Before you actually start the Dave Ramey’s plan you have to declare war on debt. No more debt! PERIOD! Stop using credit cards, don’t borrow cash from your brother…no credit of any kind. If you don’t have the cash to pay for it, don’t buy it. You need a true commitment to getting out of debt and becoming financially responsible.
Dave Ramsey’s Baby Step #1 $1,000 emergency fund
Emergencies seem to happen to us when we are least prepared for them. Just when we think the monthly budget looks balanced, the car breaks down or a child gets sick. That is when we want to throw in the towel and say “forget it”. It’s like eating the whole gallon of ice cream with the piece of cake when you have stuck to your diet all day. Emergencies and unplanned expenses leave us feeling hopeless. Dave Ramsey’s solution to this is an emergency fund.
Baby Step #1 sets saving as a priority. Expect that unexpected events are going to happen. Things that you can’t foresee but “God Only Knows” may happen.
Don’t think this is the entire emergency fund that you will ever need. This is just to hold you over while to move onto Step #2. There will be a larger more permanent emergency fund established in Step #3.
So, how do you build your emergency fund?
• Make only the minimum payments on your debt until the emergency fund has been established.
• Cut your budget (no eating out or extras services)
• Sell unwanted items around the house using eBay, consignment shops or the like
This step may take you a few months depending on how much you are able to scrape up.
An emergency fund gives you a sense of security, a safety net, so that you can concentrate on other more important things and you are less likely knocked off course.