I have to admit that on one level Dave Ramsey is really just speaking common sense to people who have never heard about saving money before… and that's why for some, it’s a great plan to help get on the path to financial security and to actually have a future. If you dissect his plan and have read a little about personal finance I'm sure you would have a different opinion on one thing or another given enough time... and that's okay because this is after all PERSONAL FINANCE =)
While I'm sure we could blog all day about whether it is better to pay the smallest bill first and get that early “win” and motivation... or if should you tackle the debt that has the highest interest rate… But that's not what this post is about.
Most personal finance blogs out there on the internet focus on getting rid of consumer debt like car loans and credit cards, AKA “Toxic Debt.” The guru's of finance write their plans and strategies based on people having huge amounts of debt, paying it off, and then turning that HUGE amount of money they were tossing at their debt into wealth building... Which is great if you had a lot of debt and used the snowball method... But what about the select few of us, the “No Student Loans - No Credit Card Debt - Just a Mortgage” kind of people. We have some savings... and we have dabbled here and there with investments... but we don't really have a large amount of money to put towards all our goals. We tend to try and do everything all at once because there isn't a plan for us out there on the internet... because we are the minority. So we take plans... mash them together... and try and work on 3 goals at one time... and all it leads to is burn out because IT TAKES FOREVER to feel like your making progress.
So, I've decided to look at Dave Ramsey's plan and see if it would really work for me because I'm suffering financial burn out.
I already have my mini emergency fund. I don’t have to debate about paying back student loans with deductible interest because I don’t have any… I don't have credit cards with various interest rates to argue about and i don't have any car loans either... I already came to the light earlier this month and stopped making extra mortgage payments. So that puts me somewhere between step three and step four because I do have at least 3 months of expenses saved up...
Do i keep plugging away until I have the full 6 months and stop funding my retirement... or do i begin to transition into retirement and the EF at the same time like I have been doing?
Because i didn't have any debts to snowball, I don't have a lot of money to work with each month... and if I'm trying to max out my Roth IRA and work on my emergency fund at the same time (like I'm doing now)... I find I'm loosing momentum because I'm not seeing very much progress... Some people may argue about missing out on an employer matching their 401k if they stopped funding retirement… BUT again, I DON’T HAVE THAT to argue. I have a pension at work that I have to contribute to.
Truthfully, right now I understand what Dave keeps talking about finance being an emotional game... not strictly a numbers one. I miss having a “Win” to boost and keep me vigilant about my finances. I keep wondering if I should just hammer out the EF and put retirement on hold.
Right now, my EF stands at: $8,982.67... and i'd like it to be $11,000.00
- ING Direct Emergency Fund: $6,967.85
- Salle Mae Savings account: $1,004.64
- Salle Mae Cd’s: $1,010.18
Post honeymoon/time off we'd then make all the HR changes and modify my withholding to reflect being married and then we’d change focus and start putting our extra money towards Retirement. With 4 months left in 2011, we’d be able to put at least $1250 a way… plus I’d get two extra checks for another $2,200.00 … so the Roth would get at least $3450 by the end of the year… if I made overtime, it could be even more. (plus we can still contribute to it until March of 2012 for 2011.) A big tax return could put us in a nice place to play catch up with... and i'd only have one thing to focus on... max out Roth IRA & contribute 15% of my income to retirement.
So why am I thinking about this all right now??? The other day on Dave’s radio show a caller was asking about stopping retirement contributions for a short time to knock the EF out of the park because doing both seemed like a stand still financially)... and his advice was to get that EF funded… and then focus on retirement because you never know when you might need that EF... and I think thats the best thing for me and the future hubby to do. We talked it over and that's the new game plan for now.
Mission fully funded EF here we come.
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