I have taken this truncated version of the baby steps from the Diaperswappers forum:
Pre-Step 1: Get current on your debts and do a budget
Before you begin the
baby steps, you must be current on your bills and, if you aren’t doing one
already, begin doing a monthly budget.
Baby Step 1: Save $1000 cash in
Start your emergency fund. If your income is less than $20,000, make
Baby Step 2: Get out of debt
With Gazelle intensity and
using the debt snowball, pay off all your debts.
Baby Step 3: Finish the
With the money you were paying towards debt, now with no debts, you can save 3-6 months of expenses into a fully funded emergency fund.
Baby Step 4: Save for retirement
Saving 15% of your income
didn’t seem possible before, but with no payments, you’ll be ready for
retirement and not have to take a job as a Wal-Mart greeter.
Baby Step 5:
Save for College
Instead of taking out student loans, your kids will be
eternally grateful you thought ahead and had a plan for their higher
Baby Step 6: Pay off the house
Baby Step 7: Build
Wealth and Give It
0.1 Commit to NEVER borrow $$$ EVER for ANYTHING other than possibly a
0.2 Talk with spouse and get him/her on the same page as you concerning
0.3 Do a written budget
0.4 Temporarily stop all retirement
0.5 Get current on the basics (You MUST have Food, Utilities,
Shelter, Basic Transportation)
0.6 Amputate “toys” (bikes, boats, ATV’s etc)
if they will keep you from completing the snowball within 12 months
lifestyle (Cut CATV, Cellphone, Regular phone “extras”, Internet, Eating out,
etc) and/or take a second job if $1000 EF will take more than 30-90 days.
(depending on income)
0.8 Get current on ALL bills.
1.0 Save $1000 in Baby
Emergency Fund (EF)
1.1 Chop up CC’s. (You have an EF now, no NEED to keep
1.2 Get Health Insurance NOW (chances of getting sick w/major
medical bills are larger than that of death), especially if you have
1.3 Get Life Insurance NOW if you have debt/your family couldn’t
make it financially if you died. Especially important if you have children!
Social Insecurity only provides a small amount of coverage if you have
1.4 Amputate cars that you can’t pay off within 24 months (you
have an EF to fix “bondo buggy” if something should happen)
raising insurance deductibles to $500 or $1000 and dropping full coverage on
paid for “bondo buggy” (you have an EF ya know)
1.6 Draw up a will.
Get Long-Term Disability Insurance.
2.0 Do debt snowball, paying all your
debts from lowest BALANCE to highest.
2.1 You can take your first vacation
since finding Dave if you can pay cash for it. (no using the EF!!!)
3-6 months EXPENSES in EF (FFEF)
3.1 Start replacement car fund.
up 20% for home purchase OR pay down existing mortgage to the point that you can
3.3 Start furniture or other non-essential stuff replacement
3.4 Move up in car if you still feel the need to (must pay cash for
it!, you can only buy NEW if you have a net worth over a million dollars)
Start contributing 15% of your paycheck to retirement.
5.0 Save for kids
6.0 Pay off the house early.
7.0 Live like no one else since
you have lived like no one else! Give, Build Wealth and Have Fun!