Completing Baby Step #3: Six-Month Emergency Fund
If you're not familiar with Dave Ramsey's financial baby steps, here's the rundown:
Put $1,000 in savings ($500 if you're single).(completed February 2009) Pay off debt (not including your mortgage).(completed Jan. 3, 2011) Save 3-6 months of expenses.(completed Jan. 17, 2013)
- Invest 15% of income for retirement
- Set up a college fund for children
- Pay off home early
- Build wealth and give
It's a great way to see where you're headed and focus on one financial goal at a time. We've really been blessed by it.
A couple weeks ago, we crossed baby step #3 off the list!
(You may remember that exactly one year ago today, we said the same thing - we had completed our emergency fund! It was so exciting to have that security in place before Rooney was born. And then, in October, we decided to use some of that money to pay off our second mortgage. Then, with only one mortgage payment each month, we were back to saving hard-core for our $15,000 emergency fund.)
Thanks to a year-end bonus from Eric's work, we were able to complete the savings fund (again) a couple weeks ago! And it feels even better than it did the first time! (Right now we keep our emergency fund in a bank checking account that gains 3% interest.)
Growing up, I always thought I’d have to save money (like $100/paycheck) for the rest of my life. So it’s freeing to know that now we’ve got a fully funded emergency fund (with six months of expenses) that we hope to never touch, and we can instead focus on throwing any extra money at investing for retirement (baby step #4).
We're getting right after it and are meeting with an investment counselor this week. Eric also did some calculations last week and the estimate for one child for college in 17 years will be $275,000. Eek! (That's for a private college... Go Simpson Storm!)
Did you get a bonus at work this year? How did you spend it?