The first step in Dave Ramsey's 7 baby step system to get out of debt is often the most overlooked step.  Too many people skip over this first step because they are anxious to start paying off debt.  However, this Baby Step 1 sets the foundation for your Total Money Makeover.  This article is the second article in my Dave Ramsey Baby Step 1 series.  If you missed the first one, check out Dave Ramsey Baby Step 1 (Part 1).

Stop Borrowing Money

Baby step one revolves around saving a $1000 emergency fund.  But, if you just focus on saving the $1000 you are missing the point.  The $1000 emergency fund is just a tool to help you to stop borrowing money.  The main focus of baby step 1 is to change your relationship with debt forever.

When you start the Dave Ramsey Total Money Makeover, you need to change your relationship with debt.  You need to stop being a borrower and start paying off you debt.

To stop borrowing money, you need to stop using your credit cards, stop taking out payday loans, and stop financing purchases using store credit.  If you don't totally swear off debt, you will fall off the wagon.

To make sure that you don't fall of the wagon, you need to save the $1000 emergency fund.  This emergency fund is your insurance for when the expected unexpected expenses come up.  You know these expected unexpected expenses - car and house repairs, doctor bills, ect.

Baby step 1 is all about setting up your foundation for disciplined personal finance.  By putting yourself in the best position to not need to borrow more money you can proceed on to Dave Ramsey's Baby Step 2.

If you liked this article, please subscribe to my RSS feed.  This is part 2 of several articles taking a deeper look into Dave Ramsey's Baby Step 1.

Related posts:

1. Dave Ramsey Baby Step 1 (Part 1)
2. Dave Ramsey’s Total Money Makeover Baby Steps
3. 4 Steps To Change Your Relationship With Money Forever

Anyone who follows Dave Ramsey at all as probably heard of his baby steps.  Dave's Baby Step system is a step-by-step system to get out of debt and transform your financial life forever.  Unfortunately, most people just know the primary action for each baby step.   While accomplishing the primary action of a baby step is the most important thing to accomplish for that baby step, if that is all you are doing, you are missing out on a lot of what Dave Ramsey is teaching.

This article is going to cover ALL of Dave Ramsey's teachings for baby step 1.  If you would like to read an overview of Dave's baby steps, here is an overview that I wrote several weeks ago - Dave Ramsey's Total Money Makeover Baby Steps.

$1000 Emergency Fund

The primary action to accomplish in baby step one is to build a $1000 emergency fund.  Before you begin to dig yourself out of debt, Dave says that you need a limited emergency fund to break your addiction to debt.

By saving $1000, you will not have to borrow money to pay for life's little emergencies that will occur while you repay your debt.  By establishing an emergency fund, you will be prepared for the expected unexpected.

Here on The Debt Hawk, I call this the first step to disciplined personal finance.

If you would like to read more about why you need an emergency fund read this article - Why Do I Need An Emergency Fund?

What else does Dave Ramsey Teach About Baby Step 1

While saving $1000 emergency fund is the ultimate goal of baby step 1, there is much more to baby step one than is often discussed.

Get Spouse To Agree To A Total Money Makeover

If you are married, the first step to The Total Money Makeover is getting your spouse and children (if old enough) on board.  There is nothing more important to having success with The Total Money Makeover than making sure your spouse is also on board.

Dave talks all the time about money issues being the number one reason for divorce in the United States.  If you want to be successful with Dave's program, both you and your spouse has to want to follow the plan.

You have to agree on the goal of getting out of debt, cutting spending and living like no one else.  Without this agreement, you will never be able to complete The Total Money Makeover.  I 100% guarantee that you will fail.

Getting out of debt and saving money requires disciplined personal finance practiced by the entire family.  So, make sure you are both on board.

Related posts:

1. Dave Ramsey Baby Step 1 (Part 2)
2. Dave Ramsey’s Total Money Makeover Baby Steps
3. Dave Ramsey’s Holistic Approach to Debt Reduction