Baby Step #1 is probably the most controversial of all of Dave Ramsey’s Financial Peace plan. There seems to be a constant debate whether or not $1,000 is enough in today’s world or if this part of the plan is behind the times.
According to the Dave Ramsey plan, $1,000 emergency fund should be enough to cover all most common emergencies. The amount is to stay this small to keep people uncomfortable so they will be more motivated to attack their debt and move on to the following Baby Steps.
With more than 70% of Americans living paycheck to paycheck, having $1,000 in the bank actually seems to be a step up if you think about it.
Rarely upfront ER costs, car repairs, house repairs, etc. exceeds the $1,000 emergency fund plus extra debt payments that can be held off until the emergency is solved.
If you have been following this blog since the beginning, you know that my family and I started this debt free journey after my husband unexpectedly lost his job. We were blessed to find employment within 3 weeks and committed ourselves to get out of debt since then.
The first year was pretty amazing. We were on fire. We were gazelle intense and we were making HUGE progress. We paid off over $40,000 by cutting our living expenses to the bare bones and throwing everything extra we made towards our bills.
However, there have been a few oh no moments that were definitely not planned. Life is like a box of chocolates right? These scenarios have definitely taught us the difference between an emergency and an inconvenience. We have been able to cash flow the hiccups without even touching our emergency fund.
And then something happened…
My husband’s new job wasn’t going so well and he knew it wasn’t going to last long. Not to mention his dad was terminally ill with cancer and we knew we were going to be making frequent trips to Indiana.
Even though we saved about another $1,000 for travel expenses, my husband and I both felt like it to be smart to go ahead and continue to place all of our extra money towards savings opposed to debt.
I had a really hard time with this because even though I am a saver by nature, I am also a rule follower. It sounds so silly as I look back now but I really had a hard time breaking away from the plan. I felt like I was giving up on our goals and we were not doing what we needed to do to get ahead.
One day before my father-in-law died, my grandmother died. And six weeks after my father-in-law died, my husband’s job came to an end leaving us unemployed yet again.
I don’t want to scare you. Everyone’s job, medical, housing and family situations are different. My point is to take in consideration what your situation looks like and to have discernment when planning for your family’s future. Dave Ramsey’s Financial peace plan is amazing and his advise is solid. But the Baby Steps are only a general guide to help you be smarter about money. Dave Ramsey’s message reaches to the masses so he has to keep his plan straight forward and conventional. The point is to make wise financial choices. I’m pretty sure even Dave would agree with me when I say, if you know there is going to be some hardships ahead, save for it! And don’t feel guilty!
So is $1,000 enough? For some yes, for others no. That is why it is such a huge debate. In our house, we decided to save 3 months of living expenses before paying off out debt. We knew our income was going to be unstable and it just makes financial sense for us. But, the principle is still intact…save for a rainy day, and pay off your debts as quickly as possible!
P.S…My hubby was able to secure a new job in just 2 weeks of unemployment! God is always so good!
What are your thoughts and experiences on Baby Step 1? Leave a comment below.