My Baby Steps: A Takeoff on Dave Ramsey's Personal Finance Advice

My "Baby Steps" is a takeoff on the wonderful list Dave Ramsey preaches to his readers/listeners. It's designed to fit my particular situation and my needs, so it may not be applicable for most people. In fact, I'm fairly certain it won't be. However, you might be able to take something from my list and apply it to your own situation.

As useful as Ramsey's steps are, I do not believe there is a "one size fits all" plan for personal finance. Educate yourself, take in lots of different ideas, and come up with a plan that fits you. This is my plan.

1. $1k in emergency fund
This step follows Ramsey's to the tee. Just like when dieting, you have to avoid at all costs situations that will lead you back to your bad habits. If you don't want to be tempted with fast food, make sure you have plenty of good food in your house at all times. If you don't, you'll find yourself at the McDonald's drive-thru window at the first sign of hunger.

The same is true with finances. If you are trying to rid yourself of debt and build wealth, you have to prepare yourself for the unexpected expense (car breaks down, you have a plumbing emergency, etc.). If you have an emergency fund saved for such situations, you won't have to rely on Mr. Credit Card to get you through. He is the enemy.

In short, this step keeps you from stumbling when you are trying to pay off debt.

2a. Invest 6% in 401k (or up to your company's match)
This is where I deviate from Ramsey's plan. He advises paying off all debt (except for mortgage) before saving for retirement. My take is, if you can afford to, do both at the same time. Each year you go without saving for retirement is one year of lost compounding interest. Essentially, what I am doing is paying about half of what I would like to contribute to retirement each month. I'll contribute the other half once I am completely debt free.

(Why am I doing 6%? Well, my company matches 50% of the first 6% I contribute from my paycheck. For example, if 6% of my paycheck was $100, that means my company would chip in $50 every paycheck. This is free money, and my frugality prevents me from turning down free money.)

When it comes to fixing our finances, we can all feel like infants.

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