My biggest departure from his advice is that I will invert steps 2 and 3 of his baby steps. Life experience has made me unwilling to forego a financial safety net even if this means delaying total elimination of my debt.
- Save $1,000 to start an emergency fund
- Pay off all debt using the debt snowball method
- Save 3 to 6 months of expenses for emergencies
- Invest 15% of your household income into Roth IRAs and pre-tax retirement funds
- Save for your children’s college fund
- Pay off your home early
- Build wealth and give
1. $1K Emergency Fund
I completed this step several years ago and I’ve never looked back.
2. 3-6 Months’ Expenses
I have roughly 9 months of living expenses saved and invested in something relatively high risk for an emergency fund. I also have 50% buffer on top of Ramsey’s recommended 6 month’s of expenses, so I feel reasonably secure. I don’t plan to add to this invested amount, but I also will not liquidate it to reduce my debt.
3. Debt Snowball
This is the step I’m currently working on. My modified Debt Snowball method entails paying down high-interest balances first, with the exception of small balances that would immediately improve my cash flow.
I created another post with more specific discussion of my debt elimination goals. I will capture my progress below.
|Group C Loan||7.0%||$3,156||$0|
|Group B Loan||6.3%||10,074||?|
|Group D Loan||6.0%||10,895|
|Group A Loan||5.3%||22,495|
|Weighted Avg Rate||-||5.3%|