Is Your Financial Plan Missing This Critical Step? (+ How to Fix It)

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The Baby Steps Debate: Financial Gospel or Just Guidelines? 🚶‍♂️

Hey, it’s Ren here…

You guys won't believe what happened at my local coffee shop the other day!

I overheard this (kinda) heated debate between two people about Dave Ramsey's Baby Steps method.

One lady was practically preaching it like gospel, while the other was rolling her eyes so hard I thought she might get stuck that way! 😅

It got me thinking about these famous seven steps and how they've become such a hot topic, especially on social media.

I mean, we're talking TikTok wars over here! (Who knew personal finance could be so dramatic?)

Before we dive into this financial fracas, let's consider something that really hits home...

Can One Financial Plan Really Fit All? 🤔

You know how when you buy those "one size fits all" clothes, they never quite... fit all?

(Ugh, awkward, just me huh?)

Well, that's kind of the debate we're having about Dave's Baby Steps right now.

Some swear by it like their grandmother's secret recipe, while others are doing more of a "choose your own adventure" version.

Let's break this down, shall we? (I've got my chai latte ready, and I suggest you grab your favorite beverage too!)

The Baby Steps Breakdown: What's Hot and What's... Not? 🔍

Step 1: Save $1,000 for Your Starter Emergency Fund 💰The Good:

• It's like having a mini safety net while you're learning to walk the financial tightrope
  

• Super achievable goal (I mean, who doesn't love crossing something off their list?)
  

• Gets you into the saving habit without feeling overwhelming

The "Hmm" Factor:

• In 2024? $1,000 might cover your phone screen repair (maybe 😅)
  

• If you're in a high-cost area, this might feel like bringing a water pistol to a forest fire
  

• Might need more if you've got kids or other dependents

Step 2: The Famous Debt Snowball ⚪ (i.e paying down your smallest debt first, then adding the repayments to the next and so on) The Good:

• Those small wins feel AMAZING (like fitting into your old jeans amazing!)
  

• Super simple to understand - smallest to largest, no math degree required
  

• Keeps you motivated (because who doesn't love crossing debts off their list?)

The "Hmm" Factor:

• Math nerds might cry about ignoring interest rates
  

• Could cost more in the long run if interest rates and cost of living surges
  

• Might not be the fastest way out of debt

Step 3: Full Emergency Fund (3-6 Months) 🏦 The Good:

• Now we're talking real safety net, a sense of relief and a sense of abundance too
  

• Helps you sleep at night (trust me on this one, I’ve been down that other road too!)
  

• Forces you to actually calculate your monthly expenses. I didn’t want to face this for the longest time, but it’s so fricken liberating when you do

The "Hmm" Factor:

• That's a LOT of money sitting in savings earning tiny interest
  

• Might take forever if you're in a high-cost area
  

• Could be invested more efficiently (but don't tell Dave I said that! 😉)

Step 4: Invest 15% in Retirement 📈 The Good:

• Finally! Some growth potential, but if you don’t have good short-term cashflow this can be tricky
  

• Clear percentage makes it easy to calculate how things are going to go in the future
  

• Forces you to think about the future - let’s face it, we probably don’t spend enough time considering this

The "Hmm" Factor:

• Might need more if you're starting late
  

• Could be too much if you're struggling with high living costs
  

• Doesn't account for employer matches (if that’s relevant where you are)

Step 5: College Funding 🎓 The Good:

• Planning ahead for the kiddos which is way better than a surprise bill or hoping they get a scholarship - outcomes you can’t control
  

• Prevents student loan cycles. Those things are super nasty and they’re given out like free candy samples
  

• Clear priority order - you’ll definitely need some discipline for this

The "Hmm" Factor:

• Assumes the traditional college path which is becoming less common these days I feel
  

• Might not be relevant for everyone (Hubby & I can’t have kids unfortunately)
  

• Could college costs even be predictable anymore? I mean some of the degrees these days seem crazy expensive!

Step 6: Pay Off Your Home Early 🏠 The Good:

• Imagine no mortgage! (I know, I'm dreaming too and working towards it now with building our home in a few years!)
  

• Reduces long-term interest paid (Yaay!)
  

• Security of owning your home outright (Also yay, but at least if everything goes to custard, you have somewhere to be)

The "Hmm" Factor:

• Could miss out on investment returns if you have your funds elsewhere
  

• Might have better uses for that money like holidays, fun stuff, emergencies…
  

• Low interest rates might make this less urgent over the long run

Step 7: Build Wealth and Give 🎁 The Good:

• Focus on legacy over immediate stuff
  

• Encourages generosity (reminds me of Chuck Feeney who gave away all his wealth before he died)
  

• The ultimate financial freedom - imagine the impact you could make to others

The "Hmm" Factor:

• Feels very far away when you're starting and even when you have momentum sometimes
  

• Might want to give earlier. I try to give at least 10% to varying causes
  

• Could use more specific guidance

Making It Work For YOU ✅

Here's the thing - and I learned this the hard way - you don't have to follow ANY financial advice like it's carved in stone.

Even Dave's! (Gasp!) - I know, shock horror, right.

Here's how to make it work for you and your specific situation…

1. The Reality Check 📊
   

   • Look at YOUR actual numbers. Incoming/outgoing. Any other major costs?
     

   • Consider YOUR cost of living - jot it all down (I know, this may not seem fun at first, but neither is being stuck financially)
     

   • Think about YOUR goals - what do you truly want? Think of the old saying ‘A dream written down with a date becomes a goal. A goal broken down into steps becomes a plan. A plan backed by action makes your dreams come true.’ ~ Greg Reid
     

2. The Customization Game 🎮
   

   • Maybe you need a bigger starter emergency fund? That’s completely cool too. No one-size-fits-all in this fitting room. Just work out what’s best for you, your goals and your fam…
     

   • Perhaps you want to combine snowball AND avalanche methods? I’ll write more on this in future as deleting debt is something I’m so passionate about.
     
     For now, just choose one method to minimise and eliminate debt.
     

   • Adjust the percentages to your situation. This is one of the biggest secrets to success in life - don’t compare yourself to others.
     
     Don’t worry about what the rule book says, just as long as you’re making it work for you.
     

3. The Modern Twist 🌟
   

   • Consider digital banking options - even setting up an automatic payment to come out here and there can be very liberating
     

   • Look into high-yield savings accounts - yep, even in this environment they do exist. You just need to do your homework
     

   • Don't forget about side hustles! I could chat all day on these. My hubby and I have tried pretty much everything at this stage - for another time perhaps.

💎 A Golden Opportunity?

Speaking of smart money moves...

While we're talking about financial strategies, here's something interesting I wanted to share with you (full disclosure: this is a sponsored feature, but I think you'll find it relevant to our discussion about building wealth!)

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Why?

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Final Thoughts 💭

You know what's funny?

When I first heard about the Baby Steps, I was like "This is too simple to work!" But then I realized - maybe that's exactly why it DOES work for so many people.

It's like having training wheels on your financial bicycle!

The key isn't following Dave's steps exactly - it's taking those principles and making them work for YOUR life.

Whether you go full Dave or Dave-ish, what matters is that you're moving forward.

To your financial success (baby step by baby step!),

Ren

P.S. Let me know if you're using the Baby Steps or your own version - I love hearing your stories! Just hit reply to this email. 😊