Dave Ramsey's Expanded Baby Steps - Baby Step 0

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Baby Step 0:

Live like no one else…

0.1 Commit to NO DEBT EVER AGAIN. (mortgage is possible exception)

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 Food, Utilities, Shelter, Basic Transportation).

0.6 Amputate "toys" (bikes, boats, ATV's etc) if your snowball will take more than 12 months

0.7 Cut lifestyle (Cut cable, cell phone, landline extras, internet, eating out, etc)

0.8 A Get a 2nd job if Baby Emergency Fund ($1,000) will take more than 30-90 days.

0.9 Get current on ALL bills.

Here are the specific personal steps I took as I began this journey:

1. Track every expense; every penny has to go somewhere. Use the history from your bank statements, electronically, to generate a starting reference point. I created an Excel spreadsheet to handle this.

2. Start using a cash envelope system for certain expenses. Allocate less cash than you were spending when you review your expense tracking. The categories we settled on for the envelopes are:

a. Food

b. Spending Money – His/Her Blow Money

c. Lawn & Garden

d. Yard Sale

e. Clothing – Adult & Children

f. Date Night

3. Work up a written budget. A spending plan before the month begins. Allocate every dollar of income to a category of your budget. We used the expense tracking as the starting point and just changed our view from a historical rear view to a forward looking planning view.

a. Take care of necessities first: minimal food, shelter, necessary utilities, transportation, basic clothing – no frills, no luxuries

b. Minimum payments on all debts. Set up electronic payment everywhere possible.

c. Then look at optional utilities/services: cable/satellite, phone services, internet service

d. Next look at personal wants and pleasures

e. TRIM THE FAT – immediately remove or reduce the obvious

f. Add that money to your minimum payment on the smallest debt, using a debt snowball approach. This will be discussed later in detail.

Previous Posts:
Baby Steps - Expanded

Coming Up Next:
Baby Step 1.0: Save $1,000 in Baby Emergency Fund (BEF)