My younger sister (who doesn’t believe in owning credit cards, and therefore, hasn’t built up much of a credit history at age 31), is a big Dave Ramsey fan and I’ve heard many others talk about him, both digitally (online) and analog (in person). So, I thought I’d take a look at his site http://www.daveramsey.com and see what I could glean in a 30 second glance. The first thing I lit on were the Baby Steps. Here they are listed below (directly from the website):
|$1,000 to start an Emergency Fund|
|Pay off all debt using the Debt Snowball|
|3 to 6 months of expenses in savings|
|Invest 15% of household income into Roth IRAs and pre-tax retirement|
|College funding for children|
|Pay off home early|
|Build wealth and give!
Invest in mutual funds and real estate
This is interesting – the first goal is to build up an Emergency Fund. It goes against what Suze Orman *used* to advise (she has since changed her tune, but more on that later) and it is a little counter-intuitive for me. I understand that it is harder to get credit, now, and that even those who are paying on time and don’t maintain a balance are finding that their card companies are cancelling their credit lines, so it makes sense that you would need to build your own emergency fund for “in case” instead of counting on your credit cards.
I’m just trying to gauge the practicability of waiting to pay of debt until the $1,000 is saved. At this point, we’d default on our settlements, so I think we’ll just continue on in putting a little aside each month into savings and work on building up the Emergency Fund while co-currently paying down our debt. It will be great to see how much we will have in savings three(ish) years from now when our debt is gone. I suppose I should set a goal.
What is your thought about Dave’s Baby Steps?