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Baby Step 15

September 1st, 2013 at 03:24 am

Anyone who has listened to Dave Ramsey (insert evil or triumphant music here, depending on your proclivities), knows he suggests "baby steps" for paying off your debt.

As a reminder, his steps are:

1. Save $1000 for an emergency fund.
2. Pay off all consumer debt sans mortgage.
3. Save up 6 months of expenses.
4. Put 15% toward retirement.
5. Save for kids' college.
6. Pay off your mortgage.

The last time we were paying off debt - and now we're doing it again, but that was last month's biotch - we didn't follow his plan for the debt snowball (lowest balance to highest balance). We also didn't follow the debt tsunami (highest interest rate to lowest interest rate). We followed the "loans then lines of credit." DW and I figured it's easier to not ask for another loan (paperwork) than to leave a credit card alone (swipe! cha-ching!).

Fast forward to now. DW just bought a new car, made some home improvements, is buying some furniture, and loaned some money to DD2 and her DH for their new house home improvements. So, we have consumer debt again as well as our mortgage.

So, we're on baby step 15:

We're paying off her new loans at a good clip (yes, already): Baby step 2
We're saving up the emergency fund again: Baby step 3 (total: 5)
We're putting more than 15% toward retirement (baby step 4: total 9)
And we're paying down the mortgage (Baby step 6: total 15)

This is possible because the "great car compromise" included NOT buying another house. We aren't building that fund until baby step 15 (or at least through "9") is done. I think we've already got step 3 back in place, more or less. I still have the "float" and there is still quite a bit of "furniture money" in the checking account, so I'm not worried on those lines. I would like a bit more cushion, though.

We should be back on an even keel - only car and house, with full EF - before the end of the year, with both the car and house still being attacked quickly.

4 Responses to “Baby Step 15”

  1. rob62521 Says:

    As long as you are moving in the right direction, baby steps are fine and you are moving with caution. Good job!

  2. scfr Says:

    It's interesting to be a neutral observer on the whole love/hate Dave Ramsey thing. When I first heard about DR my thought was that his advice could be extremely helpful for people in debt, and I was glad he was out there for those folks. Because I wasn't in debt and was already working on what DR would call "Step 6" I realized that he wasn't going to be very useful for me so I've chosen to follow other financial figures (Clark Howard, Scott Burns, etc.) more closely.

    My only "quibble" with DR is the same one that I have with shows like The Biggest Loser: celebrating extremes (excessive debt followed by rapid payoff culminating in an on-air scream, or extreme obesity followed by rapid weight loss culminating in a beauty makeover and big reveal, etc.). We seem to have lost our appreciation for moderation.

    Sorry to digress a bit ... congratulations on getting things back on track so quickly!

  3. Wino Says:

    We were on BS 6 when DW decided to split her time between Dubai and the US. We got a chance to hire someone perfect for the job, and therefore pulled the trigger four months early to let DW leave during the hot summer rather than waiting until November. It's amazing how much difference four months can make to your plans.

    I still like listening to DR, especially the debt-free screams. I had well over $100K in debt and paid it all down. It was a great feeling. If I add DW's latest spree (since we still had mortgage debt), the total debt we will have paid off will be well over $300K, but that pay off won't be for at least another year, now.

    Retail therapy is real when one is in a clinical depression, and that's where I was only a few years ago. I wiped myself out financially and put myself very deep into the hole. I think that's why DW putting us back into debt was so strongly aversive to me last month. I just saw the whole mountain in front of me again, though this time, it's not much more than a rise in the road by comparison.

    As to Clark Howard, I listened to him for a while, but he isn't frugal, he's cheap. I don't want to live watching every penny. I prefer to earn more pennies by working harder, and not worrying about saving 8 cents on a $15 purchase. I can make more with similar effort by doing more at work. Think about it: Would you rather save $20 or earn $50? It's a no-brainer. That's also why I don't do the credit card reward chase. Too much work for too little gain. If I want to put in that much effort, I would be better off putting the effort into my job.

  4. SecretarySaving Says:

    I love DR and I follow his plan. It's worked well for me.

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