Baby Step 3 explained! How we plan to SAVE CASH FAST~ Dave Ramsey Inspired Budgeting

[Music] hey guys welcome to another video I am Kiki mom and this channel is all about how we are navigating Dave Ramsey's baby steps I have been documenting our debt free journey and going through the baby steps and we have recently completed baby step 2 we have paid off over seventy seven thousand dollars worth of consumer debt and we are currently on baby step three which is to save a three to six month emergency fund I'm going to link all the baby steps down below so that you can look those up if you are interested but this video is going to be focusing on baby step three which is saving a three to six month emergency fund we started baby step three at the beginning of January 2019 so we became consumer debt free at the end of December finished baby step two and moving on to baby step three and the purpose of saving a three to six month emergency fund is I mean essentially it's your first step in financial freedom because the point of a three to six month emergency fund is to be able to have cash in the bank so that if anything were to happen if you were to lose your job if you were to have a medical emergency anything you have cash in the bank that can fund that and that can take care of it and that's what breaks your reliance from credit cards you don't need to take out a loan if an emergency happens because you have the money on hand to be able to fund that so it's really the first step in financial independence you are creating your own insurance you're not relying on anybody else to get you through a tough time and it's a really important baby step and it's really exciting when you can finish baby step two and start baby step three and your paychecks are no longer going to pain somebody else and going to a lender and paying for your past mistakes but now all that money that you were putting towards the debt snowball is now going into the bank for you to keep to start your path to financial independence okay so the tricky thing about baby step three that many people experience is that after being on baby step two for so long we were on baby step two for three years and we were pretty gizelle intense for those three years and the tricky thing is that you kind of start to lose some steam when you start going into baby step three it's just because you know the journey is long and we've been paying off debt for so long and yet to baby step three and there's this temptation to just relax and to just start enjoying life and to not be so hyper focused on saving so I was talking to a Financial Peace University coordinator and she was sharing with me that you know the a lot of people experience what I'm talking about is that you lose that steam when you start going to maybe step three but she was saying you know is so important that we teach the importance of baby step three because what happens is people pay off their debt they do all that work to pay off their debt they get to baby step three they lose momentum they lose steam they're not saving cash very quickly then an emergency happens and they find themselves right back in debt because they didn't have the cash saved up that would be so hard so really I'm trying to keep that perspective I'm thinking about what she said and really trying to realize how important baby step three is and trying to get myself motivated to get it done as quickly as possible so that being said at the beginning of this year when we wrote our our budget for January our first month in baby step three we did loosen the reins on a few things we did change our budget a bit I've shared that in previous video so I'll leave a link up here so you can see what budget changes we made but for the most part we're really motivated to get baby step three done as quickly as possible so let's go into the actual numbers for our baby step three so first of all I just want to say that Dave Ramsey recommends three to six months of expenses so this is not three to six months of your take-home pay or your actual income it's three to six months of your expenses like what you need to live off of that being said there's also a comfort factor here so but really when it comes to this step there's no like exact number that you have to abide by if you are comfortable with a larger savings fund then that's okay and you can do that so me and my husband actually don't see completely eye-to-eye on this baby step I tend to want to stay to exactly what Dave Ramsey recommends he says three to six months of expenses all right let's be on the safe side let's go with six months of expenses in the bank that's what I personally would be comfortable with my husband on the other hand he is actually more comfortable with a larger amount in the bank he does not think that the number that we came up with we said hey these are our expenses per month times that by six this is all we need he thinks that we need a bigger number so this is an area where I'm willing to compromise and I don't think that there's anything wrong with having extra cash in the bank so we are going with an urgency fund of $24,000 so we have a goal of saving $24,000 and into our emergency fund so technically that would be about four thousand dollars a month for six months so our expenses are not four thousand dollars a month you guys we're able to live on less than that our expenses per month are about three thousand dollars per month so a $24,000 emergency fund for us is definitely going above and beyond the six month of expenses and definitely a good cushion there for us though it's a number that both of us feel really comfortable with and knowing that we'll have that in the bank for emergencies and security is huge so we plan to have that fully funded emergency fund done by July that is our goal and I know that seems like a ton of money to save in six months and it actually blows my mind to think that it's possible for us to save that amount of money in six months because you guys when we started our debt free journey three years ago we had a much smaller income and could barely scrounge together enough money for a death snowball especially in that first year so the reality that we have gotten ourselves financially secure enough have increased our income to the point where we can save that much money in half a year it blows my mind and it's a testament to the fact that this plan works you guys getting out of debt being intentional with your money and working hard and believing in yourself and working towards your goals and achieving your dreams you will win with money so how do we plan to save that much money in only six months well as you guys know I started working this past year so I returned to full-time work for the first time since being a stay-at-home mom for over a decade so I'm a full-time teacher prior to that we had always lived off of one income and we still live off of one income so even though I've been making my salary we have not changed our lifestyle at all we have kept our lifestyle to be below our means so much so that if I were to lose my job tomorrow we could still survive and thrive off of my husband's job so that's one thing is like if you can get your budget to live below your means to cut your cost of living to survive off of one income and then you start being a two-income family eventually like even if you're a stay-at-home mom right now which I was for several several years eventually if as your kids get older and if you choose to return to work keep living off of that one income because now when you become a two-income family you can do so much with that extra income so that is the phase of life that we are in now it has been years coming we have not always been in this phase of life but I'm so glad that we learned how to live on a budget and learned how to live below our means so all those years of budgeting and paying off debt and living frugally with one income has gotten us so comfortable and so used to living on one income and now we can do so many more things with my extra income so everything that I earn is going directly to our financial goals so that's one way that we're going to be able to save quite a bit every month because we know how to live off of one income and we have not adjusted our lifestyle at all since becoming a to uncomf Amalie so another factor that we think is really going to help us in achieving this goal of fully our emergency fund in six months is my husband does get a once-a-year bonus so it's not something that is guaranteed but it is something that has been very consistent over the last several years that my husband's worked with this company and once we get that bonus it will go directly into our emergency fund and should really help to fully fund it by July and if we don't get that bonus then it will set us back and we won't achieve our goal of having a fully funded emergency fund by July and it's okay if we don't reach our goal we've already kind of come to terms with the fact that you know we're gonna set this goal and we're kind of being dependent and having faith on you know life going our way but life doesn't always go our way and that's okay and we can readjust if we need to but we want to have those goals in place to keep us gazelle in tents and keep us motivated to stay on track with our plan and do everything in our control to make that happen there are gonna be things that might happen in life that are outside of our control and we will deal with that when we get there all right guys so I do plan to keep everyone updated on Instagram of our progress towards baby step three so if you're not following me there make sure you follow me there so I plan to do monthly recaps of what we're able to save so you can kind of see our progress and cheer us on if you are new to my channel and you are currently thinking about starting a debt free journey maybe you're in the midst of your debt free journey and you're on baby step two and you can't really relate to this video and you're looking for some resources to help encourage you through your debt free journey please check out my channel I'm gonna link our debt free journey playlist somewhere up here so that you can go and check that out because we have been documenting our journey and I share a ton of videos about our our experience through baby step two and I think that those will be really motivating to you it is possible to pay off your debt it is possible to start a life towards financial independence so hopefully that can be helpful to you alright guys that is all for this video I will see you in the next one bye you [Music]

Channel: Debtkickin Mom

Views: 67,181

Rating: 4.9018264 out of 5

Keywords: debtkickinmom, debtkickin mom, debt free journey, dave ramsey, rachel cruz, financial peace university, how to pay off debt, total money makeover, intentional living, how to make a budget, how to live debt free, debt free, zero based budget, how to live below your means, pay off debt fast, save cash fast, baby step 3, how to save money, one income family

Id: PUSkQuKRiR4

Length: 11min 15sec (675 seconds)

Published: Sat Feb 16 2019