The Baby Steps

So, you want to be completely debt free? The steps are simple. The execution is difficult because it involves telling yourself “no” a whole lot. You can do it, I promise.

I am a huge Dave Ramsey guy. I followed his program and it’s done wonders for me and my family. Here’s something a lot of people don’t know or understand about his program:

You don’t have to buy anything.

Seriously.

The first two years I was doing “the plan” Dave got exactly $0 from me. All I did was listen to the radio show, which you can do over the internet for free if there isn’t a local affiliate. I didn’t go through Financial Peace University until I had already completed Baby Step 2.

Wait, what?

There are seven (really, there are nine) Baby Steps that walk you through to retirement. Step 0 is to be current on everything.

1. Save $1000 as a starter emergency fund.
2. Pay off your debts, smallest to largest. Pay minimum payments on everything except the smallest, and absolutely freaking kill the small one.
3. a) Put 3-6 months of expenses away into a Money Market. This is your fully funded emergency fund.
   b) Save for a 20% down payment on a house, plus all closing costs and moving expenses, including all that furniture you want to buy.
4. Invest 15% of your gross pay into retirement accounts.
5. Save for your children’s education.
6. Pay off the house.
7. Put your former house payment into mutual funds.

Steps 0 through 3b are done in order, to the exclusion of all other steps. Yes, this means stopping the 401K while paying off Visa.

Steps 4, 5, and 6 are done concurrently. Step 7 is obviously started when the house is paid off.

That’s it. That’s the entire plan. No “buy this software!” or “attend this seminar!” required. I will tell you that there is value in going to FPU, and it’s well worth the money, but if you’d rather take the $199 (or $99 when you catch it on sale) and put that on your Capital One card, by all means do that. That’s pretty much what I did.