Expanded Baby Steps - Stolen from MYTMMO.com - Page 2
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  1. #16
    Registered User joyofsix's Avatar
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    5.0 Save for kids college fund

    6.0 Pay off house early

    7.0 Live like no one else since you have lived like no one else (investment ideas at this stage greatly appreciated, Dave doesn't go into too much detail on this stage)

    So we're down to #5, but feel like paying the house off is our priority. I'm not sure it's bad for kids to work their way through school. We also figure if we're not making a house payment that frees up that money to help them with college. Our home should be paid off by then. No plan should be gospel, IMHO.

  2. #17
    Registered User Michelle's Avatar
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    Our situation (filled out so I can see where we are in this):

    0.1: Commit to NEVER borrow $$$ EVER for ANYTHING other than possibly a house. (may not be practical when buying a car--otherwise, okay, I agree. And "possibly" a house? Who in this day and age can buy a house without borrowing?)

    0.2: Talk with spouse and get him/her on the same page as you concerning finances. (done)

    0.3 Do a written budget (done)

    0.4 Temporarily stop all retirement contributions (not going to happen at this time, and we didn't do it when we were in CC debt either. We only contributed up to what our employer's matched, but we never stopped altogether. Plus at many companies it's not just a matter of making a phone call to make adjustments any ol' time you want. In the last 5 companies that Dave & I have worked for, changes to 401K could only be made quarterly.)

    0.5 Get current on all the basics (You MUST have Shelter, Food, Utilities, Basic clothing) (done)

    0.6 Amputate "toys" (bikes, boats, ATV's etc) if they will keep you from completing the snowball within 12 months (didn't have any to begin with)

    0.7 Cut lifestyle (Cut CATV, Cellphone, Regular phone "extra's", Internet, Eating out, etc) and/or take second job if $1000 EF will take more than 30-90 days. (depending on income) (Baby EF is funded, cutting out the rest unnecessary at this point)

    0.8 Get current on ALL bills (done)

    1.0 Save $1000 In baby EF (done)

    1.1 Chop up CC's (You have an EF now, no NEED to keep those CC's !!) ($1K is too small of an EF for me to rely on that soley for emergencies. I won't be cutting up my CC. I won't be cutting them up even when I have 3-6 mos in my EF.)

    1.2 Get Health insurance NOW (chances of getting sick w/ major medical bills are larger than that of death), especially if you have children. (done)

    1.3 Get Life insurance NOW if you have considerable debt/your family couldn't make it financially if you died. Especially important if you have children !! Social Insecurity provides only a small amount of coverage if you have dependents. (done)

    1.4 Amputate cars that you can't pay off within 24 months (You have an EF to fix the "bondo buggy" if something should happen) (done for now...not sure about the near future as we will be buying a "new to us" car soon.)

    1.5 Consider raising insurance deductables to $500 or $1000 and dropping full coverage on paid for "bondo buggy" (You have an EF ya know) (need to check policy. Pretty sure this is already done.)

    2.0 Do debt snowball, paying all your debts from lowest BALANCE to highest. (done)

    2.1: You can take your first vacation since finding Dave if you can pay cash for it (no using the EF !!!)

    3.0 Save 3-6 months EXPENSES in EF (working on it)

    3.1 Start car replacement fund (when does this end? how does one determine when to move on in steps? after using it to replace a car?)

    3.2 Save up 20% for home purchase OR pay down existing mortgage to the point you can drop PMI. (done)

    3.3 Start furniture or other non-essential stuff replacement fund (same as 3.1: when does this end? how does one determine when to move on in steps?)

    3.4 Move up in car if you still feel the need to (must pay cash for it) (one of our cars is 11 yrs old and about to die...we'll be buying "new to us", and there's no way we'll be able to pay cash for it--not the same as moving up when one already has a car, but I'm not going to buy a beater car and then save until I have enough money to buy a car outright. It's just not practical IMO--not for us anyway.)

    4.0 Start contributing 15% of your paycheck to retirement. (done)

    5.0 Save for kids college fund (Not sure how I feel about this one. I think I agree with Suze Orman's recommendations more than DR's. Need to research more thoroughly)

    6.0 Pay off house early

    7.0 Live like no one else since you have lived like no one else (investment ideas at this stage greatly appreciated, Dave doesn't go into too much detail on this stage)

  3. #18
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    Quote Originally Posted by Ceashels View Post
    Is your spouse committed at all to the idea of saving money and giving up a few things now so she can have more later?
    Can you modify DR's plan to better meet her security needs? It might take a little longer to reach the final goals but if the 2 of you can work together on it .... life is easier and the goals will get here faster.
    Loves the idea of saving money. Apprehensive about the idea of paying down debt at an accelerated rate... expanding on this a bit now that I think about it...maybe my snowball is too agressive?

    I think she would rather keep the life style of spending freely to a point. I'm not saying spending lavishly but more like, not have to think about buying a $25-50 item.

    I really don't know how else to explain it.
    ~Russ

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  5. #19
    Registered User TheRootedNomad's Avatar
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    We are working 3,4,5, & 6 simultanously.

    3) I think that having 3 finished first is a good idea and we were done but have decided to increase the amount we consider a completed EF from 3 months to 6 months. (When we hit that we will probably shoot for 8 months and then a year) We don't see this as a huge rush though as neither if us see storm clouds on the horizon and either of our incomes could bare bones us if we had to go EXTREME.

    4) There is 16% going into my 403b and DH has about 10% going into his. There are a lot (Think 19% to health insur.) of deductions coming out of his check so as not to make him cry when he's sees his check we are upping the % 1% at a time every few months. We also have some small investments. (Laddered CDs are currently part of the EF)

    5) I tend to agree with joyofsix here.
    "So we're down to #5, but feel like paying the house off is our priority. I'm not sure it's bad for kids to work their way through school. We also figure if we're not making a house payment that frees up that money to help them with college. Our home should be paid off by then. No plan should be gospel, IMHO."
    We are putting aside some but it is not a main focus.

    6) Paying off the house. I throw whatever doesn't get allocated elsewhere here. I would like to up the intensity but it isn't realistic at the moment.

    7) I'd like to see us here are a reasonably young age. We are behind with retirement savings though and this may take longer if we new more about investing earlier.

  6. #20
    Registered User Greebo's Avatar
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    Quote Originally Posted by Michelle View Post
    0.1: Commit to NEVER borrow $$$ EVER for ANYTHING other than possibly a house. (may not be practical when buying a car--otherwise, okay, I agree. And "possibly" a house? Who in this day and age can buy a house without borrowing?)
    The average car payment in the USA is $320 a month. If you invested $320/month at 10% for 20 years instead of paying it on car interest, you would have accumulated $242,998.03, as opposed to paying $76,800 in interest.

    Hope you like the car!

    Here's a crazy plan. Pay your current car off, then keep putting that car payment into a savings account until you have enough cash in the account that, when added to the value of your current car, you can buy a nice, 2 or 3 year old used car, for cash.

    1.4 Amputate cars that you can't pay off within 24 months (You have an EF to fix the "bondo buggy" if something should happen) (done for now...not sure about the near future as we will be buying a "new to us" car soon.)
    DR says: Redirect snowball (debt or EF snowball) to savings for any certain major purchases coming up in the relatively near future.

    3.1 Start car replacement fund (when does this end? how does one determine when to move on in steps? after using it to replace a car?)
    When trade in value + car replacement fund = cost of new to you car.

    3.3 Start furniture or other non-essential stuff replacement fund (same as 3.1: when does this end? how does one determine when to move on in steps?)
    When you have sufficient income to replace any furniture or other non-essentials. The you stop building this fund. If you dip into this fund for anything, then you start building the fund again. The month to month budget will look different every month - it's a living document.

    I'm curious why it's "impractical" to pay cash for a short term beater while you save up for a better car? If your existing car is 11 yrs old, odds are, you're already driving a near beater anyway. Why go into debt, increasing risk, decreasing financial security, and throwing money into stupid tax (interest) for an object that will lose value over time anyway?

    Or is "impractical" a euphemism for "I just don't want to"?

  7. #21
    Registered User Greebo's Avatar
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    Quote Originally Posted by rcannon View Post
    Loves the idea of saving money. Apprehensive about the idea of paying down debt at an accelerated rate... expanding on this a bit now that I think about it...maybe my snowball is too agressive?

    I think she would rather keep the life style of spending freely to a point. I'm not saying spending lavishly but more like, not have to think about buying a $25-50 item.

    I really don't know how else to explain it.
    She can tighten up a bit, you can lighten up a bit, to quote Dave.

    Give her a blow money fund of $50-$100 a month, doled out weekly. Let her use that money for whatever she wants, and if she wants something bigger, she can save for it.

  8. #22
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    0.1: Commit to NEVER borrow $$$ EVER for ANYTHING other than possibly a house.err, keep a card for travel

    0.2: Talk with spouse and get him/her on the same page as you concerning finances.spouse, what spouse?

    0.3 Do a written budgetdone

    0.4 Temporarily stop all retirement contributionsadjusted to 100 dollars biweekly until 6 month emergency fund and new car fund is funded

    0.5 Get current on all the basics (You MUST have Shelter, Food, Utilities, Basic clothing) done

    0.6 Amputate "toys" (bikes, boats, ATV's etc) if they will keep you from completing the snowball within 12 months done

    0.7 Cut lifestyle (Cut CATV, Cellphone, Regular phone "extra's", Internet, Eating out, etc) and/or take second job if $1000 EF will take more than 30-90 days. (depending on income) done, i feel like I'm living on freakin air

    0.8 Get current on ALL bills done

    1.0 Save $1000 In baby EF [/COLOR="Red"]done[/COLOR]

    1.1 Chop up CC's (You have an EF now, no NEED to keep those CC's !!) i am keeping a credit card for travel, locked up in the safe

    1.2 Get Health insurance NOW (chances of getting sick w/ major medical bills are larger than that of death), especially if you have children. done

    1.3 Get Life insurance NOW if you have considerable debt/your family couldn't make it financially if you died. Especially important if you have children !! Social Insecurity provides only a small amount of coverage if you have dependents. done

    1.4 Amputate cars that you can't pay off within 24 months (You have an EF to fix the "bondo buggy" if something should happen) PIF

    1.5 Consider raising insurance deductables to $500 or $1000 and dropping full coverage on paid for "bondo buggy" (You have an EF ya know) done

    2.0 Do debt snowball, paying all your debts from lowest BALANCE to highest. done - didn't take long

    2.1: You can take your first vacation since finding Dave if you can pay cash for it (no using the EF !!!) done although trip to utah went overbudget had to dip into EF

    3.0 Save 3-6 months EXPENSES in EF in progress

    3.1 Start car replacement fund this is next

    3.2 Save up 20% for home purchase OR pay down existing mortgage to the point you can drop PMI. not applicable

    3.3 Start furniture or other non-essential stuff replacement fund not needed, although a fresh slipcover for the sofa would be nice

    3.4 Move up in car if you still feel the need to (must pay cash for it)

    4.0 Start contributing 15% of your paycheck to retirement. not done, recently changed to 100 biweekly at present

    5.0 Save for kids college fund no kids although i do want to be a licensed chemcial and drug abuse counselor for when i turn 65, as a fourth career maybe i need to save for my own tuition?

    6.0 Pay off house early done

    7.0 Live like no one else since you have lived like no one else (investment ideas at this stage greatly appreciated, Dave doesn't go into too much detail on this stage)
    Last edited by ladykemma2; 08-12-2008 at 09:09 AM.

  9. #23
    Moderator Ceashels's Avatar
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    Quote Originally Posted by rcannon View Post
    Loves the idea of saving money. Apprehensive about the idea of paying down debt at an accelerated rate... expanding on this a bit now that I think about it...maybe my snowball is too agressive?

    I think she would rather keep the life style of spending freely to a point. I'm not saying spending lavishly but more like, not have to think about buying a $25-50 item.

    I really don't know how else to explain it.
    This is where my blow money is spent. On eating out with friends or buying some steamed crabs for my Mom and me, or some yarn or fabric. Having a blow money fund though means that when its gone... its gone and I have to wait for the replenishing day. A $25-$50 dollar item every day or other day is a habit. Is the item really a neccessity? Should some gentle education on wants and needs be modeled, taught and learned?

    Perhaps you might need to back off the intensity for a little while so your wife can have some breathing room and still see that the plan is working. Then start making long term plans of what you two can do with the money when you aren't giving it away to someone else. This might be the gradual incentive needed to to get her onboard.


    Should I just delete this post and put it "What Greebo says." ?? ROFL
    Last edited by Ceashels; 08-12-2008 at 08:55 AM.

  10. #24
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    Quote Originally Posted by Ceashels View Post
    This is where my blow money is spent. On eating out with friends or buying some steamed crabs for my Mom and me, or some yarn or fabric. Having a blow money fund though means that when its gone... its gone and I have to wait for the replenishing day. A $25-$50 dollar item every day or other day is a habit. Is the item really a neccessity? Should some gentle education on wants and needs be modeled, taught and learned?

    Perhaps you might need to back off the intensity for a little while so your wife can have some breathing room and still see that the plan is working. Then start making long term plans of what you two can do with the money when you aren't giving it away to someone else. This might be the gradual incentive needed to to get her onboard.


    Should I just delete this post and put it "What Greebo says." ?? ROFL
    She doesn't spend that amount every day or even every other day. I'm just saying she doesn't want to think about spending it.
    ~Russ

  11. #25
    Registered User Greebo's Avatar
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    Quote Originally Posted by ladykemma2 View Post
    0.1: Commit to NEVER borrow $$$ EVER for ANYTHING other than possibly a house.err, keep a card for travel
    While I know hotels and car rental agencies will take a debit card, I also have a CC for business travel. It's also locked up.

    5.0 Save for kids college fund no kids although i do want to be a licensed chemcial and drug abuse counselor for when i turn 65, as a fourth career maybe i need to save for my own tuition?
    Yep, that's a plan!

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    ah, but that's the point. spending should make you think. and think hard.
    the 50 dollars i get for pocket money i am careful to think - is this what i want to spend my pocket money on?

  13. #27
    Moderator Ceashels's Avatar
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    I think having a cash envelop with her blow money in it will start to make her think then. Thinking about her money is that attitude change that she needs. If she doesn't think about it now... she isn't going to think about it later until she doesn't have it. Then she'll worry about it.

  14. #28
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    Greebo - apologies for the highjack.

    Will start another thread.
    ~Russ

  15. #29
    Registered User Michelle's Avatar
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    Quote Originally Posted by Greebo View Post
    The average car payment in the USA is $320 a month. If you invested $320/month at 10% for 20 years instead of paying it on car interest, you would have accumulated $242,998.03, as opposed to paying $76,800 in interest.

    Hope you like the car!

    Here's a crazy plan. Pay your current car off, then keep putting that car payment into a savings account until you have enough cash in the account that, when added to the value of your current car, you can buy a nice, 2 or 3 year old used car, for cash.


    DR says: Redirect snowball (debt or EF snowball) to savings for any certain major purchases coming up in the relatively near future.


    When trade in value + car replacement fund = cost of new to you car.


    When you have sufficient income to replace any furniture or other non-essentials. The you stop building this fund. If you dip into this fund for anything, then you start building the fund again. The month to month budget will look different every month - it's a living document.

    I'm curious why it's "impractical" to pay cash for a short term beater while you save up for a better car? If your existing car is 11 yrs old, odds are, you're already driving a near beater anyway. Why go into debt, increasing risk, decreasing financial security, and throwing money into stupid tax (interest) for an object that will lose value over time anyway?

    Or is "impractical" a euphemism for "I just don't want to"?
    First, I don't know if you're aware, but your replies often come across as condescending. Eg: "Hope you like the car!", and "Or is "impractical" a euphemism for "I just don't want to"?" I've noticed it when you reply to others, and especially when you reply to me.

    Impractical as in beaters require more repair work. Don't you have a newer/expensive car? Why aren't you selling it for a beater?

    My 11 yr old car is not going to be worth enough to bring in much in trade. It will bring in approx. $2400 according to Kelly blue book. So how am I going to pay cash for a $25K minivan (4 yrs old--even older than your 2 or 3 yr suggestion) w/$2400? If my car dies tomorrow, how am I going to come up with $24K in cash? Not practical for most people.

    *eta: both of my current cars are paid off.
    Last edited by Michelle; 08-12-2008 at 10:34 AM.

  16. #30
    Registered User Greebo's Avatar
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    Quote Originally Posted by Michelle View Post
    First, I don't know if you're aware, but your replies often come across as condescending. Eg: "Hope you like the car!", and "Or is "impractical" a euphemism for "I just don't want to"?" I've noticed it when you reply to others, and especially when you reply to me.
    I don't intend to sound condescending - but I do intend to dispel illusions.
    "Hope you like the car" is a DR quote. Is it condescending? I don't think so. It's smart aleckey, for sure, but that's kind of the point, isn't it? It's to illustrate what you're giving up by accepting the premise that a car payment is normal or necessary.

    As for the impractical question - its a genuine question. I hear too many people define wants as needs, excuses as reasons, etc. If there are genuine reasons why its impractical, I'd like to know why. If there aren't genuine reasons, then I'm sorry, but I won't participate in helping someone lie to themselves about their motivations.

    Michelle, as I've pointed out before, this thread is posted in the DR forum. If you don't want me to argue your reasons for staying enslaved to debt, don't argue against the DR plan within the DR forum.

    Impractical as in beaters require more repair work. Don't you have a newer/expensive car? Why aren't you selling it for a beater?
    Yes, and we've considered it.
    1) The DR guidelines say that if your car debt is less than half your income, and can be paid for in less than 18 months, the you can keep the car. We are within those guidelines.
    2) We have already taken the major loss in value on these cars. We could sell them tomorrow, be debt free in cars, and come out ahead a little in cash. But since they run just fine, get good mileage, and we can still pay them off pretty quickly, with a snowball that drops > 5% of the principle balance each month, the savings in interest will be fairly minor.
    3) We don't want to. That's the main reason. We've vowed never to borrow for cars again, but we like these cars, and we'll be putting money away into a car fund once the snowball is done to allow us to maintain this level of car for cash in the future.

    No illusions - we just don't want to - and since the stupid tax is already paid but for a couple hundred in interest, there's no strong motivator otherwise.

    If I lost my job tomorrow, those cars would be sold by the end of the week and I'd be driving a paid for beater. Wouldn't be the first time!

    My 11 yr old car is not going to be worth enough to bring in much in trade. It will bring in approx. $2400 according to Kelly blue book. So how am I going to pay cash for a $25K minivan (4 yrs old--even older than your 2 or 3 yr suggestion) w/$2400? If my car dies tomorrow, how am I going to come up with $24K in cash? Not practical for most people.
    Well, DR's rule of thumb is if the repair cost is more than the value of the car, replace it. But if you're driving an 11 year old car NOW, why not buy an eight year old minivan for now and bank the $500/month car payment you'ld otherwise make on a $25k car? A 2000 Honda Odessey (sp?) with 100k miles in fair condition is about 6k - to 8k for excellent condition, from a private party. I have friends who bought a 85 Oddessey for $2k, CASH, and the only thing wrong with it is a leaky power steering hose - easily fixed.

    If you BANK $500/month starting right now (money you would HAVE to pay on a car payment of 25k ANYWAY), then in 6 months your 2.4k car plus your 3k savings is almost there. In 10 months you've got $5,000. In 2 years (if you can milk the car out that much longer), you've got $12,000 cash, and your now 13 yr old car will still be worth about $1,500 in private sale.

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