Remember back on Baby Step #1 you saved your baby emergency fund which was only about $1000 or so? Well, guess what!? Now it is time to get that piggy bank really full!!
At this point in the game you should have ZERO debt, except for your house payment. This means no car debt, no student loan debt - NADA!
This is not time to start investing or saving for college or trips, this is where you save for a 3 - 6 months of expenses in an emergency fund. This is absolutely necessary so that if something major should happen, like a job loss, you will not go back into debt.
This step should move a lot more quickly than paying off your debt. All of the money that you were so diligently putting towards paying off your debt you put into your savings account. Determine for yourselves whether you need 3 or 6 months of expenses saved. This is a personal decision based on personality - are you a the type who needs to feel the security of 6 months to feel safe? and based on the risk of your situation - are you at risk for losing your job? are you both working? and so on...
This step may seem easy and great, but for some it may be the hardest. You finally get to the point of paying off your debt and now you still have to stick to that strict budget! Just think of the freedom when you have no debt and actually have a full funded savings!! Push through and make it through this step.
One more thing...remember those rewards you set for yourself? It is probably wise to have some type of reward before you jump into this step, after all you are DEBT FREE!
Check out the other posts in this series:
Day 1 ~ Budget
Day 2 ~ Cash is King
Day 3 ~ Change Your Mindset
Day 4 ~Shaving Down the Grocery Bill
Day 5 ~ Think Outside the Box
Day 6 ~ Baby Steps
Day 7 ~ Get Together
Day 8 ~ The Reluctant Spouse
Day 9 ~ Reward Yourself
Day 10 ~ No Credit Cards Allowed!
Day 11 ~ Emergency Fund
Day 12 ~ Bye Bye Debt
Day 13 ~ Earning Extra Income
Day 14 ~ Infrequent Payments
Day 15 ~ Avoid Impulse Shopping
Day 16 ~ Consignment Stores
Day 17 ~ Making Cuts
Day 18 ~ Be Careful Who Your Friends Are
Day 19 ~ To Tithe or not to Tithe
Day 20 ~ Making the Hard Decisions
Day 21 ~ Co-signing
Day 22 ~ Borrowing from Family or Friends
Day 23 ~ Start Young
Day 24 ~ Emergency Fund #