As part of the M-network series on the Dave Ramsey Baby Steps to Financial Peace, I am going to be covering the “unofficial” first step, nicknamed “Baby Step ZERO.” This is the jumping off point, and lays the foundation for the rest of the Baby Steps. Interestingly enough, it’s also not on the list over at Dave Ramsey’s site even though many of us who follow the Dave Ramsey plan consider it absolutely vital to success.
Baby Step Zero has three basic components: swearing off debt, getting current on your bills, and making the written budget. Before you start in on Baby Step One, you need to have these three things covered.
Make a solemn oath to never borrow again: no new debt! You won’t feel like you are making progress in Baby Step Two if you keep borrowing more! Or, as Dave says (in the middle Tennessee accent), “You can’t climb out of a hole when you are still digging out the bottom.” And the truth is, you won’t make any progress if you keep borrowing. Put away the credit cards, step away from the HELoC, and don’t borrow from family. Have a long conversation with the person in the mirror, and if you are married you might want to warn your spouse. Of course, it will work best if your spouse is on board with your plan and a willing partner … but that said, I made it work while dragging my hubby along kicking and screaming until he noticed he liked the results.
The second component is to get current on your bills. This does not include accounts already in collections (with third party collection agencies) but it definitely includes all the necessities. If you think you might not have enough to bring all your active accounts current at first, then prioritize them … but before you start on the official first Baby Step you need to bring all your active accounts current. If you have old accounts in collections and are receiving phone calls, ask them to validate the debt and mail you the paperwork so you can work them into your budget as a delaying tactic while you get your finances in order.
Which brings us to what I feel is the crucial key to success: the BUDGET! Some people cringe at the word “budget” so you can change its name to cash flow plan, spending plan, or debt battle op-order if you feel really punchy LOL The point is you need to write out where your money will go BEFORE it leaves your account. This is absolutely critical to accomplishing all the remaining baby steps. This will help you see what it will take to get current on your bills. This will be the key to determining how quickly you move through the remaining Baby Steps as well.
For me, Baby Step Zero happened all on one day: December 29th, 2006. Yes, I wrote it down and committed it to memory. It was the day I made the conscious decision to grab control of my financial life and wrestle our debt problems down to the ground. I wrote out a budget and got current on all the bills. I made the commitment to never borrow again. I knew hubby would dig his heels in on this last idea, so I started to solicit advice on how to bring him around to the debt free idea (it eventually took 11.5 months to convince him completely). By taking the plunge and knocking out Baby Step Zero, I laid the foundation for my current victory: paying off all of our consumer debt (Baby Step Two).