*The Dave Ramsey 'Baby Steps' Thread*

[ThereYouSeeHer]

This thread is for those of us who are actively working or have completed the seven baby steps. Please let us know which step you are on, and any successes or struggles along the way!
​

Before Starting the Baby Steps
(Sometimes referred to as Baby Step 0.)

1. Create a zero-based budget.
(Give every dollar a name and protect your Four Walls first.)

2. Get current on past due bills.
(Catch up on any late accounts and continue to stay current.)

3. Do not acquire any new debt.
(Stop utilizing credit cards and loans like payday loans, 0% financing, balance transfers, consolidation loans, etc.)

The 7 Baby Steps
(Steps 1-3 are completed in order, one after another.)

1. Save $1,000 for your starter emergency fund.
(As quick as you can, get $1000 in the bank!)

2. Pay off all debt (except the house) using the debt snowball.
(Gazelle intense...no vacations and no eating at restaurants! Pay down your debts in order of smallest amount to largest.)

3. Save 3–6 months of expenses in a fully funded emergency fund.
(Generally, 3 months of expenses if you are a double-income family with relatively stable health and income. Otherwise, 6 months.)

3b. Save for a house down payment.
(To avoid Private Mortgage Insurance (PMI), down payments must be 20% or more of the purchase price. Your monthly house payment (including principal, interest, property taxes, homeowner's insurance, PMI, and HOA fees) should be no more than 25% of your monthly pay after taxes.)

(Steps 4-6 are worked on in order, but will continue simultaneously until complete.)

4. Invest 15% of your household income in retirement.
(Match beats Roth beats traditional.)

5. Save for your children’s college fund.
(Consider a 529 or ESA.)

6. Pay off your home early.
(You're almost there! Complete debt freedom is so close!)

7. Build wealth and give.
(Now you can really live and GIVE like no one else!)

 

[ThereYouSeeHer]

Motivational Quotes from Dave Ramsey

*Debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice.

*Life moves at the speed of cash.

*Normal is broke. Be weird.

*You can wander into debt, but you can NOT wander out of it. You have to get mad enough to make a change. You have to run like your life depends on it.

*I never met a millionaire who said, "I made all my money with airline miles." Rich people don’t fall for stupid credit card tricks.

 

[ThereYouSeeHer]

Reserved

 

[ThereYouSeeHer]

Starting this thread to keep myself motivated!

We started our debt-free journey many years ago, but always seem to fall back to Baby Step 3 (cash-flowing expenses without resorting to debt is hard and often involves using our emergency fund!).

Looking forward to re-starting 4 and starting 5 in the new year!

Step 1: Done!
Step 2: Done!
Step 3: In progress
Step 4: Anticipated 2023?
Step 5: Anticipated 2023?
Step 6: Done!
Step 7: Anticipated 2030??

 

[Dakota731]

I love his show! Great common sense advice for everyone!!

 

[ThereYouSeeHer]

It's the first of the month! Make sure your zero-based budget is set for November.

A budget simply tells your money where to go, instead of wondering where it went!

Zero-based means every dollar has a name by assigning it to a particular category. Your budget should 'zero-out' once every dollar has been assigned.

NOT Zero-based
Income
-Expenses
--------------
$500 leftover for whatever (you'll have no idea where this went at the end of the month)

Zero-based
Income
-Expenses
-$250 for savings
-$250 for fun
--------------
$0 leftover (your categories above may need to be adjusted throughout the month, but at least you started with a plan)

 

[ThereYouSeeHer]

FYI. Dave's annual Christmas Cash Giveaway and $10 Sale have begun!

 

[toesmom]

Motivational Quotes from Dave Ramsey

*Debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice.

*Life moves at the speed of cash.

*Normal is broke. Be weird.

*You can wander into debt, but you can NOT wander out of it. You have to get mad enough to make a change. You have to run like your life depends on it.

*I never met a millionaire who said, "I made all my money with airline miles." Rich people don’t fall for stupid credit card tricks.

Don't try to look successful, rather be successful

 

[hsmamato2]

I'm here to give you a boost b/c I like the basic reasonableness of the DR stuff.... I'm on step 6...till unexpected life events took over ,which made the building wealth (#7) an impossibility right now...however b/c we lived steps #1-6, we still can live well,and share with others- I can't imagine how life would look right now if I hadn't done those steps before "Murphy came calling"...

 

[ThereYouSeeHer]

I'm here to give you a boost b/c I like the basic reasonableness of the DR stuff.... I'm on step 6...till unexpected life events took over ,which made the building wealth (#7) an impossibility right now...however b/c we lived steps #1-6, we still can live well,and share with others- I can't imagine how life would look right now if I hadn't done those steps before "Murphy came calling"...

Thanks! I agree. I find the steps reasonable, and it gives me something to work toward.

Great job on the work you've done! I feel the same way. I finally came to the realization that step 7 just isn't going to happen anytime soon. That said, I'm thankful our steps to debt freedom years ago are helping us navigate the bumps today.

But, for anyone deciding to make a change, it's never too late to start! It truly is a series of baby steps, over a number of years, that will produce results.

 

[ruadisneyfan2]

I love DR Baby Steps. We started at Step 1 in 2013 with way too much cc debt, a car payment, a home equity loan and a mortgage. Over the years, we paid off the cc debt, paid off the HEL, took on some Parent Plus loans, paid for trade school for our youngest, paid off the truck, bought another car and paid it off in less than 1 year, and paid off the mortgage last October. We have been 100% debt free since October 2021.

So I guess officially we are at Step 7 but we need to increase our retirement amounts. We are currently at 10% until we finish saving for some things first. I probably should do them concurrently but then the saving for big items would take so much longer. Right now I'm able to save up for things we need/want wicked fast. Faster than I could ever have imagined in 2013 when I started.

I have set aside funds for a new bedroom set that should be finished and ready to deliver around Christmas. I saved $26k for a new or new-to-us truck which will require more money than that to avoid a car loan but I took a temporary break from that. My goal was $30k but I think I'll need to increase it. We are avoiding looking at any vehicles because we don't need a new one urgently and dh is content to wait until demand/prices are not so outrageous. He knows if he sits in one, he'll break down and buy something. I swear they put kryptonite in new vehicles.

Right now I'm saving for Christmas and just finished saving to send my niece and her family on a Disney cruise. They stay with my father who has dementia M-F while she is his caregiver. They live 2 hours away and he is a lot to handle; she does it well and is very reliable. I'm so grateful for all that she does for him and even if I slipped her some extra cash to show my gratitude, her children wouldn't get that. Sure, they'd benefit indirectly but with a cruise, they all get it. It's such a great way to unwind and reconnect as a family. I think they really deserve it and I'm glad I can do it for them.

My next goals after the Christmas fund is to save more for the truck, then save for a cruise we booked for next October, then roughly $20k to remodel our master bathroom. This should take us til around September and then we can start maxing out our retirement funds and beefing up our savings/emergency funds.

 

[ruadisneyfan2]

Just wanted to add, we do still use credit cards but we always pay in full every month and have become strong enough to not ever charge more than we can afford. We became thrifty in order to pay off our debt and in the process, it just stuck and it doesn't feel difficult or leaving us feeling deprived.
While I agree that no one became a millionaire on airline miles, there's no reason to avoid those perks IF you are able to use credit cards in a healthy/safe way without charging more than you can afford to pay by the due date.

 

[ThereYouSeeHer]

I love DR Baby Steps. We started at Step 1 in 2013 with way too much cc debt, a car payment, a home equity loan and a mortgage. Over the years, we paid off the cc debt, paid off the HEL, took on some Parent Plus loans, paid for trade school for our youngest, paid off the truck, bought another car and paid it off in less than 1 year, and paid off the mortgage last October. We have been 100% debt free since October 2021.

So I guess officially we are at Step 7 but we need to increase our retirement amounts. We are currently at 10% until we finish saving for some things first. I probably should do them concurrently but then the saving for big items would take so much longer. Right now I'm able to save up for things we need/want wicked fast. Faster than I could ever have imagined in 2013 when I started.

I have set aside funds for a new bedroom set that should be finished and ready to deliver around Christmas. I saved $26k for a new or new-to-us truck which will require more money than that to avoid a car loan but I took a temporary break from that. My goal was $30k but I think I'll need to increase it. We are avoiding looking at any vehicles because we don't need a new one urgently and dh is content to wait until demand/prices are not so outrageous. He knows if he sits in one, he'll break down and buy something. I swear they put kryptonite in new vehicles.

Right now I'm saving for Christmas and just finished saving to send my niece and her family on a Disney cruise. They stay with my father who has dementia M-F while she is his caregiver. They live 2 hours away and he is a lot to handle; she does it well and is very reliable. I'm so grateful for all that she does for him and even if I slipped her some extra cash to show my gratitude, her children wouldn't get that. Sure, they'd benefit indirectly but with a cruise, they all get it. It's such a great way to unwind and reconnect as a family. I think they really deserve it and I'm glad I can do it for them.

My next goals after the Christmas fund is to save more for the truck, then save for a cruise we booked for next October, then roughly $20k to remodel our master bathroom. This should take us til around September and then we can start maxing out our retirement funds and beefing up our savings/emergency funds.

Congrats on your debt freedom!

I love everything you wrote. It shows the power of this process. Going from being overextended, to debt-free, to saving for purchases before they are needed, to taking care of your own emergency fund and retirement, to taking care of others!

We had to finally replace our vehicle this past summer, which is what took out our emergency fund. But, I'm glad we had enough to cover it, so that we didn't have to go back into debt. Let me be the first to encourage you to continue saving for that car! You're doing a great job!

 

[ThereYouSeeHer]

Just wanted to add, we do still use credit cards but we always pay in full every month and have become strong enough to not ever charge more than we can afford. We became thrifty in order to pay off our debt and in the process, it just stuck and it doesn't feel difficult or leaving us feeling deprived.
While I agree that no one became a millionaire on airline miles, there's no reason to avoid those perks IF you are able to use credit cards in a healthy/safe way without charging more than you can afford to pay by the due date.

Yes, this is such a tough one! We are completely debt-free and super strict with our spending. We still use cash for everything possible, and only have one credit card.

If we put something on the card, we make sure every penny is backed up with cash, and we pay it off in-full before the bill is even due.

Credit card marketing is designed to make the shopper feel like they are beating the system, giving them that shoppers high when they reap 'rewards'. Chasing short-term credit card benefits is often not compatible with long-term success. Even if a purchase was going to be made anyway, the user is still more likely to overspend and buy things sooner in order to meet certain spend and deadline requirements.

We decided awhile ago that we don't want to play in their games. Thankfully, this has led to no emotional attachment with our credit card nor a sense of urgency regarding its deals.

As Dave says, there is a reason credit card companies (and most financial companies) have the tallest buildings in the skyline!

 

[ruadisneyfan2]

Congrats on your debt freedom!

I love everything you wrote. It shows the power of this process. Going from being overextended, to debt-free, to saving for purchases before they are needed, to taking care of your own emergency fund and retirement, to taking care of others!

We had to finally replace our vehicle this past summer, which is what took out our emergency fund. But, I'm glad we had enough to cover it, so that we didn't have to go back into debt. Let me be the first to encourage you to continue saving for that car! You're doing a great job!

Thanks! It's been a long road but unless we have some catastrophic event, we'll never go back into debt. Both of our jobs are very secure but if one of us did lose our job, we'd still be ok. The bills would get paid but the traveling and generous gifts would have to stop.

Other than cash for tips while on vacation, I never use it. I don't think I've had money in my wallet for years. Dh does because he feels more secure. For a while I kept a $20 in there for "just in case" which I'd occasionally dust it off and put it back, but it sat there for years and finally put it in the bank. I eventually stopped carrying an atm card also. I'm not a fan of those and feel more secure using a credit card. They get my money a month later, not immediately.

Maybe we're unusual but we don't intentionally spend more than we otherwise would because of our credit cards, but if we're going to pay for groceries, cell phone bills, gas, etc. anyway, we might as well receive the perks that it helps with in other areas. For anyone who struggles with trying to live below their means, and find that cc make buying stuff too tempting, then it's better to stick with cash.

My point is, we all should do what works for us. I don't go around chasing perks but they do accumulate and it helps with being generous. Over the summer, I also sent my niece and her family to stay at Universal for 4 nights. Using cc perks, their flights were free in both directions and I only had to pay $29 for their airport parking because that has loyalty points with free days.

You will find that once your children are completely independent, from a financial standpoint, life gets a LOT easier.

 

[ThereYouSeeHer]

Other than cash for tips while on vacation, I never use it. I don't think I've had money in my wallet for years. I eventually stopped carrying an atm card also. I'm not a fan of those and feel more secure using a credit card. They get my money a month later, not immediately.

Yeah, it's getting harder to safely carry enough cash around! In general, I also feel more secure using a credit card than a debit card just as a means of separation from my checking account.

You will find that once your children are completely independent, from a financial standpoint, life gets a LOT easier.

This. I am starting to figure out that until our children are past college age, there's not much we can do other than keep moving forward!

 

[FreeTime]

We just finished the last step on October 27th. Can you hear the debt free scream?

We do need to revisit retirement as during this journey I became self employed and haven’t been investing but did increase DH’s to make up most of the difference.

We are going to cover things over the next few months with cash that we have been putting off while paying everything off. Headstones for a few family members that passed in the last five years, down payment for a home account for our daughters (we have always told them we would not fund a wedding and would rather contribute to a house - they both say they would rather go to the courthouse and have a pig roast anyways so that works out), rehabbing bathroom, and going to Europe for the first time. We will do all of this very intentionally, with cash.

We do break Dave’s rule of not having a credit card. He says rewards are living off the interest of those that are suffering. But without our rewards card we would not be going Europe. Paying it off every month is key.

Good luck everyone.

 

[ThereYouSeeHer]

We just finished the last step on October 27th. Can you hear the debt free scream?

We do need to revisit retirement as during this journey I became self employed and haven’t been investing but did increase DH’s to make up most of the difference.

We are going to cover things over the next few months with cash that we have been putting off while paying everything off. Headstones for a few family members that passed in the last five years, down payment for a home account for our daughters (we have always told them we would not fund a wedding and would rather contribute to a house - they both say they would rather go to the courthouse and have a pig roast anyways so that works out), rehabbing bathroom, and going to Europe for the first time. We will do all of this very intentionally, with cash.

We do break Dave’s rule of not having a credit card. He says rewards are living off the interest of those that are suffering. But without our rewards card we would not be going Europe. Paying it off every month is key.

Good luck everyone.

That's amazing! Congratulations!

I love the Braveheart soundbite with each debt free scream. It gets me every time!

Looks like you have some thoughtful and fun purchases coming up. Best wishes and please keep us updated!!

 

[Dakota731]

Congrats to all! I wished they would teach these lessons to high schoolers! We taught our kids, but there are so many out there living way beyond their means. And it’s extra hard right now with this high inflation. I heard on the news last week that one in three Americans were late or missed paying at least one bill last month. It will probably get worse this winter, and with no emergency funds, some people are going to be in trouble. I’m thankful my dad was a frugal man and taught me well!

 

[ThereYouSeeHer]

Congrats to all! I wished they would teach these lessons to high schoolers! We taught our kids, but there are so many out there living way beyond their means. And it’s extra hard right now with this high inflation. I heard on the news last week that one in three Americans were late or missed paying at least one bill last month. It will probably get worse this winter, and with no emergency funds, some people are going to be in trouble. I’m thankful my dad was a frugal man and taught me well!

Agreed. This is one of the reasons I created the thread. I know it's hard out there, and I feel bad for others who are struggling. Hopefully, this can be a space to share knowledge, wisdom, and encouragement. It's easy to have bad habits enabled online, so let's change that!