As some of you know, we’ve been following Dave Ramsey’s baby steps to get out of debt. It’s a seven step program to financial freedom and we’ve been drinking the kool aide since 2019 when our son was hospitalized with some pretty serious medical issues and we were totally broke and one of us had to work while the other stayed in the hospital with Gannon.
That really scarred me. When we encountered yet another serious hospitalization when Anders had meningitis as a 2 week old, we were in a much different financial situation with a nice cushion of cash in the bank. When Gannon was hospitalized for a week again later that December, it finally clicked for us that maybe we need to take a second look at how we are following the baby steps.
My biggest fear is another hospitalization in which Craig and I are forced to choose between work and being with our children during such a critical time. Not to mention the closest children’s hospital is about 2 hours away. Money spent on gas, missed work, cafeteria food etc. really adds up quickly.
So, in light of our semi bad luck when it comes to medical issues, we decided we would like to skip Baby Step #2 (pay off all debt) and move to baby step #3 (3-6 month emergency fund).
Baby step #2 still has about $24,000 in student loans and $50,000 in home remodel expenses. We are on track to pay off my student loans by about April this year.
It does feel good to know that I have enough cash on hand to wipe out my student loans but our priority is to feel safe and secure – that’s what this entire financial journey is about and this is what is going to make us feel that way.
I’m always somewhat hesitant to share our true financial numbers but I always appreciate when other people in the #debtfreecommunity share their real and raw numbers to give a more realistic picture of what their baby steps look like.
With our “fixed expenses” (expenses that are the same every month) $20,000 is what we have decided would make us feel like we could comfortably (and then some) live off of for 3 months if neither Craig or I worked. Now realistically, once we actually complete baby step 2 (paying off all of our debt) we will likely beef this up to about $35,000 to really meet the 6 months of expenses instead of the 3 months we have saved right now.
We are parking this cash in a high yield savings account with SoFi and earning 4.6% on interest which is about $75 a month. So I’m writing to celebrate meeting another baby step milestone…just in a little opposite order of what Dave would prefer.
You may be thinking to yourself, “Why is she sharing this?”
There are several reasons. One is that I’m very open and honest about our struggles with debt. I know what it’s like to be so deeply in debt you feel like you can’t breathe. I know what it’s like to spend every other week living off of a credit card. I know what it’s like to feel so down and I also know what it’s like to pull through on the other side. There is hope. Even if it takes years just like it is taking us years to dig back out.
I’ve also had dozens of people reach out and share how our story has inspired them to get their financial act together. Some have had questions about the program, some still share their milestones with me as they move through the baby steps which just makes me so happy.
So cheers 🥂 to baby step three, $20,000 is in the bank! Now back to baby step two – student loans, I’m coming for you!
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