Dave Ramsey's baby steps

tiff

Just wondered if anyone here is following the Dave Ramsey plan (American financial expert)

His way is broken down into baby steps. Baby step 1 is to get current with your debts and save a $1000 baby emergency fund, baby step 2 is to get out of debt, baby step 3 is to increase your emergency fund to 3 to 6 months expenses, and so on. I think there are 6 steps.

He also believes in using cash envelopes to budget with. So you take your wages and give every dollar a name until everything is accounted for. Whatever is left is your snowball to throw at debt.

Im starting with cash envelopes for grocery and entertainment this month and just wondered if anyone else is doing the same? Also trying to build my emergency fund to £1000.

tanmu

we found out about Dave Ramsey in the last year or so of paying off our debts. We are sort of following his plan - though our 'cash' envelopes are virtual in that we assign every pound, but online, and then use different accounts for different things.

Because of where we had already got to in paying off our debts, we chose to finish paying them instead of starting the baby emergency fund. We have now paid off almost all of our debt, apart from a few hundred pounds of overdraft. We will then move onto baby step 3 of 6 months' worth of expenses.

He has been such an inspiration to us (we listen to the podcasts and have bought The Total Money Makeover boook), and his common sense approach is so refreshing - and contrary to everything we are taught to believe about spending and accumulating in today's society.

tiff

Hi tanmu, I listen to the show on his website too. Where did you buy the book? I disagree with some aspects of what he teaches, for example I dont believe in giving 10% of our income to the church, but I respect that he is a Christian and tithing is very common in the US. I suppose you apply the principles of his plan and take what you need from it.

I've been doing very well with using cash for groceries and entertainment, its really helped to keep those costs down seeing what I have available to spend. Everything else is done in my online banking, I have different accounts for Christmas, car expenses, emergency fund etc and standing orders pay money into those accounts each month. It is amazing, the last couple of times I've had to pay car tax the money has been sitting there waiting, before I would struggle to pay it.

We have a tiny balance on a credit card that will be paid this month. The only other debt we have is a loan taken out in 2008 pre DR over 7 years, we cant make overpayments so we will have to save the money in an account until we have enough to do an early settlement. That will free up £220 which will be great.

If anyone is interested in reading more about this, here's a link to the baby steps

http://www.daveramsey.com/new/baby-steps/

You can listen to his radio show here (beware of long commercials!)

http://www.daveramsey.com/radio/home/#archives-tab