The Total Money Makeover was written by New York Times bestseller and nationally syndicated radio host Dave Ramsey. The book lays out a process on how to get out of debt and save for the future.
It consists of seven goals he calls “The Baby Steps” and the idea is to lay out a plan that is simple to understand while working through the process of financial independence.
Dave Ramsey’s Baby Steps
- $1,000 saved as a Baby Emergency Fund
- Use the Debt Snowball Method to eliminate debt
- 3-6 months of expenses saved
- 15% invested into retirement plans
- Save for kid’s college
- Pay off the house early
- Build wealth & give a bunch of it away!
Dave Ramsey’s Baby Steps are laid out in an order that should be followed. However, it has an ebb & flow. Like a car that normally moves forward, sometimes you need to slow down, stop, or even go in reverse.
When to push Pause
There are situations that will cause you to push pause on working the Baby Steps. It should be noted that these pauses are for a short period of time, certainly less than 9 months:
- Looming layoff
- Move to another location
When to push Stop
Other circumstances may knock you off track. This will cause you to stop working towards completing the current step and could knock you back a Baby Step or two:
- Car accident or major health issue
- Miscalculation on tax withholding
Baby Step 3b
By completing Baby Step 3 you have increased cash-flow and more options for what to do with your money. After all, you have more money to manage because so much of it used to go towards monthly debt payments. This may allow the creation for a subsection of Baby Step 3b. These are detours one could choose to make if the situation warrants:
- Build up a downpayment for a home
- Save up money to get out of a house that is underwater
- Open a small business
The stupid deck
Each pause will postpone reaching the overall goal of complete financial independence. However, we can be certain of one thing: Life is constantly changing. Recently I got frustrated because we had to push pause on Baby Step 5 in order to replace a stupid deck. That frustration can instantly turn into a feeling of failure, which could cause me to want to quit.
Remaining focused on working the plan, on reaching Baby Step 7, always brings me back in line. I didn’t fail, we only needed to take a break. I actually enjoy my new stupid deck. Would I feel the same way if I used debt and had to write a check for it each month?
Half the battle
Sticking to a financial plan is difficult. It takes a long time to build wealth, especially if debt is involved. Getting started and working the plan, even for a few months, will bring you so much closer to the ultimate goal than the average American who is content with two car payments and monthly credit card debt. However, that’s only half the battle. The other half is getting back in the game after being benched by an unexpected event. Don’t quit. Be encouraged by the fact that you are on the right path to taking care of your family, your future, and your financial freedom.