our baby steps

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since we are on the dave ramsey bandwagon, we are working through the 7 baby steps. you’ll see below, but we aren’t doing it exactly how he prescribes.

i think of the baby steps like benchmarks. i use benchmarks a lot at work and neil jokes that if and when i’m a stay-at-home mom, he’ll need to set benchmarks for me so i don’t get bored. he’s probably right and i get really excited for what my benchmarks might be….walking 10,000 steps, running, baking, going on guided tours with arya, no spend months, the list goes on and on.

a little information before i start. my husband and i both have full-time jobs with benefits. we made a great sacrifice moving FAR away from family, but we also get to enjoy beautiful weather and we do make enough that we can enjoy some of what we make. i get pretty upset with our debt decisions every time i make a payment. i always think,”if we would have just saved money for the past 6 years like we are doing now, we wouldn’t have all this debt and we’d be rich!!” but, it will come eventually and you got to start somewhere.

we started the baby steps in november 2014.

baby step #1: $1K starter er fund–completed november 2014, currently in an easily accessible savings account (not sure if that’s the best place for it)

baby step #2: debt snowball–total debt, not including our mortgage was $49,520.49. this includes a tsp loan, a personal loan and a home depot credit card. anticipated completion feb 2016 (bs#2 and bs#3 at the same time from may 2015-february 2016). we should call it debt pay down instead of a snowball, because we are tackling the highest tsp loan first, the other two have no interest and the money taken from the tsp was from our retirement savings, so the faster we get it back in there, the more it can earn for later.

baby step #3: 3-6 months er fund–we are going to add in an additional 3-4 months of mortgage payments in case we end up renting our condo and have trouble finding renters. goal: $15K-$20K. anticipated completion april 2016

baby step #3.5: save up for a car fund of at least $8,000.

baby step #4: save 15% of income for retirement. for the first 4 years of neil’s job, we put 20% of his paycheck into his TSP. since november 2014, we have been doing 5% with a company match of 3%. i also have a pension right now of about $700 that i can get once i hit retirement age. the longer i stay with the job, the higher that pension gets. neil also gets a retirement benefit from his work and we both have roth-ira’s. with a total of 5 retirement accounts and because of our pensions and our 8% into his TSP, we may be close to 15% already. when i figure that out, i’ll update ya.

baby step #5: save for college. when arya was born we opened a 529 plan and put in $2,000. we haven’t done anything to that since then.

baby step #6: pay off house early. if we stayed in san diego, doing what we’re doing, we’d have our condo paid off by 2020. if we move away, our goal is 15 years.  right now, we are paying the minimum on a 30 year mortgage.

baby step #7: build wealth and give

our 2015 cash envelope system

cash envelopes 2015

if you are a follower of dave ramsey, then you probably know about  the baby steps. baby step #1 is saving up 1k as your starter emergency fund.  baby step #2 is the debt snowball.  we are currently on baby step #2 and with that, we needed to create a budget, stop using credit cards and use all our extra funds to pay down our debt (other than our mortgage) as fast as possible.

back in november 2014, we created our cash envelope system to use for 2015. basically, you try and figure out what you are going to need to spend money on throughout the year and then break it down into 12 and put money in every month.  so far, everything is going pretty well. like i’ve mentioned before, we’ve gone over budget on our food, but i’ve also been known to steal a little money from one envelope to pay for another envelope. i’m trying to stop that!  march is going to be the month for that.

we started using the plain old white envelopes and for some of our sinking funds, we are still using those.  for the categories we dip into more often, i started using the dave ramsey cash envelope system basic wallet that we got with our financial peace university kit. eventually, i think i’d like to get a newer system, but i’ll wait until my envelopes wear out.  my mom is a huge sewer, so maybe she’ll make me one! 🙂

The five envelopes in my dave ramsey wallet are:

food, my blow money, arya’s money, personal (haircuts, etc), and house. (my husband keeps his blow money in his wallet)

the plain, old white envelopes are:

car registration & insurance, car care, birthdays, christmas, amazon prime, shutterfly (for annual photo book), vacation, date night (new as of this month), & clothing.

there is one category that I’m not sure how to handle yet. every once in a while, i have to buy something for work and i get reimbursed as soon as submit my receipts.  its usually not more than $20 or so, so i usually just use the debit card and then deposit the check back into our account when i get it.  it hasn’t been an issue yet, so i’ll probably keep doing it that way.

i’m interested to see how everyone uses the cash envelope system! what categories do you have?