I’m going to start a “Financial Friday” series that will speak to the different baby steps, things that we have encountered the previous week, and anything else that fall into the financial category. It wont be too in depth, because I have limited understanding of it myself.
This week lets go over baby step 0. Yes, there is a baby step 0 and it focusses on everything you need to do to be prepared to start the next step. Baby step 0 is broken down this way….
0.1: Commit to never borrowing money ever for ANYTHING other than possibly a house. One of the main points of this program is to get out of debt. You have to stop borrowing money and going into debt in order to get out of it.
0.2: Talk to your spouse and get him/her on the same page as you concerning finances. If you are on board, but your souse isn’t, what’s the point? You both need to agree on what the plan entails, and agree on doing it together.
0.3: Do a written budget. Dave Ramsey says to do a zero based budget. This means every single penny is budgeted to go somewhere. Click HERE for more information on the zero based budget.
0.4: Temporarily stop all retirement contributions: Steps 1-3 focus on emergency funds and paying off debt. You can start putting away fr retirement again during step 4.
0.5: Get current on ALL the basics (you MUST have shelter, utilities, food, and basic clothing): If you are behind on your rent or mortgage, electric bill, propane bill, water bill, gas bill, etc… you MUST get current. How? Follow your budget and find ways to make extra money to get current.
0.6: Amputate “toys” (ATVs, bikes, boats, etc) if they will keep you from completing the snowball in 12 months. If you are in debt, and trying to get things paid off, sell the extra “toys” to help get current on the basics, and put towards baby step #1.
0.7: Cut lifestyle (cut cable TV, Cellphone, Regular phone “extra’s” (voicemail, call waiting, call forwarding), Internet, Eating out, etc) and/or take second job if $1000 EF will take more than 30-90 days. (depending on income). Again, cut your budget as much as you can to just the basics. By cutting out anything that isn’t a “need” you will have money to put toward baby step 1 and 2.
0.8: Get current on ALL bills. Again, get current on everything you are behind on.
Baby step 0, as you can see, covers everything you need to do to get ready to start baby step 1. My husband and I are on the same page and agreed on the same goals so I’m thankful for that. It took us a few weeks to get our budget done because we needed to gather information, cancel some things, and so on. Give yourself some time to get the budget completed. Don’t expect to get it complete in an hour. We don’t have any retirement (this is SCARY!) yet, we are current on all of our bills (thankfully we never fell behind on anything), we don’t have any “toys”. We cut out cable and got Netflix and Hulu (saving over $100 a month), changed our cell phone plan, changed out internet provider (we need it for days my husband works from home) to save $20 a month, agreed to not eat out, and really cut down on any extras we don’t need right now.
I am so thankful that we started following Dave Ramsey’s plan. It is the most terrifying thing I have ever done, but it will be the most rewarding thing in the end.