Dave Ramsey Baby Step 3 Explained

 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

Moneyforthemamas.com

Keep your momentum going, it's tough, but you are now seeing some HUGE progress! So proud of you!

Dave Ramsey Baby Step Two Explained

 Ok, if you are here you are trying to get out of debt.

The first step was to save $1,000 for your emergency fund.

Make sure you are current on all of your bills...make sure you and your family are taken care of before you dive into this. You need to have FOOD, SHELTER, UTILITIES, and TRANSPORTATION. 

Next, you sit down and make a full list of every single debt you have.

Now, Step Two of Dave Ramsey's Baby Steps:

Now it’s time to attack debt with a vengeance using the debt snowball method. Pay off one debt at a time from smallest to largest, gaining momentum until you’re debt-free.

How Does the Debt Snowball Method Work?

The debt snowball method is a debt-reduction strategy where you pay off debt in order of smallest to largest, gaining momentum as you knock out each remaining balance. When the smallest debt is paid in full, you roll the minimum payment you were making on that debt into the next-smallest debt payment.

Here’s how it works:

Step 1: List your debts from smallest to largest regardless of interest rate.

Step 2: Make minimum payments on all your debts except the smallest.

Step 3: Pay as much as possible on your smallest debt.

Step 4: Repeat until each debt is paid in full.

Now, before you start arguing about the interest rates, hear us out. If your largest debt has the largest interest rate, it’s going to be a long time before you start to see a dent in that crazy balance of yours. But when you stick to the plan (without worrying about interest rates), you’re going to be jumping up and down when you pay off that smallest debt super quick. That excitement is what’s going to motivate you to keep working hard—all the way to that debt-free finish line. But more on this later.

Make a chart to put on the frig if you need to. Write yourself motivational notes. The term snowball here is exactly right! You want to keep up intensity as you pay off that smallest bill first, and then move to the next one... I got a second job, I sold stuff...everything I could to pay off quickly.

I still say the most important thing is to stop spending leaks!

Dave Ramsey Baby Step One Explained

 So I posted that I became debt-free using the baby steps by Dave Ramsey. 

Step one is so important!

 We all have emergencies...you get sick, your dog get sick...a flat tire... so take some of the stress out of the inevitable by saving up $1,000 that you never touch-strictly for an emergency! 

 Decide what quantifies an emergency...it's not buying that cute shirt because it's 50% off...or a once in a lifetime deal on a new car.  Make your own guidelines for an emergency. This could keep you from putting an emergency situation on a credit card and creating more debt that you need to get out of.

Here is how:

Start saving more money and spending less. You can save $1,000 quicker than you think—really. It just takes a little focus and some hard work. Try selling stuff, clipping coupons, saying no to extra expenses, planning your meals, eating out less, using or selling old gift cards, and downloading money-saving apps. The ways to earn or save $1,000 are nearly endless. Pick a few and get down to saving up.

For more free info see Dave Ramsey's website by clicking here

Got Debt?

 If you have debt, here is a way to help you get rid of it!

In light of the current economic situation, I would highly encourage you to curb your spending, or at least be more intentional.

I actually followed these steps and am debt free...even my mortgage!

We went to a local church and did the Financial Freedom seminar by Dave Ramsey!

It was a total game changer, and it works!

You can too!

1. Save $1,000 for Your Starter Emergency Fund.
2. Pay Off All Debt (Except the House) Using the Debt Snowball.
3. Save 3–6 Months of Expenses in a Fully Funded Emergency Fund.
4. Invest 15% of Your Household Income in Retirement.
5. Save for Your Children's College Fund.
6. Pay Off Your Home Early.
7. Build Wealth and Give.

Having the starter $1,000 emergency fund is essential! It is for WHEN, not IF you have an emergency...car trouble, medical issue, pipe leaking...we all get them!

This method is not hard to understand, you don't have to buy any program, you just use a tablet and paper like I did!

I was later in life when I started, so I haven't built wealth, but I absolutely do the giving.  So, if you are starting later in life, don't be discouraged, the majority of people at the seminar that we took several years ago were past 50.

May God bless you in this financial journey!

Click here for more free detailed info from Dave Ramsey's site.

See Dave Ramsey Solutions for more details.

Thankful for God's Provision

 

Our family took Dave Ramsey's Financial Peace Univeristy

back in 2011.

We've been working on becoming debt-free ever since!

 

And so today, I am thankful for the job the Lord provided for my husband

and I to clean offices to get extra money to reduce our debt.

This was actually an answer to one of my prayers.

Psalm 6:9

The Lord hath heard my supplication; the Lord will receive my prayer.

The work doesn't take a lot of brain power, but

it is physically taxing (esp. for me).

But, as long as I can do it, I will--it is helping us

reach our goal!

We are hoping to be debt-free by the end of 2014!

 

So, thank you Lord for the extra work you've provided for us

to reach our goal!

Also, thanks to Dave Ramsey for such a great program!

 

Colossians 4:2

Continue in prayer, and watch in the same with thanksgiving;

 

Free At Last! :0)

Before May is over, I wanted to hit a couple of highlights...

Our yard looks so lovely in this shot--I just love it!

The BIG news from the month of May???

We paid of our MORTGAGE!
Yippeeee!!!!!

We had a fun family bonfire to celebrate :)

We burned the rest of our payment slips :)

My husband worked a lot of hours to get that paid off!

No wonder he's smiling--all paid!!!

Brad has been learning some golfing tips from his grandfather,

and he gave us some pointers...

Bri turned out to be a natural!

Fun stuff!

(although Brad hit one clear back into our neighbors yard--yikes!)

We thank God for providing for us and allowing us to have a home...that's paid for!

And, we're one step closer to being debt-free!

It seems like we should have extra money right now, but we don't yet.

We have to save for the real estate/school tax bill due Sept 1st,

and for our Homeowners Insurance.

But, we're getting there!!!!

Can Christmas Be Done Without Debt???

It's the most wonderful time of the year! Truly it is! I love Christmas!

We get to celebrate the birth of the Savior!

But, somehow, the Lord Jesus (Who is the real gift!) gets overshadowed by stacks of presents. :(

Followed by stacks of bills in January...

But, it doesn't have to be that way. (Debt is a choice!)

 I just wanted to pass along a few holiday tips for you-to help you

stay debt free!

#1-KEEP CHRIST AS THE FOCUS OF CHRISTMAS!

A few ideas for doing this:

• Read the Christmas Story
• Set up a Nativity Scene (I had one especially for my kids when they were little also)
• Bake goods for some lonely neighbors (esp. elderly or single parents)
• Go caroling (either in your neighborhood or a nursing home-choose godly carols)
• Sing carols around the house
• Have kids do secret good deeds for family members (draw names)
• Attend church (esp. the Nativity play and the Contada)
• Make or buy Christmas cards with a spiritual message to send out
• Use and light an advent wreath

#2 KEEP TO A BUDGET

A few ideas:

• Have your plan in writing. Find out how much money you have to spend
• Write down the names of who you need to buy for-allot amounts for each
• Use a small expandable folder for your holiday money (think dollar store)

(Label each section with the person's name-and put the money for that person in it. Only take this with you when you shop-no credit cards. When the money is gone--you stop!) Oh-and put the receipts back in filed by person in case you have a return

#3 GIFT IDEAS

For Kids:

• Play kits-choose a theme such as: Dress-Up, Doctor, Chef, Grocer, Workman etc... Then, go

"shopping" in your closets, garage, thrift store etc.. and round up accessories to make the kit. Depending on your theme, bandanas, jewelry, shoes, boa, painter's cap, tupperware etc...

Be creative! 

• Books or books on CD (check amazon.com or auctions as well as the store)
• Piggy Bank (put a few dollars in to start them out)
• Homemade Play Dough and cookie cutters
• Puzzles
• Crochet Kit
• Christmas Tree ornament you make or buy (help them start a collection)

For Teens:

• Movie Tickets
• Picture Frame (perhaps filled with a photo you took of the recipient)
• Cell Phone Minutes
• Devotional
• Book
• Journal and pen
• Scrapbook supplies
• Board Game
• Calendar

For Adults or a Family:

• Popcorn Bucket filled with movie and candy
• Coupon for Babysitting or Petsitting
• Magazine Subscription
• Basket with pancake mix, syrup (or brownies, muffins etc...)
• Make a Gift in a Jar (instructions are easily found online)
• Make a photobook, calendar, or collage with meaningful pics
• Book (or a basket full of books from a thrift store)
• Gas Gift Card
• Photo Album
• Homemade Cookies or other Baked Goods (best gift ever!)

#4 DECORATING IDEAS

• One of the prettiest and inexpensive items I use for decorating is napkins!

I find red, green, or gold and use them on end tables, under decorations, at the dinner table etc...

• Use your own tree branches (lovely with glitter!) or pine/holly branches
• Dress up dinner napkins with a ribbon tied in a bow and holly or bells
• Have the children make place cards with a Bible verse
• Use Christmas colors in your food -as decorations!

Such as red cherry tomatoes and green broccoli on your veggie plate

• I buy floral bunches at the Dollar Store and cut them up and tuck the flowers on picture frames, mirrors, etc...
• USE WHAT YOU HAVE! If you have red balls of yarn-place them in a basket on a table
• Fill a green mug with candy canes tied with curling ribbon in red and/or green
• I use lots of pinecones (we have pine trees) they look great in baskets-and you can glitter them too!
• Candles always warm up the room (Walmart has great inexpensive candles in holiday scents)

PLAN AHEAD FOR NEXT YEAR!

Start in January-looking for ways all year to save up cash for Christmas...

• Start a Christmas fund in a Mason Jar with your spare change
• Put aside all the money you save with coupons
• Put $5 or $10 a week in your Expandable Coupon file
• Use the money you get back for Rebates
• Pay yourself when you resist an impulse buy
• Use food from your pantry and freezer -put the money you would have spent on groceries

in your Christmas Fund

A great resource is the book Debt-Proof Your Christmas by Mary Hunt

You can get lots of ideas there.

I hope that you and yours have a lovely, debt-free, Christ-centered Christmas!