Dave Ramsey’s baby steps
Posted by admin on March 1, 2009
I have lived in debt ever since I was in college. Like most people in college I had many expenses and very little income so when I graduated I had $4,000 in credit card debt. Then I graduated and got my first job three weeks before I got married. Unfortunately no one told me that when you graduate from college you don’t get paid anything until you prove yourself.
Every time I have paid off my credit cards I would have some unforeseen expense that would put me back in debt. I had no concept of the emergency fund or actually using a budget. After a couple of years my wife and I started making enough money to save 5% for a down payment for a house. Which was good, but the closing wiped out our savings. Then a year later we were expecting our first child. I was able to save enough during the pregnancy to pay all of the doctor bills, but we would need a new car when the baby got here, and you see where this story is going.
No matter what we did or how we saved something would always happen and we would have to use our savings or credit cards for an emergency. Then one day I heard Dave Ramsey on the radio. It was the motivation I had needed to get off my butt and get in gear. I was able to take his Financial Peace University class with my wife and we began working the baby steps.
Dave Ramsey’s Baby Steps
- Emergency Fund of $1,000
- Pay off your debt using a debt snowball
- Save 3 to 6 months worth of expenses
- Invest 15% of your household income in IRA’s or 401K’s
- Save for college for the kids
- Pay off your mortgage
- Build wealth through investments and give
I don’t necessarily agree with the order of all of these, however I do agree with the first three. I think once you are in this position you can make your own decisions. Trent Hamm has a little different take on how to do some of these things in his article Should You “Debt Snowball” Directly into a Savings Account Instead of a Debt Payment?
I can say truly that Dave Ramsey has helped me and my family greatly by allowing us to work our way out of debt (we are almost home free) and getting us on a budget to save. I strongly recommend going to his site Dave Ramsey.com and reading some of his info to find out if this might be right for you. You do not have to take his class, you can do it on your own with his book The Total Money Makeover: A Proven Plan for Financial Fitness
Remember get on a budget, pay off your debt, and start saving so you can control your money and not let it control you.
