OK, done grumping for now, so I’ll move on to a more cheerful topic than the solid-white sky hovering over the region. How about a wrap-up of the M-Network’s series on Dave Ramsey’s Baby Steps plan? Mine is of course going to be a tad different from the two official wrap-ups at BeingFrugal.net and PaidTwice simply because I am a tad bit more opinionated on this subject LOL
First up was Patrick’s introduction to the series where he went over what exactly the baby steps are. Patrick will of course be the first to admit he is not a listener or reader of Dave Ramsey’s stuff, so I went to read it immediately when it was posted to check for errors LOL
Single Guy Money and I both covered “baby step zero” which doesn’t appear on too many lists. SGM tackled the specific “No More Debt” aspect, where I went wide and covered the three prongs of swearing off debt, getting current on bills, and making a budget.
Gibble at Gather Little By Little covered Baby Step One, which is the “beginner baby” emergency fund usually recommended to be $1,000. Gibble brings up an excellent point in his post: that $1,000 figure is NOT set in stone. Dave Ramsey says for low-income (under $20k per year) folks he recommends $500, and for large families (like Gibble and his six kidlets) or self-employed business owners will want more than just $1,000 between themselves and the financial abyss.
PaidTwice covers Baby Step Two which is the Debt Snowball (pay off all non-mortgage debt) and does a comparison and analysis of her snowflaking method and the eternal argument of lowest balance (DR’s method) versus the highest interest rate (usually mathematically best). She also gives a shout out since she wrote the post two days after I completed it.
Lynnae speaks from experience when she says how much Baby Step Three, a fully funded emergency fund, is a key component to financial security. She votes firmly on the side of having cash versus some form of a credit line, and also tackles the sticky questions of how much? and what constitutes a real emergency?
The DoughRoller takes the visual approach to Baby Step Four: Saving 15% for retirement. I’m glad he used charts LOL because just the numbers would have made my eyes glaze over and my head swim. DR (the blogger) is much more advanced in his investing knowledge than I am. I did really enjoy his charts of Dave Ramsey’s 15% versus the “conventional wisdom” recommendation of 10% towards retirement … I was planning to do the 15% anyway but that chart is absolutely convincing.
David over at MyTwoDollars doesn’t get nearly as technical for baby step five (saving for kids’ college) as DoughRoller did for retirement, and I have to admit I was glad LOL Instead, David get controversial and supports Dave Ramsey’s insistance that saving for the kidlets’ college funds is always after saving for your own retirement. I third that notion, and have told my son he is going to be on his own for his undergrad degree to give me time to get my own college done and then save up to help him with grad school if he decides to pursue a masters degree or higher. Of course, I made this promise BEFORE I found out how expensive grad school tuition is … so son is going to make out like a bandit if he takes me up on this deal.
Pinyo at Moolanomy volunteered to take on the sticky wicket of Baby Step Six: Pay off the mortgage and be completely debt free! I think this point has to be the single most controversial subject in PF blogging today. I of course say PAY THE MORTGAGE OFF and be FREE!!! But the numbers nerds insist that is losing money LOL since most mortgage interest rates are much lower than a majority of investment vehicles.
Plonkee got the truly fun one: Baby Step Seven which is live and give like no one else. This is where you have no bills other than utilities, food, and taxes so the rest of your income can go towards non-retirement investments, charity you believe in, and chasing your dreams now that you are financially free.
I actually know people on the MyTMMO boards who are at baby step seven, and they can travel at will and help out family and go back to college without worry. They ALL say they will never again go back into debt for anything in the world! They say they feel truly free, and cannot put any price to that feeling. They say to anyone and everyone: Keep working the baby steps because IT’S WORTH IT.