We are on 'baby step 3' - I 'heart' Dave Ramsey

Here is a site I cannot recommend enough  - http://www.daveramsey.com/

Some of my readers may remember previous posts singing the praises of finally getting our family on a 'cash only' budget system via Dave Ramsey's Financial Peace University

It is an easy (well not easy to live out but certainly easy to understand) plan made up of 7 Baby Steps that are as follows.

AFTER you get a realistic budget (key word being realistic - you've got to include EVERYTHING - that is where we always got tripped up - we never really saved for Christmas, major car issues, vacations always ended up costing a little (or a lot) more than we originally estimated - etc) You can read more about budget planning on http://www.daveramsey.com/ - you follow these steps...

1. Get $1000 in the bank to start an emergency fund (it surprised me that the majority of Americans do not have at least this in the bank - scary!)

2. Pay down all unsecured debt via the 'debt snowball' - wipe out smallest debts first

3.  Put 3 - 6 months worth in the bank- only for MAJOR emergency (this is not the Cabo fund)

4.  Invest 15% of household income into Roth IRA's & pretax retirement

5. Invest 15% of household income into children's college accounts

6.  Pay off your house early

7. Build wealth and give

We thankfully started our class without nearly as much debt as was average and we started with 'baby step 1' already covered & then some.  We just pounded through 'baby step 2' - we paid off the one Credit Card we had a balance on as well as the only car we owed on - it took 5 very strict months, but so nice to finally have off our shoulders. I want to point out we paid every dime of our debt, we didn't negotiate or wiggle our way out of paying something we promised to pay - harder maybe, but it just feels better.  Now we are on 'baby step 3' with about one month in savings already so we kinda have a head start....we plan to be there before the holidays come around. (side note - when the holidays come around we have them in the budget this year - woot!)

Now this is about the point where (without our new big grown up plan) my husband and I would probably decide that his 99 Camry probably needs to be upgraded (which it does) - where we would have slipped up is we would have gone into a dealership and purchased (with financing) probably a $15,000 - $20,000 car - normal right? And the poor hard working guy is driving a 99 Camry - he deserves something significantly nicer - right?  Here is how we plan on keeping on track - we are going to buy him a new(er) car - but we are buying it cash, so it will be an upgrade - but only what we can save up (outside of our 3-6 month plan) plus whatever we can get for that car - our little side goal is to avoid a car payment ever again - and hey - going from a car worth maybe $2,500 to one that is worth about $6,000 is an upgrade right?

I could go on and on...

I think the hardest part for most people is really just getting through that 2nd step - once debt is gone (and you have a concrete plan to keep it at bay) it is so much easier to do everything else!  We look down the road and while we think it will take several months to get to step 4 - we already have a 'head start' there as well - we aren't investing 15% - but we are investing some & 15% will be no problem once we have a fully funded emergency fund - same with step 5 - we've got a head start there too....it isn't at 15% - but that won't be hard once all the ducks are in a row...and slowly but surely we can start to envision ourselves without a house payment even - man - that is cool to think about!  Ok, we've only been in our house for 5 years & we have a 30 year loan - so even with a hard core system to pay it down early we are still talking a decade plus - but a girl can daydream....

What on Earth would we do without a house payment????

As Dave says.... 'Anything you want'

Kate