Baby Step 3 – Dave Ramsey Baby Steps UK Version

This step can be the one that people find difficult to keep their momentum up with. We’ve had all the awesome wins from paying off our debt in BS2 and now,

Baby Step 3 (BS3) is to save 3-6 months of expenses in EF to make it your Fully Funded EF (FFEF)

It can be hard to keep pushing yourself when you really feel like you deserve a break after all that hard work in Baby Step 2 but if you can just push through this step with as much energy as possible then you’ll be sitting a lot more comfortably from now on with your emergency cash.

As we talked about in Baby Step 1 emergencies happen and they usually happen at the most inopportune time, your Fully Funded Emergency Fund (FFEF) is there to help you through the big emergencies, for example a job losses/redundancy, illness or any other big emergency that you can’t cover in your budget.

As this is originally an American plan it has a bigger role to play in the US as they have to pay for medical care so, where as a two week hospital stay for us wouldn’t be nice, it would be free but in America it could easily cost upwards of $10,000 (sadly a study in 2009 found that over two thirds of bankruptcies in America had a medical cause)

It’s important to remember that BS3 is 3-6 months of essential expenses, were not budgeting for takeaways and date nights in this one it’s just the bare bones of what it would cost you to survive 3-6 months if there was no income coming in.

Start your replacement car fund

There are no two ways about it – Cars can be a money suck. Luckily for those of us on the plan most car emergencies can be dealt with from the Baby Emergency Fund, but what if you don’t want to keep fixing the same problems and panicking before every MOT?

Well, now’s a good time to start saving for a new car. This can either be a car to replace you’re current one when it finally gives up the ghost or if you decide you want a car upgrade (maybe your family has grown and you can’t squeeze all the kids in the back anymore or you’d just prefer to not be driving around in a rust bucket!).

Start furniture or other non-essential stuff replacement fund

I don’t know if you’re anything like us but in our house currently we have one double bed being held up by breeze block in the middle as that little support pole thingy broke when we moved house, sofas that have MDF under the seat cushions as someone (Dean) launches himself on them and has broken the springs or whatever it is that stops them from being all saggy and uncomfortable and a freezer with no drawer front as it broke off. These things don’t bother me too much at the moment as we are still in BS2 but when we get to BS3 I am going to implement a fund to save up to replace all of the broken furniture in the house.