. In addition, a well-drafted document helps avoid potential problems with relatives or others who might want to contest its provisions after your death.

Some people choose not to make a last will and testament because they incorrectly think they don’t own anything or that their assets are going automatically to their relatives upon their death. In addition, some people think that state intestacy laws are fair to everyone.

Some people also don’t want to pay the expense of a last will and testament or don’t think it’s necessary if their spouse is going to inherit everything anyway. But the reality is that there are many reasons why you should have a last will and testament, even if your spouse does inherit everything upon your death.

If you have minor children, for example, a guardian would need to be appointed for them, somebody who would care for them and manage their inheritance until they reach adulthood. And probate avoidance strategies, such as using trusts, can provide important benefits even though the law may automatically transfer property into the trust upon your death.

Although some people think that drawing up a will or other estate planning document is just an attempt to reduce taxes or settle future disputes over assets, there are many valid reasons for having one. The last will and testament can specify gifts of cash to charity, name guardians for minor children, leave the property in a way you find most equitable, regardless of how state law divides it, provide for the orderly distribution of your property after death, avoid probate, or any combination thereof.

There’s nothing wrong with wanting a better life for yourself and your family. Pursuing higher pay and better investments can bring you many benefits. But, once you attain a higher standard of living, it’s important to give back to those who truly need it.

Building wealth and giving back to your community is a popular money habit among the wealthy and middle class alike. You’ll not only secure a financially stable future for your family, but you’ll also develop a long-lasting, honorable legacy among your favorite charitable causes. By donating what you can to ensure other people, animals, and other parts of the world can thrive, you’ll be remembered in a much more favorable light than the other guy who hoarded all his funds until the day he died.

Which of Dave Ramsey's Total Money Makeover baby steps are you on?Click To Tweet

The Total Money Makeover and Dave Ramsey’s baby steps have helped millions of people get out of debt. Building wealth and giving to charity is one of the final key pieces of the puzzle.

Baby Step 1 – $1,000 Emergency Fund
Baby Step 2 – Pay Off All Of Your Debt With A Debt Snowball
Baby Step 3 – Fully Fund Your Emergency Fund
Baby Step 4 – Save 15% Of Your Income For Retirement
Baby Step 5 – Save For Your Children’s College Education
Baby Step 6 – Pay Off Your Mortgage Early
Baby Step 7 – Build Wealth And Give

What about you? Which baby step are you on? How do you like to build wealth and give to charity?