Can buying a house be a 'Baby Step'?
I’ve been trying to get control of my money, and the other day I was looking at your plan. Where does buying a house fit into the Baby Steps?
Dear Dave,
I've been trying to get control of my money, and the other day I was looking at your plan. Where does buying a house fit into the Baby Steps?
Stacy
Dear Stacy,
Let's call it Baby Step 3b. Baby Step 1 is saving up $1,000 for a beginner emergency fund. Step 2 is paying off all consumer debt from smallest to largest using the debt snowball. Then, Baby Step 3 is where you top off your emergency fund with three to six months of living expenses.
Once you've done that, it's time to save up for a down payment of at least 20 percent on a house. If you take out a mortgage, make sure it's a 15-year, fixed rate loan, where the monthly payments are no more than 25 percent of your monthly take-home pay.
Doing it this way may delay your dream of being a homeowner a little bit. But buying a house when you're broke is the fastest way I know to become a foreclosure statistic!
-Dave
Dave Ramsey is America's trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover,EntreLeadership and Smart Money Smart Kids. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.