Sunday, December 26, 2010

Checking in with the "baby steps"

I've recently started listening to the Dave Ramsey Show.  I've only had the chance to listen to the first hour because I podcast it and listen at work.  But he keeps mentioning the "baby steps" for financial freedom.  They look something like this:

Baby Step 1
$1,000 to start an Emergency Fund

Baby Step 2
Pay off all debt using the Debt Snowball

Baby Step 3
3 to 6 months of expenses in savings

Baby Step 4
Invest 15% of household income into Roth IRAs and pre-tax retirement

Baby Step 5
College funding for children

Baby Step 6
Pay off home early

Baby Step 7
Build wealth and give!

I have step 1 complete. Step 2 is where I consider myself to be even though the only debt we have is the mortgages.  But I believe this 2nd mortgage is what would be considered "unsecured" because we owe more than the house is worth.

I have step 3 started - we have about 2 months of expenses saved. We are also working towards step 4, but it's not at 15%.  I think my husband is putting away 6% and I've been putting away $200 in a Roth the past few months. I don't want to tell my husband to stop putting money into his 401k to pay down the mortgage, but I probably could suspend my IRA contributions for awhile, but the question is should I stop contributing to the IRA until the 2nd mortgage is paid off? What do you think? Also, should I take all but $1,000 of our emergency fund to pay off the 2nd mortgage?

No comments:

Post a Comment