Dave Ramey's 7 Baby Steps in Canada

hi everybody welcome back today I'm going to be sharing with you Dave Ramsey's baby steps and how they might have to be tweaked or changed ever so slightly in order to work here in Canada for those of you who are not familiar with my channel or our story my name is Angela and my husband Jeff and I used Dave Ramsey's baby steps to help us pay off close to $60,000 worth of consumer and student loan debt in twenty four months twelve months later we also happen to have a fully funded emergency fund of $15,000 so that means in 36 months we went from Owen close to 60,000 to having $15,000 in cash in our bank account I never thought I would ever see the day where that would actually be the case but we were able to stay focused and we were able to stay on track because we found Dave Ramsey's system so easy to follow that being said we do live here in Canada and some things are slightly different not huge difference but things that you might need to consider if you are planning on using that step or those steps here in Canada so let's just go through all seven baby steps and talk about things you might need to consider if you live north of the border baby step number one baby emergency fund this is where Dave Ramsey talks about having $1,000 in the bank in a baby starter emergency fund now I live in an area of the country where housing prices are reasonable food and gas aren't so bad I know compared to other places in the world they do seem a little bit more expensive but generally speaking it's all fairly manageable so for us the thousand dollars in the little savings account tucked off to the side definitely it felt like a safe amount if anything did come up while we were paying off the debt $1,000 was enough to kind of it gave us a bit of a cushion now that being said if you are in Toronto or Vancouver or any of those other places in Canada where your cost of living is significantly higher than it is if you're living here in the middle of the country you may want to consider upping that amount to perhaps $2,000 but again this amount is not forever it's just to get you started so for most of us I'm gonna go out on a limb and say $1,000 is a fairly safe amount but again if that doesn't seem like enough and you want to have a little bit more than by all means go up to a couple thousand but it's just for a few months it's gonna be okay you can you can really get it going once that debts paid off baby step number two this is where the fun begins this is where you're paying off that debt in order to do it and to get motivated and to really gain some traction Dave recommends lining up your debt smallest to largest regardless of interest rate and start paying off those smallest debts first and let me tell you it works I cannot begin to express the joys that I felt when I saw those student loans which were our smallest debts finally get paid off after paying on them for close to 11 years to finally eliminate them and get them out of my life and move on to the credit card debt which was next I just had this huge sense of relief so that rule applies here in Canada the one thing that Dave does talk about though and this one is a little bit trickier he talked about stopping all retirement investment while you're paying off your debt now if you are paying into an RRSP that is no problem cutting it off you can go ahead and stop your payments and put that on hold and take that money and put it on towards your debt but we also pay into pension plans which aren't really well we kind of have to so here in Canada we do have the Canadian pension plan that every Canadian who is employed pays into we don't have the option of stopping that if you are also put in the public sector like myself you are paying into a pension plan that for me I had to continue paying into the teacher pension plan throughout our debt payoff because it's not an option you have to pay into it so yes we do have government-funded pension plans that we cannot cut off and then if you're also in the public sector and paying into either government pension plan through work or a teacher pension plan or something similar yeah unfortunately putting that on halt doesn't it doesn't work so it doesn't apply but and the bright sides the money is gonna be there when you need it to retire I guess but yeah it is hard to cut off those pension payments it's really hard for baby step number three this is where you are now working on building your fully funded emergency fund now Dave Ramsey talks about putting it into a money market account something that's not super high interest but accessible for Jeff and I I set up a TFSA through simply financial that is linked to my debit card so it's very very easy for me to transfer money from our checking account into our TFSA account especially when we were working on building that likewise if we ever needed the money I could simply go online and transfer funds from our emergency fund back into our checking account as needed it's not linked to my debit card I cannot easily spend it but it is easy to access if you ever need it in terms of the amount this is gonna vary from person to person so really the rules for a baby step 3 apply to everybody regardless of where you live I will link a video down below in the description box talking further about how we came to our amount in terms of fifteen thousand dollars being a safe amount for us obviously it's going to vary based on your circumstances based on your expenses based on your job security all of that good stuff so baby step 3 the rules apply but you do have to do a little bit of math to see what the amount is going to be for you now we get to baby step four and this is where we start setting aside 15 percent of our money into retirements now in the states they have the Roth IRA and they have that other retirement investment thing that I can't remember the name of here in Canada we basically have two outside of any work pension so if you don't have a pension plan through work then here are the two that you probably have to choose from the first of course being the TFSA now you do have the ability to put in fifty five hundred dollars a year into a tssaa account if you don't use up that's full fifty five hundred dollars whatever amount you didn't contribute will then carry over to the next year so it builds upon each other and this is money that grows tax-free now the other option of course that we have here in Canada is the RRSP this is the registered retirement savings plan you can deduct from your taxes the amount that you put in so that is the tax deductible amount which is very nice unfortunately when you take the money out way down the line yeah gotta pay taxes on it so that's not so great the money does not grow tack three although it's tax deductible going in anyway TFSA RSP those are our two options the 15% rule that applies unfortunately we just have to utilize what we have available here in Canada instead likewise our ESP is the what you're gonna want to look into when it comes to baby step five which is setting aside money for kids college yeah 529s that's an American thing our ESPs that's a Canadian thing I think I have a video on the RESP I will go ahead and link that one down below in the description box as well if you're not familiar with it or how it works here in Canada they yes the RESP that is the only difference when it comes to baby step five and of course baby step six this is the exciting one where we talk about paying off the mortgage now my Canadian friends please be careful about this because most Canadians I know that have a mortgage also have a prepayment penalty if you go above and beyond the 10% of your original mortgage amount that means for those of us here in Canada at least for the ones that I know I don't know if everyone has this I don't want to speak on behalf of all Canadians but please be aware if you pay back more than 10% of your original loan amount in any calendar year you are subject to paying penalties in the form of well interests at the bank with leuh vote on because you're paying back the money early so take a look at your mortgage payments take a look at how much you owe take a look at the fine print and see how much you have available to pay back without penalty now for Jeff and I the original loan amount for this house was 192 thousand dollars that means each year we can pay back 19 thousand 200 dollars without penalty or extra fees so please be mindful yes we want to pay off the mortgages as quickly as possible we want to eliminate that debt so we can really build the wealth and give and be generous but you don't want to pay the bank any more money than you need to so just just be mindful of those fees and of course baby step number seven this is where you build wealth and you give and it doesn't matter where you live in the world that one is the universal rule it's something that we all strive for and quite frankly can't wait to get there might be a little while this channel might be around for a while because it's gonna take us a little while the baby step seven of course is the ultimate goal where you can just really sit back relax build your legacy and just have fun with your money so there you go guys Dave Ramsey's seven baby steps canadian-style it's not a lot of differences but they're definitely some things that you want to pay attention to along the way if you yourself are a Canadian and you have other experiences on the Dave Ramsey baby steps that you'd like to share please be sure to link those comments in that comment section just down there I look forward to reading them I look forward to hearing about your experiences likewise if you're one of my European friends or Australian friends or African friends or Asian friends or wherever you happen to be in the world and you yourself have also had some different experiences on the Dave Ramsey baby steps when compared to our American friends please let us know down below in the comment section it's always interesting to hear how things change depending on where in the world you happen to live anyway guys thanks so much for watching I look forward to talk to you very soon in my next video bye

Channel: Our Life... On A Budget

Views: 8,626

Rating: 4.948164 out of 5

Keywords: dave ramsey, baby steps, canada

Id: HXRo1z02x5I

Length: 11min 2sec (662 seconds)

Published: Sun Nov 10 2019