Dave Ramsey's Expanded Baby Steps - Baby Step 1.0

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

1.1 Shred or cut up ALL CC's. (You have a BEF now, no NEED to keep those CC's !!)


1.2 Get/Evaluate Health insurance NOW


1.3 Get/Evaluate Life insurance NOW


1.4 A Get/Evaluate Long Term Disability (LTD) insurance NOW


1.5 Amputate cars that you can't pay off within 24 months. Buy a safe older vehicle: $2-3k range


1.6 Consider raising insurance deductibles to $500 or $1000 and dropping full coverage on paid for used car


1.7 Draw up a will.

Here are the personal steps we took as we began this journey:

1. We have closed inactive credit card accounts. We still have 2 accounts open, one at our credit union that my wife hasn’t given up yet and one with Discover. We do still use the Discover card for things like gas and online purchases that don’t accept PayPal. We are considering facilitating a FPU class at our church in the next few months, if/when we do, we will cut up both these cards as an example to our class.

2. We started using the Flexible Spending Account offered by our health insurance. This account takes pre-tax contributions and allows you to reimburse yourself throughout the year. The catch with this account is that it’s a use or lose type account. Once we established an expense tracking system along with our budget I was able to develop a plan for how much money to fund the account with. This year our new insurance provider has given us a debit card linked to our FSA which will allow us to use the funds instantly without the delay of filling out forms, submitting, and then waiting for the reimbursement.

3. I then increased the LTD insurance coverage available to me through my employer. My wife works part time only so that is not available with her employer and ultimately not needed.

4. We had bought a new car only a couple of months before we started FPU. But with great intensity we paid that off in 6 months. No car payments!!

5. We did raise our deductibles for both comprehensive and collision. Murphy did strike last year regarding our increase on comprehensive from $0 to $500. We hit a deer and had to have work done on the grill and the hood. But the change in the comprehensive deductible alone saved us $548 per year. So for this case, in our first year, we only saved $48, but everything after that will be gravy, given that we steer clear of the deer going forward.

6. Regarding a will, we are slackers. This is on the To Do List for 2009.

Previous Posts:
Baby Steps - Expanded
Baby Step 0: Live like no one else…

Coming Up Next:
Baby Step 2.0: Do debt snowball, paying all your debts from lowest BALANCE to highest