Dave Ramsey UK

newtoinvest

Was trying to adapt Dave Ramsey's Baby Steps for the UK, here is what I came up with...

Baby Step 1 Emergency Fund £1000

Baby Step 2 Pay off debt (except Student Loans & Mortgage)
Snowball (psychological) or Stacking (financial)

Baby Step 3 Emergency Fund 3-6months essential expenses (approx £3-5k per person) To give a buffer and not end back in debt at high interest rates.

Baby Step 4 Ensure 15-20% gross income going to retirement fund
This can include employer contribution (e.g. Employer 8%, Employee 8% = 16%)

Baby Step 5 If on SLC Plan 2 - Potentially best to pay off student loan
Only if 1) expect to be earning above about £40k/year for a sustained period of time.

Baby Step 6 Save up for a deposit to buy a property
Buying property is generally a good investment but is not right for everyone, for example if moving a lot for work or living in London.

Baby Step 7a Overpay Mortgage
Baby Step 7b Invest.
Baby Step 7c Give generously to others
If you already own property overpaying your mortgage can be seen as a risk free investment and can be done alongside other investing (e.g. equities, buy to let or bonds). Should be able to give to others as building up wealth.

enthusiasticsaver

There are a few people on here following the Dave Ramsey babysteps. Check out babysteppers diary. Are you working on babystep 1 at the moment?

BabyStepper

Hi there

I also follow Dave R's babysteps and have adapted them slightly to my situation. We don't earn the same massive wages in the UK as people do in the States so it works a bit differently but overall Dave's is a good plan I think.

Before even starting babystep 1 you need to get on a budget and learn to stick to it. This is no small achievement in itself. Also make the decision to never use credit ever again.

Saving for a house deposit is usually baby step 3b, inbetween filling up your emergency fund and 4,5, and 6 that usually run together. I've also chosen to work these a bit differently, so I'll be doing 3 and 4 together as I don't want us to wait until our emergency fund is filled up before we start paying into pensions. Dave gives good advice about house deposits; 15 years mortgage and no more than 15% of your take home pay. Wish I'd known him when I got my mortgage...

Baby step 5 is saving for your kids' college. Is your thinking that you will pay down your own student loan in this step? I'd advise doing a lot of research around this as you will probably end up paying thousands you didn't have to and it will be no help in building wealth. If you don't have kids just skip this step (until you do).

Good to meet you. Hope you revive your thread, I'd love to hear how you are getting on with it all.

OnceUponATime

I'm new to the DR method but would love to know what others think of it... Also, how are you getting on with your adapted version of the baby steps?

BabyStepper

Hi OnceUponATime

My baby steps are going alright. Step 1 is a lifesaver and a revelation, having cash just sitting there really helps stop spending on the cards. Step 2 has become a combination of Dave and Martin's advice - pay off the smallest debts first vs pay off the ones with the largest interest rate/ deals ending soonest. Quick wins are very motivating and build confidence so paying a couple of small ones in full has helped me, but if you have lots of debt on high interest rates its probably best to pay those first.

Dave's thoughts that debt is not a maths problem, more a behaviour problem really makes sense to me. I've changed my behaviour and the debt is going down. All good.

How's things with you?

On_my_way

BabyStepper said:

Hi there

I also follow Dave R's babysteps and have adapted them slightly to my situation. We don't earn the same massive wages in the UK as people do in the States so it works a bit differently but overall Dave's is a good plan I think.

Before even starting babystep 1 you need to get on a budget and learn to stick to it. This is no small achievement in itself. Also make the decision to never use credit ever again.

Saving for a house deposit is usually baby step 3b, inbetween filling up your emergency fund and 4,5, and 6 that usually run together. I've also chosen to work these a bit differently, so I'll be doing 3 and 4 together as I don't want us to wait until our emergency fund is filled up before we start paying into pensions. Dave gives good advice about house deposits; 15 years mortgage and no more than 15% of your take home pay. Wish I'd known him when I got my mortgage...

Baby step 5 is saving for your kids' college. Is your thinking that you will pay down your own student loan in this step? I'd advise doing a lot of research around this as you will probably end up paying thousands you didn't have to and it will be no help in building wealth. If you don't have kids just skip this step (until you do).

Good to meet you. Hope you revive your thread, I'd love to hear how you are getting on with it all.

A lot of people in the US earn a lot less than those in the UK. 

charlotte1988

I follow these steps too, there are a number of support groups on social media etc.

I also added Baby step 0 - this entails getting all your 4 walls in order (overdraft, rent, bills etc) then I began the steps