By Adam Jusko, ProudMoney.com, firstname.lastname@example.org
Dave Ramsey is a popular personal finance writer/broadcaster with a loyal fanbase. I suspect his fans are so loyal because Ramsey says just about everything with supreme confidence, as if no sensible person could have a different opinion. When people are feeling lost, whether financially or otherwise, a strong personality with strong opinions may feel like a godsend.
This is not to bad-mouth Ramsey. Much of what he says is good, common sense. But not everything. And I believe it’s good to question Ramsey’s guidance just the same as you would question anyone else. Like most who give you advice (even me), Ramsey wants to make a buck off of you, as you’ll notice from the astounding number of info products he’s hawking on his website and how often he pushes you to buy.
So, today I’m going to discuss Dave Ramsey’s 7 Baby Steps to Financial Peace, a checklist for people trying to get their financial lives together one “baby” step at a time. I’ll look at where Ramsey makes sense, and where he simply has a strong opinion that many other financial experts would disagree with. Let’s go step by step…
Baby Step 1: $1,000 cash in a beginner emergency fund
It’s a sickening feeling when it seems you are just barely getting by and then an unexpected expense come up. Where are you going to get that money for a car repair, appliance breakdown, emergency room visit, etc., when you can barely meet your expected expenses?
The key, then, is to plan ahead, to do whatever it takes to rustle up $1000 to put into a separate account that you only touch in true emergencies. To do this, you’ll need to examine where every dollar is going and siphon away a few bucks each month to build this fund. Or, do something to earn more temporarily, whether that’s taking on an outside project, starting a side hustle, or selling some of your stuff.
This is no-brainer good advice. The obvious first “baby step” in your financial life should be to build some sort of cushion so you do not plunge into complete desperation when faced with an unexpected expense (which you might as well think of as an expected expense because something always eventually goes wrong, you just don’t know what it will be).