Does the amount you advise saving for a beginner emergency fund in Baby Step 1 double for a couple, or does it stay the same?
Whether you’re single or married, Baby Step 1 of my plan is to save $1,000 as quickly as possible for a starter emergency fund. This may not sound like a lot of cash to have on-hand in the event of an emergency, but you need to remember the $1,000 figure is a temporary thing.
Baby Step 1 is saving up $1,000 for a beginner emergency fund. Baby Step 2 is paying off all debt, except your home. The vast majority of folks working my plan are debt-free, except for their mortgage, in two years or less. Then, you move to Baby Step 3, which is increasing your emergency fund from $1,000 to three-to-six months of household expenses.
In reality, we’re talking about a pretty short period of time where you’d have just $1,000 in emergency savings. Plus, it serves as an exercise in financial discipline. A lot of people have nothing saved before beginning the Baby Steps.
If that makes things seem a little scary at the start, it’s not necessarily a bad thing. A healthy level of fear can be a fantastic motivator. I don’t want anyone constantly living their lives in fear, but that added push—that sense of urgency—can make you work harder to get out of debt, and move on the Baby Step 3, as quickly as possible!