Once you have completed Dave Ramsey’s Baby Step #2 you are no longer normal. Normal people are broke and have debt! You have made great strides to financial freedom and you are ready to move on to making your money work for you.
Dave Ramsey’s Baby Step #3 is a Fully Funded Emergency Fund of 3-6 months of expenses. Think of this as a type of self-insurance. The $1,000 emergency fund was great when the car needed repair or the baby got sick. Now, you need to protect yourself from a loss of a job or major illness. This is not an investment so keep your emergency fund in a money market account or some type of savings account easily accessible. I know it’s not going to make money, but don’t look at it as an investment, think of it as insurance, a cushion sort of speak.