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.
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It’s amazing how hard it can be to save $1000, especially if you have never been a saver before.