In Dave Ramsey's 7 Baby Steps to wealth building, the first step is called Baby Step 1: Save $1000 fast in a starter emergency fund. As a single mother, I can tell you, this step saved my life, and got me on the road to turning my financial life around. You see, I had always made good money. But I blew most of it. At the height of my career I had been making $100,000 a year, but had so much debt and out of control expenses after my divorce that my dream of purchasing a home for myself and my children was out of reach. This was a wake-up call for me: I made too much money to be so broke!
I decided to follow the Baby Steps, which help you build wealth by dumping debt and increasing savings. Baby Step 1 is to save $1000 fast. This breaks the debt cycle by giving you a buffer between you and life. Any new emergencies are paid out of this fund instead of using a credit card. This $1000 is insurance. It should be kept in a place where it is liquid and easily available, like a simple savings account, or cash at home. If you make less than $20,000 a year Dave recommends you save just $500 for Baby Step 1.
There are lots of ways to save $1000 fast. Have a garage sale, or sell something on craigslist/facebook/ebay. Cut back on discretionary spending like eating out or traveling for a month or two. Take on an extra side job, or work overtime at your current job. I had some money in savings, so I simply took my savings down to $1000 and then threw the rest of the savings at my debt, which is Baby Step 2~coming soon in the next blog!
In the past, I always used to "outearn my stupidity", as Dave talks about. I knew I could always make money to cover expenses and unexpected costs, but it kept me constantly scrambling, and on edge emotionally. Baby Step 1 changed all that. Once I had $1000 in the bank that was untouchable for anything but emergencies I slept better at night. There is such a deep peace that comes from knowing you have a backup. While I was getting out of debt I had to use the emergency fund 3 times for car repairs of about $300 each. This was easy and peaceful, without the stress and worry I experienced before. What a relief! I simply paid the bill out of the fund, and then replenished my emergency fund with my monthly income.
How can you free up $1000 fast for your Baby Step 1? I guarantee it, this one step will change your life! It will take you from feeling out of control financially to having actual peace in the realm of money. It is a game-changer. And hopefully it will inspire you to go on to Baby Step 2, and knock out all of your debt except your home!
Coach. Teacher. Author. Speaker.