Since I've discovered Dave Ramsey, I’ve always been selective of which pieces of advice I follow. I agree with debt freedom and to timely pay what I owe to who I owe it to but everything else is debatable to me. It’s mostly debatable due to it not relating to my situation or perception of personal finances. More specifically, Dave Ramsey’s particular advice is not 100% practical or applicable for me.
Dave Ramsey’s Baby Steps include 7 steps that have been proven to get out of debt. However, 2 out of the 7 just don’t work for me. The first baby step, an emergency fund of $1,000 is a great, first start when you’re starting off on a debt elimination journey. For me, my fund tends to include a bit more due to the additional obligations I have or may incur. I’ve had a surprise $500+ escrow bill come up during the pandemic and it’s no fun paying a car note and an unexpected repair is needed, just to name some real examples applicable to my situation.
For baby step 2, pay off all debt except the house using the debt snowball, I love the debt snowball method. However, while I have the momentum and for my own peace of mind, I plan to wipe out all my debt in one go round. I don’t want to give any lender the chance to tack on any extra interest, fees, or special offers that could prolong payoff but that’s just me airing on the side of caution.
On baby step 3, save 3-6 months of expenses in a fully funded emergency fund, no qualms here. I plan to leave mine in a high yield savings account.
For baby step 4, save 15% of your household income in retirement, another one I have no issue with. I want to contribute more than 15% but I’ll have to check my contribution limits as there are several options I have to consider.
Baby step 5, save for your child’s college fund, and baby step 6, pay off your home early, are not applicable since I don’t have any children and I plan to pay off my home in an early step. When I do have children, I plan to use a 529 plan to help pay for higher education costs.
As for the final step, build wealth and give, I plan to do this step in addition to passing on my knowledge and experiences with hopes to inspire and inform.
Now, the less favored bit of insight from Dave Ramsey mentioned here. I acknowledge I am in a favorable position in my life and I am grateful and humbled by this fact. Unfortunately, this is not the case for all. There are millions of individuals who cannot meet their monthly financial obligations through no fault of their own (whether it be from job loss, company downsizing, etc.) because of the Coronavirus Pandemic. We’ve heard so many times, that what we are experiencing in this pandemic is unprecedented, well, as is the need for aid and relief. I saw no issue with the unemployment boost given to unemployment recipients and feel the same in regards to the economic relief (stimulus) payments. The only problem I have is with fraud and dishonesty being used to obtain these benefits/payments.
As far as what Dave Ramsey mentioned in the video, coming from a impoverished family and what I stated above, here are some additional reasons why I disagree with Mr. Ramsey’s perspective that $600 can’t be life changing.