Personal Finance

Dave’d and Confused

I am still pretty confused about what our next big financial goal should be. Lately, I have been looking into Dave Ramsey’s baby steps for guidance. (Is it just me or are some steps not “baby” at all?) I can’t really tell what step I am even on! Step 4 is Invest 15% of household income into retirement. Currently I contribute 7% which is matched by my employer. I also put away 1.5% each month into an IRA. But I work part-time, so should it be more like 30%? My husband’s retirement is super confusing because they don’t match, but randomly put money into a fund for him based on how the company is doing. He also has an 401K that he contributes to, but I am not sure what the percentage is. It’s definitely not 15%, but we try to increase the percentage whenever he gets a raise. And by we, I mean that I tell him he needs to and then nag him until he does (I take my CFO mom duties seriously!) Thus we may or may not be at step 4.

However, we do have college funds for our kids which is step 5. It is set to automatically withdraw money each month from our checking account. However, when unexpected expenses pop up, it is the first thing that gets cut. At some point, we need to get more aggressive in saving for their future. But I think we’ve got time (9 and 12 years to be exact!) So are we or are we not crawling around baby step 5?

If steps 4 and 5 are completed, that leaves paying off our mortgage. Is that our big goal then? Should we start on that 7-10 year journey? Does this Dave guy really know what he’s talking about after steps 1-3? I’m definitely curious what your thoughts are. I’ve tentatively listed my goals here, but I am not really motivated to get started until I have some more clarity.

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12 thoughts on “Dave’d and Confused

  1. honestly I do not know. I have checked these baby steps and they are no baby steps, I can tell you. Many of these takes years. they are more like giant baby steps 🙂 but this should not demotivate us, I guess.

    For everyone these steps are something different and it is okay to have different opinions. I for one will skip step #5 but somehow replace it with the financial help for my parents. I also need to save and invest more than 15% as I am middle aged with little retirement savings (I have less time for my investments to return than say a 30 years old). I had read about postponing to pay the mortgage early by rather investing the extra cash (which is supposed to earn more money on the long run, as the mortgage interest rates are relatively low). It somehow makes sense to me so I will not get crazy to pay my mortgage early. But this does not mean that I will not increase my payments (which I plan to this september when I am scheduled to have a little salary increase).

    This has been a rather long comment than I had anticipated, but what I am trying to say is that a) keep reading, learning, and reflecting about different opinions/options, and b) among all make the decision most suitable for yourself and your circumstances.

    all the best 🙂

    Liked by 2 people

    1. They sound so easy but in reality they’re nothing easy at all in order to consistently perform and decisively initiate under a solid / stable financial state. Once all your finances are in a state where you know exactly where you are heading financially and know exactly where every dollar has to go towards, i feel as if once you are in complete control of your income and expenses will you be able to make these type of decisions.

      I suggest getting a piece of paper out and take the dave ramsey advice with a grain of salt, write down what you and your husband want for your future, the things included and set priorities, in that sense make a budget / goal based on the correlation to the priorities you’ve set.

      My Step #5 would be to save enough money to get at least an associates rather than take a loan / etc. But this step isn’t a high priority at the moment so i am putting it off until i finish my highest priority objectives. (This is for my circumstance and situation)

      Liked by 2 people

  2. I have been googling “Dave Ramsey Critics” and it’s been very interesting especially regarding his investing advice. I think I’m leaning towards taking it all with a grain of salt. 🙂

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  3. I don’t know too much about the steps but personally I have paid off all credit cards, and loans leaving me only the mortgage to deal with. Through living a minimalist lifestyle I am able to work towards getting that paid off in the next several years. I am currently semi retired but just started a new job that has a pension plan. My wife contributes the maximum each year into a 401k with a small company match. At 55 I figure that I have around 11 more years to go before I reach full retirement. My position has always been to enter into retirement with no mortgage and no credit payments. This gives us options of selling the house and purchasing a double wide in Florida someday and banking the difference, or just stay where we are. My greatest fear is a total financial melt down and our retirement plans becoming worth zero.

    Liked by 1 person

    1. I have been reading a lot about minimalism and am really interested in applying the principles to my life. It seems to make a lot of sense especially financially. I too have the fear of total financial meltdown. Having no mortgage debt seems to be no lose scenario to me!

      Liked by 1 person

  4. I like the baby steps because of their flexibility as life changes. From what you posted the baby steps don’t seem like they are terrible guidance, its just a matter of determining what it would look like for your family’s situation

    ***
    I have been using the steps for 8 years and this is kinda how it looks these days.

    For BS#4 I do invest 15% of my gross income as recommended. How it is invested within the Roth IRA, TSP and 401K may vary a little from what Dave recommends. Every time I change jobs I have to recalculate to ensure that I set the contribution correctly to equal 15%.
    For BS#5 I skip this because I finished all schooling and have not kids.
    For BS#6 I have been putting money towards buying a home. Not super aggressive like paying off debt, but as money is available.

    Liked by 1 person

      1. I did do them in order because I wanted the system a honest college try before making my own modification. It just so happens that it worked out.

        Liked by 1 person

  5. While we don’t follow Ramsey’s advice word-for-word, the basic tenets of his system are pretty sound in my opinion. They are a simple step-by-step guide for those who have literally no idea where to begin, such as myself. When I first dove into the realm of personal finance after our son was born in September 2014, Dave was my first source of knowledge…I devoured five of his books in a two week period and watched hours of videos on YouTube.

    1) The snowball method of paying off debt is incredibly beneficial (i.e. we paid off nearly $15k of debt in our first five months), 2) having an emergency fund is crucial, and 3) furthermore, avoiding debt and never using a credit card are all good points to follow. To note, we are now BACK on track with these methods after making some poor decisions over the past 6-ish months; lessons learned and not to be repeated again.

    However, I disagree with Dave on his saying that one shouldn’t invest at all during the debt snowball. At a minimum (which is what we are currently doing,) I believe in investing enough to get my employer’s contribution match; not doing so is like flushing free money down the toilet. Additionally, my wife and I decided from the beginning that we will continue to fully fund our son’s Coverdell ESA ($2000 per year) every year.

    So at this point in time, we have a 2-3 month emergency fund and are back on track with the debt snowball, while also funding our son’s ESA…so we’re on a hybrid of Steps 3 and 5 simultaneously.
    ************************************************************
    From what you describe, it sounds like you may be right in saying that you’re on Step 5. Unless you take my idea in the other post I just commented on, knocking out your mortgage seems to be the logical next step. You need to do some calculating to see if you would be better off to snowball your mortgage payments while maintaining your investments as-is or if it would be more beneficial to max out investments while continuing your current mortgage payments.

    Either way, if you’re not already doing so, you should consider paying your mortgage in biweekly installments (if your lending institution allows it.) Dividing your monthly payment in half and sending that amount every two weeks will result in an extra month’s payment every year and knock down the average daily balance of your loan, whereby saving hundreds, if not thousands, of dollars in interest…and decreasing the length of the loan. A fun calculator to play around with can be found here: http://www.bankrate.com/calculators/mortgages/bi-weekly-home-mortgage-payment-calculator.aspx
    ************************************************************
    Hope this is, at the very least, a little helpful. Have a nice day!

    Liked by 1 person

    1. Thank for the link to the mortgage calculator! I’ve been playing around with the number and could realistically pay off our home in 10 years. We would save about $50k in interest. I’ll have to check in split payments and see if my lender allows it, but I want to say that they do. So much to think about, but a hybrid plan might be the way to go.

      Liked by 1 person

      1. You’re welcome! $50k is an insane amount of savings! 8-D

        Biweekly, automated payments on our car is going to save us a few hundred dollars, pay the loan off sooner, and requires absolutely zero effort…it’s a win-win all the way around. I really hope you work this plan out and save a lot of $$$! 🙂

        Liked by 1 person

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