Stuck in Baby Step 3

As most of you know, I am a big Dave Ramsey fan. If you’ve ever been through The Total Money Makeover book or a Financial Peace University course, then you know the Baby Steps that Dave teaches:

  1. $1000 in a savings account as a “starter” emergency fund
  2. Become Debt-Free (except the mortgage). Pay off all debts from smallest to largest using the Debt Snowball.
  3. Build up the emergency to a fully-funded 3-6 months of expenses.
  4. Invest 15% of your income for retirement (beginning with Roth IRA’s)
  5. College Savings
  6. Pay off the house early
  7. Build Wealth & Give!

Currently, our family is on Baby Step 3: saving a fully funded emergency fund of 3-6 months of expenses. And while we are very happy to be where we are (debt free except the house), it just seems like this step 3 is taking FOREVER.

One of the reasons it is taking so long is that last fall we refinanced the house, and paid all of our closing costs (and a little bit more principal) in CASH. This needed to be done because we were previously in a stupid sub-prime ARM loan that was getting ready to adjust. So we refinanced to a 15-year fixed. This completely drained us – causing us to backtrack and restart us at Baby Step 1. So a few months later, here we sit – roughly at the mark of 1 month of expenses in the bank.

Patience will pay dividends later – but man I’m ready to feel like we’re moving forward. I know we really are moving forward – but it seems like we’re stuck in the mud.

Oh well, enough whining.

If you’ve never read the book or attended the class – just ask yourself this question, “What would it feel like to not have any payments?”


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6 Comments on “Stuck in Baby Step 3”

  1. Steven Says:

    At least you are stuck on #3, we are stuck on 2, and will be for quite some time.
    Student Loans for ya.

  2. joetaxpayer Says:

    Well, congratulations. You have a 15 yr mortgage and no other debt, you’re ahead of most people. Dave has an interesting take on things. Why a Roth comes before a pre-tax 401(k) or IRA makes little sense to me. His order for the debt snowball also needs to be looked at. I paid my highest interest cards first to save the most interest, and reduce my debt fastest. Otherwise, his advice seems sound. Good luck to you.

  3. avin Says:

    way to go Jerm. I call that ”BTE baby” (be the example).

  4. jermtech Says:

    joetaxpayer: Obviously, Dave would advise anyone to take advantage of any “matching” contributions before doing the Roths. That’s free money, baby. Thanks for visiting!

  5. Mandy Says:

    Well you so know that I am I SOOO going to agree. It feels so good to be where we are, but it is so frustrating too! But I am confident we are going to make some hay this summer…Beans and rice baby! Oh hey Steven, good for you guys! Way to go!

  6. Eric H Says:

    Yeah, Dave admits often that some of his proposals don’t always make sense when just analyzing the numbers, but some of his recommendations are meant to encourage mental milestones. I’m on a modified Ramsey plan (he actually wouldn’t approve) and the debt snowball idea worked great for Christina and I. We are now debt free except student loans, but we are working on 2, 3, and 4 all at the same time, while thinking about buying a house (told you he wouldn’t approve).

    If you believe the government and most economists that the economy sucks because you don’t spend money, then it is reasonable to suggest that Dave is responsible for the recession (or slow-down, if you prefer). The man is giving Americans what they need, and I think it’s a tremendous ministry!

    Anyway, congrats on getting past #2, and good luck with your plan! Don’t get discouraged!

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