Understanding Dave Ramsey’s First Baby Step

May 10

**Read Time / 2 Minutes**

**Theme / Financial Planning**

For those of you that are familiar with Dave Ramsey, you’re probably exhausted by the Baby Steps at this point. Build a savings, pay off debt, save for retirement, yadda yadda yadda. However, even for the most experienced Ramsey listeners, it’s worth unpacking each baby step and the logic behind it. These aren’t random steps designed by a mad man trying to get rich. Each step intentionally created, often with Biblical precedent.

Dave Ramsey’s first baby step is to start an emergency fund. Setting aside $1,000 should help you avoid going into debt when an emergency comes. The biblical precedent for savings can be found in Proverbs.

Precious treasure and oil are in a wise man's dwelling, but a foolish man devours it.

Proverbs 21:20

Emphasizing the importance of keeping savings, and not spending all that we earn. Likewise, Proverbs 27:23-24 says:

Know well the condition of your flocks, and give attention to your herds, for riches do not last forever, and does a crown endure to all generations?

The Biblical precedent is clear: Build a savings.

But how much? Dave Ramsey recommends $1,000, but why is that? Is $1,000 a magic number?

The truth is: No, it’s not a magic number. Dave Ramsey’s talked about this, but it is a nice, round number for people to set as a goal for themselves. $1,000 isn’t meant to be a full funded emergency fund, that’s what baby step three is for, but $1,000 is supposed to be a start. Enough set aside that you can accomplish the first goal and now focus on paying off debt. Other very smart financial coaches use different numbers.

The Money Guy Show recommends building your emergency fund to your highest medical deductible as their first order of operation, and I tend to agree with that analysis. $1,000 is a great initial goal that is applicable for all people. Having enough saved up to cover your medical deductible is a great practical goal that each person can individualize to their specific situation. For most Americans, the largest emergency expense they’ll have is a medical one. Start there.

There’s wisdom and knowledge in saving, if you haven’t already built up your emergency fund – lets this be your encouragement to go start your emergency fund.

Nathan Carroll

Registered Assistant

208-918-8655

nathan.carroll@christianwm.com