Back to the Baby Steps

Caution: This has been in draft mode for a couple weeks. Some of the dates/days may not make sense now.

With all that has been going on with the economy, housing market, and the bailout - I thought it was time to hear what Dave Ramsey had to say about it all. I admit that I hadn't listened to Dave for almost 2 years. I still have a hard time believing that it has been that long, but I was about 100% sure that Dave wouldn't have changed a bit in his thinking and advice. And I was correct!

So last Thursday at work I downloaded Dave's 3 most recent podcasts (which are always one day behind) into iTunes and began to listen. It was refreshing. All 3 editions were about the bailout and his position on the economy and he took calls from people who were frantically worried about losing all their money. In true Dave Ramsey style, he 'virtually' slapped them across the face, told them to grow up, stay put with their finances/investments and to quit making big financial decisions with their emotions.

In addition, he helped his listeners understand sort of, how and why all this craziness is happening.

I have now gotten back in the habit of listening every day and hope to keep it up for a while, even if it means I'm a little less productive for 30 minutes while listening to him.

What this brings me back to, though, is the 7 Baby Steps that Dave lives by and instructs his audience to live by on a daily basis - to get out of debt, become wealthy and change the family tree.

With housing prices so low right now, it would be really easy for me to buy some investment properties. But I would have to take out 97% mortgages (if that's even possible with the tightening restrictions) on these just like my primary residence,because I am still heavily in debt and have no savings to make a proper down payment. Some financial people think this isn't a bad idea as long as the properties have an income that covers the mortgages and generates positive cash flow. But...

But Dave, who agrees that this is the best time to buy houses since the great depression, does not suggest doing the above. It's foolish, and one of the reasons there are so many foreclosures in the first place. He says get out of debt, have your 3-6 months of living expenses and retirement savings fully invested, make sure you have a significant down payment, and only a 15 year (or less) fixed mortgage. Basically, don't veer off of the baby steps even though now may be the best time to buy.

What are the 7 Baby Steps anyway?

1. $1000 Emergency Fund

2. Debt Snowball

3. Fully funded emergency fund with 3-6 months living expenses

4. Retirement savings (15 percent of your income)

5. College savings

6. Pay off house early

7. Build wealth.

Unfortunately for us, we're still on baby step 2. So I'm not buying investment properties for us right now. But this is the attitude and behavior that I was mentioning in my previous post. I'm taking control of my finances and not letting the emotion of "buying while its hot and on sale" lure me into making bad financial moves. If I want to buy some investment properties, I need to be debt free!

Please pray for us as we prepare to take the necessary steps to accelerate the debt snowball in 2009.

And make a commitment to get out of debt with us. Let's change the course of our country's economic future one baby step at a time.