# @daveramsey on Instagram

- **Type:** Image
- **Original URL:** https://www.instagram.com/p/B0CI5w-JL5c
- **Gondola URL:** https://gondola.cc/posts/11583525-daveramsey-instagram
- **Thumbnail:** https://img.gondola.cc/tr:w-,h-,fo-auto/thumbnails/518642471e.jpg
- **Posted:** 2019-07-17T21:45:01.000+00:00
- **Account Owner:** Dave Ramsey (@daveramsey) — https://gondola.cc/daveramsey

## Caption

Once you've paid off all debt except for your home, you're on what we call Baby Step 3!

This is the point in your financial journey where you're going to save up a large emergency fund to help you weather life's storms. It will cover things that you CAN'T budget for; the true emergencies that most people without a plan tend to go into debt to cover. Things like the time between a job loss and finding another position, a hospital visit, or a leaky roof.

Here's how to do it:

1. Calculate your monthly expenses. 
This is the amount of money you need each month to pay rent/your mortgage payment, your essential bills like water, electricity, gas, buy food, and care for yourself and your immediate family.

2. Make a choice.
This emergency fund should be able to cover at least 3 to 6 months worth of expenses. Whether your fund is 3 or 6 months worth is entirely up to you. Are you single with a small rent payment each month? 3 months may be plenty for you. Are you married with 4 children? Having 6 months of expenses saved up might make you feel more secure. Once you've decided which amount works for you, you're ready to start saving!

3. Roll Baby Step 1 over!
Surprise! You've already got $1,000 to put toward your larger emergency fund.

4. Save like you mean it. 
With the same intensity you paid off debt, start saving up your 3-6 months of expenses! The sooner you get this saved up, the sooner you'll be able to move on to the next Baby Step! 
Now, you're finally getting to a spot where YOU get to decide what your financial future looks like, and Baby Step 3 is the first taste of the freedom and control you fought so hard to get during Baby Step 2.

Pro Tip: Put this fund in a basic checking or money market account that's separate from your everyday money. 
Remember, this is NOT an investment, it's insurance. 🏡 After Baby Step 3 is the perfect time to save for a down payment. I call this Baby Step 3b. Save at least 10% for a down payment on a home. 20% is better to avoid PMI. Get a mortgage that's no more than 25% of your take-home pay at a 15-year fixed-rate. 
#debtfreecommunity #7babysteps #babysteps #babystep3

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## Tags

debtfreecommunity, babystep3, 7babysteps, babysteps

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