I’m just going to come out and say this straight away, Baby Step 0 (BS0) is the hardest step! It’s a lot to get your head around and a lot of changes to make but once you commit to changing bad habits you have already won half the battle.
Baby Step 0 is ‘Commit to not borrowing for anything ever again (except for maybe a house in BS3b)’
It sounds so simple doesn’t it! But for a lot of people when they start this plan they are in a perpetual loop of having to borrow to make ends meet each month – as Dave says they have ‘too much month at the end of the money’
Luckily this is a cycle that is breakable but to do this we have to chunk Baby Step 0 it down into a few smaller steps.
Now, I know what some of you are thinking – ‘Baby Step…zero? What kind of plan starts on zero?’ It’s called Baby Step 0 because it’s not exactly a step, it’s more of a case of preparing you to start the steps and get you into the best position you can be going forward.
Talk with your spouse and get on them on the same page concerning finances
They say opposites attract and this is usually made very apparent when people look at money within a relationship, normally someone is the saver and planner ‘The Nerd’ and the other is the spender who doesn’t want to be constrained by a budget ‘The Free Spirit’. This can be one of the hardest conversations to have and you won’t always see eye to eye but money worries are the leading cause of marriages falling apart because people avoid the important and potentially difficult conversations. You both need to agree to not borrow money again, there is not point in you saving £50 on the food bill one month if they go out and spend £80 that wasn’t in the budget on a night out.
Create a budget and learn to stick to it
‘Budget’ is almost like a four letter word to some people but it really doesn’t have to be. When you have a budget that works it can lift so much stress from your life, you know where your money is going each month and there are no nasty surprises – a budget can actually be freeing rather than constrictive. Again, it’s not always easy to do and it can take a good few months to get right but it is an essential part of the steps.
Creating a budget is a whole other topic unto itself so I’ll dedicated a few more blogs posts to it in the coming weeks.
Get current on the basics; food, utility, shelter and basic transportation
These are what are known as your ‘Four Walls’, the basics you need to live and function in day to day life/maintain a job.
- Food – you need to eat, fairly self-explanatory
- Basic Utilities – you need to have heat and water
- Shelter – you need a roof over your head
- Basic Transportation – you also need a way to get around (maybe that’s a vehicle or maybe its public transport)
If you are in dire straits and need to sort a budget then you approach it looking at the Four Walls first; how much money do you need to eat each month, how much do you need to be able to have a roof over your head/electric/water and how much do you need to be able to travel to work if you have a job?
If you are arrears with your rent or main utilities we also use this step to get current on them as you don’t want to lose your home/ability to earn an income.
A lot of places will offer payment plans or help to get current with bills if you are struggling, again this is something I will cover in future blog posts.
Get rid of ‘toys’ and all non-essentials (anything that will slow down your debt snowball)
This is the bit that a lot of people find most painful – getting rid of the fun stuff. For some people, the non-essentials are things like an expensive phone contract, a second car (that might be on finance) that isn’t 100% necessary, a gym membership you never use, a motorbike that only gets ridden on sunny weekends. Basically, anything that is costing you money monthly or is worth a lot of money but you won’t die without. Is it handy to have a second car? Yes! Will it kill you to have to get the bus once or twice a week if you didn’t have it? No! If you really really miss these items when you’re out of debt then you can save up and buy them again but whilst you are doing the steps you need to free up as much as possible money wise.
Cut your lifestyle
It’s the little treats each month that can really add up. Fortunately, there are plenty of ways to reduce everyday spending that are fairly painless. Do you pick up a coffee from Starbucks or Costa on the regular? It seems like a harmless treat but just one fancy coffee a week could cost you over £130 a year! Here’s a few tips on how to save money on your coffee habit.
One of the ways to save money in the supermarket is by ‘Down-Branding’, the monthly challenge in the Dave Ramesy Scorched Earth Group over on Facebook is all about this – find more details here on the groups pinned post.
Again, there are so many ways and ideas to cut your lifestyle that it deserves a post to itself which I’ll have up in the next few weeks!
Get current on ALL bills
Once you are up to date on any arrears in your ‘Four Walls’ you can then get up to date with other bills. The idea is to not accrue any more debt ever so once you are current you want to stay current.
Baby Step 0 – Dave Ramsey Baby Steps UK Version was first posted on CharlotteMusha.co.uk March 1st 2018
(this post is updated regularly with links to new information)