Expanded Baby Steps - Stolen from MYTMMO.com
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  1. #1
    Registered User Greebo's Avatar
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    Default Expanded Baby Steps - Stolen from MYTMMO.com

    Credit where credit is due - this is taken from the MyTotalMoneyMakeover forums, posted by 54regcab

    Ok we know Dave has a financial plan for us following 7 basic steps.
    However there are a few things "left out" if you did not attend FPU.
    So here goes the "expanded" baby steps.
    Feel free to correct anything I missed or that may be in the wrong order.

    0.1: Commit to NEVER borrow $$$ EVER for ANYTHING other than possibly a house.

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

    0.3 Do a written budget

    0.4 Temporarily stop all retirement contributions

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

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

    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)

    0.8 Get current on ALL bills

    1.0 Save $1000 In baby EF

    1.1 Chop up CC's (You have an EF now, no NEED to keep those CC's !!)

    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.

    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.

    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)

    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)

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

    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

    3.1 Start car replacement fund

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

    3.3 Start furniture or other non-essential stuff replacement fund

    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.

    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)
    Last edited by Greebo; 08-11-2008 at 02:05 PM.

  2. #2
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    how do you get to 0.3 if you can't get past 0.2?

    0.4 needs to be clarified. Hard to pass up matching contributions.
    ~Russ

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    Registered User Greebo's Avatar
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    Quote Originally Posted by rcannon View Post
    how do you get to 0.3 if you can't get past 0.2?
    If the spouse isn't on the same page, there are serious doubts as to whether you have any chance of pulling off the DR plan. It requires intense commitment from both members of a marriage.

    0.4 needs to be clarified. Hard to pass up matching contributions.
    The idea is you give up the matching for a short while to get out of debt as quickly as possible. The intention is to create intensity, and a little fear, because your safety net WILL be so small ($1k) and you will be giving up a little retirement funding in the process.

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    Quote Originally Posted by Greebo View Post
    If the spouse isn't on the same page, there are serious doubts as to whether you have any chance of pulling off the DR plan. It requires intense commitment from both members of a marriage. .
    I've already reached that realization.


    Quote Originally Posted by Greebo View Post
    The idea is you give up the matching for a short while to get out of debt as quickly as possible. The intention is to create intensity, and a little fear, because your safety net WILL be so small ($1k) and you will be giving up a little retirement funding in the process.
    I figured as much and I understand the reasoning.
    ~Russ

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    Moderator Ceashels's Avatar
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    Greebo and I committed to a modified plan. So we might not be "gazelle intense" but we are still committed to a plan. We have also met weekly if not more just to discuss any changes needed to the plan. It has helped us get on the same page, even though the page is not one from DR's book. It is a page we wrote based on DR's strategies.

    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.

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    Registered User 3tomboys's Avatar
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    I have read several of your posts and replies (Greebo & Ceashels). You have me really interested. I have just read the info posted. I am wondering if this is a one book thing or if it is some type of program that Dave Ramsay has. We have debt right now (some of which we just got, prior to joing FV) that I have put on a snowball pay down, but I'm really interested in what to do when some of these steps have been met. Thank you for any info you might be able to provide.

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    Registered User Greebo's Avatar
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    Quote Originally Posted by 3tomboys View Post
    I have read several of your posts and replies (Greebo & Ceashels). You have me really interested. I have just read the info posted. I am wondering if this is a one book thing or if it is some type of program that Dave Ramsay has. We have debt right now (some of which we just got, prior to joing FV) that I have put on a snowball pay down, but I'm really interested in what to do when some of these steps have been met. Thank you for any info you might be able to provide.
    Dave Ramsey has several books. Financial Peace talks about his own personal journey to debt freedom, while The Total Money Makeover is geared more towards educating on why living with debt is something to reject.

    Neither is mandatory reading to follow his plan, which is outlined above.

    The point of his plan, especially when you have debt, is baby steps. You learn to crawl before you walk, walk before you run. You do one step at a time, only one step at a time, and if your journey stumbles, you go back to the appropriate step and start over.

    Which steps do you have specific questions about?

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    ah, that clears something up for me.

    i couldn't figure out how i was going to fund a new car fund AND save 15 % to retirement at the same time on a 50,000 per year salary.

    car fund first, then 15%. got it. that's what i was going to do anyway.
    Last edited by ladykemma2; 08-11-2008 at 08:02 PM.

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    Registered User Greebo's Avatar
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    Ah well - I'm sorry, my bad - the "one step at a time" is for BS 1-3. After you have your fully funded emergency fund, then you work on 4,5 and 6 together - although in order, again. Now yes, a car fund comes before the 15% retirement, because a car is a more immediate need.

    But lets say you have your car fund. You then invest the 15% towards retirement. If there is extra in the budget, then you work on kids savings for college. Finally, if you've maxed out the kids savings for school, then you start paying extra on the mortgage. However, for many people, 4, 5 and 6 all happen simultaneously. 1, 2 and 3 are absolutely supposed to be one at a time.

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    Registered User 3tomboys's Avatar
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    Thank you for your response Greebo. I was reviewing the steps and although you can see I have debt it is in snowball with a goal of 2 years excluding the home. Like Ceashells commented this would be tweeked in our home (some of the steps). We have not read any of Dave Ramseys books, but have put several of the things he has on his list to work in are lives over the last 21 years. We have achieved many of these steps over the years, not exactly in the order he has listed and still have some steps to achieve but I am a planner and would love to start looking into what can be done to maximize retirement savings on are own after are steps are reached. We have 3 teenage daughters that will all graduate from high school within the next 4 years and before we know it we will be empty nesters. I don't always want to wait until tomorrow I know there are things my husband and I would like to do in the early years after the girls have left and I would like the money to be there when the time comes. We do have a financial advisor that we are very happy with and does not hound us to do what he wants, he lets us be an involved party on the steps to take (his main focus over the years has been retirment savings). I guess what I am trying to find out is does Dave Ramsay have advice (books,tapes,etc) on how to pursue future savings/retirement goals after the debt is paid off. I know I have sometime to prepare for retirement and the things we would like to do, but I don't want to look at my accounts a few years from now and think if only I had planned something differntly or not done something that would have helped achieve these goals. Thank you again for your response to my previous question. I would have responded sooner but my alotted 15 minutes on the Internet at work had been maxed for the day!

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    Registered User Cricketlegs's Avatar
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    This is where I have problems. Even though I am not yet 40 I do have 2 kiddos in college. One JR and the other a Freshman.

    I can't do all the other stuff and then SAVE for college.

    College is here and has been here way before I found Dave.

    All I can do is follow the steps

    We are current on bills

    We have our EF in place

    We are on the snowball......still

    But saving for retirement--my dh already had his 401k going before Dave and his employer add to it too. It is money we never see so we DO keep it going.

    Maybe that is bad BUT hey we are about to be 40! We don't have mch retirement at all so we will continue on with it.

    We are already buying our own house but with insurance and taxes we pay $553 on a small 3 bedroom 1 and 1/2 bath brick in a nice hood. I have NO plans of moving while we have debt and kids in college. We pay less than rent, that would be insane. We are losing kiddos, not adding them.

    I think that Daves plan is GREAT but you have to tweak it to make it work your life.

    My debt payoff is in great shape by the way and soon I can start saving my 3-6 living expenses account.

    I am waiting to see what dhs raise will do to our bottom number.
    Last edited by Cricketlegs; 08-11-2008 at 10:56 PM.

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    since I signed up here we are doing pretty well

    "0.1: Commit to NEVER borrow $$$ EVER for ANYTHING other than possibly a house. (check)

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

    0.3 Do a written budget (check)

    0.4 Temporarily stop all retirement contributions (meh, I dont put much in anyway)

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

    0.6 Amputate "toys" (bikes, boats, ATV's etc) if they will keep you from completing the snowball within 12 months (I will part with my harley when they pry it from my cold dead hands)

    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) (should take less than 90)

    0.8 Get current on ALL bills (thats gonna take awhile)

    1.0 Save $1000 In baby EF (working on it)

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    Registered User Greebo's Avatar
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    Quote Originally Posted by 3tomboys View Post
    We do have a financial advisor that we are very happy with and does not hound us to do what he wants, he lets us be an involved party on the steps to take (his main focus over the years has been retirment savings).
    Good - a financial adviser who tries to rule your finances is an adviser who should be fired. Its YOUR money after all.
    I guess what I am trying to find out is does Dave Ramsay have advice (books,tapes,etc) on how to pursue future savings/retirement goals after the debt is paid off.
    He does, but on his radio show and in his books he doesn't spend as much time on it, because MOST people need the most help with steps 1-3.

    His general investment advice is:
    1) Invest into your 401k first but only up to the amount matched by your employer. If there is no match, skip to #2.
    2) Invest as much as possible into a Roth IRA, up to the federal limit (5k/yr in 2008) or the 15% mark, whichever you hit first.
    3) Go back to the 401k and invest up to the 15% mark.

    As for how to invest the money in the 401k and Roths, he suggests good growth mutual funds with SOLID 5 and 10 year track records. He looks for funds which have 5 and 10 year returns of 12% or better - although you may find that hard to find in your 401k.

    He says you should divide the money up 4 ways:
    25% in Growth mutual funds
    25% in Growth & Income mutual funds
    25% in Aggressive Growth mutual funds
    25% in International Growth mutual funds
    http://www.daveramsey.com/etc/cms/in...ContentID=4635

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    Registered User Greebo's Avatar
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    I know you know this stuff, but I want to respond to this for those who do not.
    Quote Originally Posted by Cricketlegs View Post
    This is where I have problems. Even though I am not yet 40 I do have 2 kiddos in college. One JR and the other a Freshman.

    I can't do all the other stuff and then SAVE for college.
    Yes, it does depend on where you start, but since you are a DR listener, I assume you know what he recommends for kids where parents aren't prepared for college, right? Go scholarship crazy!
    http://www.scholarships.com/

    But saving for retirement--my dh already had his 401k going before Dave and his employer add to it too. It is money we never see so we DO keep it going.

    Maybe that is bad BUT hey we are about to be 40! We don't have mch retirement at all so we will continue on with it.
    The reason (as you already know again) DR says stop putting money to retirement is two fold:
    1) Not putting money into retirement is supposed to create intensity in you to get the debt gone. Its supposed to make you afraid enough to act.
    2) Putting money into retirement earning at 6 or 8 or 12% is losing ground when you have debt at 15, 19, 21, 29%.

    We (and I mean all of us) have a mental tendency to separate retirement from debt, and types of debt from each other, but in reality, its all ONE pool of money - ours. Its like a big bucket. If you're pouring money into the bucket at a gallon a minute but you have holes in the bottom that let out a gallon and a half a minute, what's the point? So Dave teaches people to patch up the holes first, then put money in the bucket.

    I think that Daves plan is GREAT but you have to tweak it to make it work your life.
    And I agree - we made adjustments as well. Our BEF is $2,000, and we put another $200 per paycheck into it. I'd have been happy w/ $1,000 and not adding to it until the snowball was done, but Ceashels wanted it to keep growing, so we adjusted it. Likewise, we're putting money into various sinking funds or freedom accounts that *could* go to the snowball now, but we wanted some regularity in our month to month budget.

    As has been said before - DR's plan is like 12 steps for alcoholics. It's financial rehabilitation for the financially handicapped. It provides basic rules to live by so that those who never got an education in personal finance have clear guidelines to follow. People who have good money habits (and I was NOT one of them) don't need his plan.

    Of course, how you define "good money habits" is a different story...

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    Registered User Greebo's Avatar
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    Quote Originally Posted by Quadcam View Post
    0.5 Get current on all the basics (You MUST have Shelter, Food, Utilities, Basic clothing) (check)

    0.8 Get current on ALL bills (thats gonna take awhile)

    1.0 Save $1000 In baby EF (working on it)
    So you are not current on some debts?

    In your case, you should stop funding the BEF and put all available money to GET current. If you're late on CC's or other debt, the late fees are gonna kill you. Stop the bleeding first!

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