Ok...step 3.
If you are here you have paid off all of your debt! Congratulations!!!!
According to Dave Ramsey's Method:
You will have more than $1k’s worth of emergencies in your life. That’s why one of the pros to Dave Ramsey’s baby steps is that he recommends going back and fully funding your emergency fund in step 3.
This refers to expenses, not income. And once you’re out of debt, your expenses will be lower.
That’s likely why it’s listed as step 3. It’s a lot easier to save 3-6 months (or more!) of expenses when you don’t have that many expenses. There are no cons to fully funding your emergency fund.
Since I took the course they also now talk about Baby Step 3b or the Secret Baby Step...
3b is when you rent while working the baby steps, but would like to own a home. So 3b is saving for your home. Dave would, of course, like everyone to pay cash for their home, but in today’s housing market, that isn’t very realistic.
Dave begrudgingly admits that you may need to take on debt to purchase a home. So 3b is saving for that downpayment, ideally at least 20% of the cost, so you don’t pay private mortgage insurance (PMI).
Yet, even better is if you only take on a 15-year fixed-rate mortgage. That’s his bottom line. So you may be in this step for two years or so. But in the long run, you will save SO MUCH in interest; it is well worth it!
I read this on the following blog about the Dave Ramsey Steps
Keep your momentum going, it's tough, but you are now seeing some HUGE progress! So proud of you!
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