Dear Reader,

I usually reserve this space for articles about personal finance. Tonight, however, I would like to share with you the story of a young man who lives in our local community. His name is Steven and he was involved in an accident Thursday afternoon. He is currently in the hospital. It would be unfair to him and his family to disclose too many details, but the reality is that Steven’s situation can only be defined as “critical”. Steven is 13 years old. His mom is a member of our church. We live in a rather small county and Steven is well known and well thought of. He is a quiet, loving, unassuming kid. So, while I usually focus on personal finance, I wanted to share Steven’s story with you. For those of you who believe in prayer, I’d humbly ask that you say a prayer for Steven, his two sisters, and his parents. I have spent the better part of the last 2 days at the hospital, doing my best to help Steven’s family through this difficult period. Blogging, obviously, must take a backseat to “real life”. Again, if you believe in prayer, please say a prayer (or two) for Steven and his family.

In Christ and His Grace,

Jason (NCN)

(By the way, I’m still fiddling with the site design. I prefer a 3 column theme, but I cannot find one that I really, really like.)

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Here’s a brief rundown of what’s been going on this week at No Credit Needed:

I’ve recorded and posted a new episode of the No Credit Needed Podcast. (I recorded the episode late last night, under the stars, in my backyard. Topics include Dave Ramsey’s baby steps, a link from Five Cent Nickel, the opinions of others, and being debt-free.)

This past Monday, I hosted the Carnival of Debt Reduction. Also, my post about mini-goals was included in this week’s Carnival of Personal Finance, hosted by Fire Finance.

I’ve started a series here at No Credit Needed entitled “Dissecting Dave Ramsey’s Baby Steps“. Here’s article one in that series.

The membership over at the No Credit Needed Network keeps growing and growing and growing. To keep up with all of the latest charts, visit and bookmark this page: Chart Updates.

I hope that you are enjoying the look and feel of the sites, now that I’ve changed the layout and the theme. If you have any suggestions, feel free to leave a comment below or hit the contact tab at the top of this page and drop me a line.

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I’ve been listening to Dave Ramsey’s radio program for more than five years. I’ve attended his Total Money Makeover Live Event. I’ve read all of his books, including The Total Money Makeover: A Proven Plan for Financial Fitness and Financial Peace Revisited. I’ve watched his DVDs and I’ve listened to his CD’s. In other words, I’m a huge Dave Ramsey fan! In fact, I used his Baby Steps to get out of debt, build an emergency fund, and begin to invest for college and retirement. So, I thought I’d take a stab at Dissecting Dave Ramsy’s Baby Steps.

The idea behind the Baby Steps is pretty simple. Just like a child who is learning to walk, you must begin with baby steps. Each baby step leads to another baby step, which then leads to another baby steps. The free pdf from Dave Ramsey lists all 7 baby steps. Today, I’ll focus on baby Step 1: $1000 To Start An Emergency Fund. (By the way, I am in no way affiliated with Dave Ramsey or the Dave Ramsey Show. I’m just a huge fan!)

Baby Step 1: $1000 To Start An Emergency Fund

After creating a budget, Dave suggests that you create a mini-emergency fund of $1000. While many people who call into Dave’s show or read Dave’s books are ready to get out of debt, very few of them have any cash in savings. Dave suggests that creating an emergency fund will free people from their dependence upon credit cards. If the stove stops working, you have to get it fixed. If you do not have any money available in savings, an inconvenience becomes an emergency. You must borrow money (or use a credit card) to repair the stove. But, if you have sufficient cash reserves in your emergency fund, then you simply pay cash for a newer stove (or for a repair) and you get on with your life. In other words, a mini-emergency fund provides “insurance” against having to use your credit card.

After fully funding your mini-emergency fund, you are ready to move to Baby Step 2. Following Dave’s plan, you will not add any additional funds to your savings account until you have paid off all of your debts. This mini-emergency fund is intended to be a temporary solution to a problem that will soon go away. After getting out of debt, you will increase the emergency fund from $1000 to 3 to 6 months worth of expenses. You will drop the mini- and you will now have a fully-funded emergency fund.

Dissecting Baby Step 1:

Question 1: Is $1000 enough? Is it too much? Over the years, Dave has been consistent about recommending $1000 dollars as an adequate amount. I have heard him, from time to time, suggest a slightly smaller amount for a single person or a couple without children. Conversely, I’ve also heard him suggest a slightly larger amount for those with larger families, health conditions, or unstable job conditions.

My opinion: While getting out of debt, I had to use the money in our emergency fund on two separate occasions. Both of those “emergencies” cost less than $1000. So, for my situation, $1000 was the correct amount. Had we had an emergency that cost more than $1000, I suppose we would have had to bite-the-bullet and borrow money. Personally, I think that $1000 is a good “ballpark” figure and works well in most situations. If I was a single-guy, I’d probably shoot for $500. If I had 3 or more kids, I’d only be comfortable with $2000 or more.

Question 2: Where should I keep my mini-emergency fund? I’ve heard Dave suggest a checking account, money market account, or savings account. Personally, I keep my emergency fund in an online ING Direct savings account. Remember, you should be able access your emergency fund rather quickly, so CD’s or Savings Bond do not work, unless you are willing to pay penalties associated with cashing them in early.

My opinion: It really doesn’t matter where you keep your emergency fund, as long as you can get to it, it is secure, and you feel comfortable with where the money is at. Personally, I think that a money market account with your local bank, a secondary checking account, or an online savings account are all great places to keep you emergency fund.

Question 3: What if I’m ready to start paying of my debts? Do I really need an emergency fund? Dave always suggests that, before paying extra towards your debt, you create an emergency fund. Why? If you do not have an emergency fund, you will be forced to borrow money, when / if, you are faced with an unforeseen expense.

My opinion: I believe that having an emergency fund is crucial. Remember, even though it took a month or two to fully-fund my mini-emergency fund, those savings came in handy while I was getting out of debt. While I am sure that there are plenty of people who get out of debt without using an emergency fund, I find that most people, when confronted by a minor emergency, get side-tracked, borrow money to pay for the emergency, and then never get back to the business of debt reduction. An emergency fund turns an emergency into an inconvenience.

Question 4: What about a rate of return? How much money should I make on my savings inside my emergency fund? Dave rarely mentions rate-of-return while talking about the mini-emergency fund.

My opinion: While it would be nice to get “mutual fund” type returns on your emergency savings, I felt that the security of a money market fund or a savings account far outweighed the limited benefits of investing the money in mutual funds or stocks. Remember, the purpose of the emergency fund is to provide security should you face an unplanned for expense. You do not want to “gamble” with the money inside your emergency fund. Trust me, once you get out of debt, you’ll have plenty of time to learn about investing and growing your money.

I welcome your questions and comments. Have you used Dave’s Baby Steps? Do you have a question that you’d like me to answer? Do you disagree with Dave? Do you agree with him? How about me? Let me know. One thing: Please keep comments and questions focused on Baby Step 1.

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Stop worrying about what other people think about the car you drive.  Realize that an automobile is simply a mode of transport.

Stop worrying about brands and designer labels.  Your real friends don’t care where you bought your shirt.  If they do care, get new friends.

Stop complaining about the “unfairness” of life.  Wishing that you were “someone else” will not make it so.  You cannot change your past, you cannot change your parents, you cannot change your background, but you CAN begin to change your future.

Stop blaming other people for your financial situation.  Take responsibility for your actions.

Stop borrowing money.  If you want to get out of debt, you must make a conscious decision to stop borrowing money.

Stop throwing your money away on books you will not read, movies you will not watch, games you will not play, food you should not eat, clothes you will not wear, furniture you do not need, and toys your kids will not like.  Focus on long-term value instead of short-term (impulse driven) vanity purchases.

Stop living without a plan or a purpose.  Create a budget and use it.

Stop falling for get-rich-scams.  Instead of watching silly late-night infomercials about real estate investing, get a good night’s sleep, look for a better job, and start to build up your savings.

Stop arguing with your spouse about money.  Start talking with your wife about money and personal finance.  Also, talk to you kids about money and the value of hard work.

Stop feeling guilty about past financial mistakes.  Focus on your future, not you past.  Work diligently to pay the people that you owe and then create a plan to provide a secure financial future for yourself and your family.

Stop getting angry with people when they tell you to “stop”.  Consider that the person telling you to “stop” just might be right!  Getting out of debt requires sacrifice.  It requires an inward determination to be different.

For more than two years, I’ve forced myself to examine my own behaviors (and the motivations behind my behaviors).  I realized that changing my financial future required that I find NEW motivations, so that I could adopt NEW behaviors.  Now I am motivated by my love for my family, a real determination to be different, and a confidence in the direction that I am headed.

There are no secret formulas for getting rich or getting out of debt.  All of the tips, tricks and techniques in the world are “useless” unless they are combined with determination, motivation, and behavior modification.  It is NOT enough to simply DESIRE change.  You must take the steps necessary to actually CREATE change.  And, sometimes, the first step in the right direction is to stop stepping in the wrong direction.

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I thought I’d take a peak at my Roth IRA and see how it was performing.  My wife and I have four primary retirement funds.  I have a 403b through work, she has a pension plan through her work, and we both have Roth IRAs.  I’d breakdown my investment philosophy thusly:

Pension Plan:  My wife’s plan will provide guaranteed retirement income, so, no real worries here unless she were to change jobs or get sick.

403b: I’m pretty aggressive with my 403b investments.  I invest in a small cap mutual fund, an international growth stock fund, and a REIT.

Roth #1 (My Wife’s):  In this account, we stick to “safe” index-based ETFs.

Roth #2 (My Roth):  In this account, I invest in single stocks, trying to buy stocks that have a dividend and / or appear to be “good values”.

(I’m not an investment professional, and I would NEVER give investment advice.  I’ve read several books on investing, and every time I read a book, I think, “NOW I understand!”.  Then, I read another book and I completely change my mind!  The above breakdown represents what I’m doing TODAY.  By tomorrow, I may change my mind and become more conservative, or, conversely,  I might change my mind and become much more aggressive.  Honestly, my main goal at this point is to save as much as I can, upfront, and learn as I go along.

Here’s the current chart for my Roth IRA, Roth #2:

As you can see, I purchased 60 shares of PEP (Pepsico) in April.  Since then, the price of the shares has gone up, which is always a bonus.  I’ll update this account, and the others, from time to time.

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Welcome to the 88th Edition of the Carnival of Debt Reduction. If you are new here, I’m “NCN” which stands for No Credit Needed. My long-term personal finance goal is to live my life “No Credit Needed”. I’m trying to live my life without ever borrowing money! Before you read any further, take a second to subscribe to No Credit Needed, so that you can keep up with me and my journey. Will I make it? Subscribe and find out!

88th Edition of the Carnival of Debt Reduction:

There are many components of a well-designed debt reduction, but, basically, radical debt reduction comes down to the following things:

Spend Less Than You Earn:

The Frugalist gives us 27 Tips and Tricks for reducing gasoline usage. Remember, the more money that you can “save”, the more money you will have available for debt reduction!

Campus Grotto writes about ways to save money while in college. (I did not attend college, so, I’ll just add that these tips will work for those of you in trade school, high school, or those who might work for a corporation which offers lots of “perks”.)

How To Make A Million Dollars with a post about saving money when dealing with Comcast cable. Personally, we use Dish Network, and if it were not for about four shows, we’d shut the whole thing off and just read books (or personal finance blogs!).

Find New Sources Of Income:

My Two Dollars made mad cash selling stuff on Craig’s list. (I’m a huge fan of eBay, Craig’s list, yard sales, etc. Look around your house… I’ll bet that you have $300 (or more) worth of “junk” just sitting around, ready to be sold! Think “outside of the box”.

Get Motivated:

Prime Time Money with a post about “Man Vs. Debt”. What would YOU do if you HAD to change your personal finances, right NOW!?!

Blogging Away Debt recaps a NY Times about the “credit trap”. Great article, written by John Leland (the same dude who interviewed me a few months ago!)

Everybody Loves Your Money with a big post about banks, credit… tons of stuff! This article spans SEVERAL categories! ELYM, you rock!

Use A Spending Plan And Change Your Habits:

The Wastrel Show writes an article about using a notebook to control spending. (I love it!)

Personal Finance Blog Articles talks about creating as household budget. (I’m a big fan of using a budget to control spending.)

Binary Dollar with ideas about changing your personal finance-related behaviors. It is super important to realize that blaming “circumstances” and “others” can only last so long. Eventually, we must look at the “man in the mirror” and hold HIM responsible for our financial futures.

Beyond Sanity shares 8 ways to survive (and thrive) while getting out of debt. (Might I add, being debt-free ROCKS?!?)

Understand How Credit Works:

Michael Emilio with a post about improving your credit.

My Credit Scores with a single idea about improving your credit.

Money Smart Life with an interesting post about credit card companies… and their honesty! Wowsers! At first I thought, “No WAY!” but, then I read the article, and MSL is correct!

My Credit Scores writes about how to stop “junk mail”. (Hint: If you don’t RECEIVE credit card offers, you are less likely to APPLY for credit cards. Brilliant!)

There you go, several post about saving money, living on a budget, finding motivation, and improving your credit. Normally, the Carnival of Debt Reduction is a bit more “focused”, with posts that are about.. ummm.. debt reduction. But, this week, the articles were a bit more “general” in nature. So, if you are looking for posts that focus more on debt reduction itself, I’ve written a few over the past two years.

10 Ideas About How To Begin

Almost Everything I Know About Debt Reduction

Finally, if you are new to my site, may I suggest checking out the No Credit Needed Network and the No Credit Needed Podcast. Both of those sites work in “connection” with No Credit Needed to keep you informed about debt reduction, debt repayment, frugal living, saving money, and investing for your future. Thanks for stopping by and comments, as always, are welcome!

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