Getting to Baby Step 3 is a huge, monumental victory! This means you have paid off all of your consumer debt – everything but your mortgage. Congratulations! It isn’t quite time let off the gas pedal – we now must save up 3-6 months of your income into a fully-funded emergency fund. This fund is what will help keep you from going back into debt. Everything from furloughs, medical, fridge broke, car repair – all these can be paid for with cash.
- Baby Step 1: Save $1,000 cash in a beginner emergency fund
- Baby Step 2: Use the debt snowball to pay off all your debt except for the house
- Baby Step 3: Save a fully-funded emergency fund of 3 to 6 months of expenses
- Baby Step 4: Invest 15% of your household income into retirement
- Baby Step 5: Start saving for kids’ college
- Baby Step 6: Pay off your home early
- Baby Step 7: Build wealth and give generously!
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