Baby Step 3: My Financial Journey as a Single Parent

As the analysis of the financial and moral responsibility of following Dave Ramsey's baby steps as a single parent continues, I find myself questioning why anyone would even bring up the question. 

But let's continue. 

Previous posts: 

Irresponsibility and Baby Step 0: Commit to No New Debt
Baby Step 1: Starter Emergency Fund

Baby Step 2: Debt Snowball

Now the debts are gone, using the infamous Snowball method. For me that was a bit modified to keep my motivation going. I got rid of the small stuff, then tackled the stuff that made me the angriest. Motivation and anger are the key factors here.

For baby step 3, there are some choices. Take that momentum and keep it rolling - or pause, celebrate, then pick it back up again. Unfortunately, some people pause too long and end up stopping here. It's good enough. Until they slip back into debt.... Oops!

Baby Step 3: Save 3-6 months of EXPENSES in a Fully Funded Emergency Fund

I paused a bit, saved a bit but not the full amount, I had recently moved into a house instead of our apartment, so rent was higher, but utilities were barely more. We had space to expand business operations (wood cutting, stamp making, soap making, sewing) and eventually we chose to do foster parenting for a year. Financially we were good, stable. But I wasn't focusing on building the emergency fund though some was slowly trickling in and not funding retirement at all!

I needed a van after the first couple of months and I paid cash for it. So there was clearly enough money I could pool together when needed, but it wasn't as organized as it should have been. I took a break, but I wasn't being irresponsible with money. It could have gone; it didn't. I should have been doing the steps all along. In the meantime, I introduced teenagers to Dave Ramsey middle school financial peace and provided monthly allowances for their personal needs. It was a great experience!

After our foster parenting days closed up, I pulled out the chart above and dove back in.

• 3-6 months of living expenses: this is a tricky definition. Each family has to decide for themselves what this means. For our family, we looked at our spending and decided on what could be cut back if possible and what was absolutely necessary spending. If we knew we had no income coming in, where would we cut back to make that money last as long as possible? We set our number at that and multiplied by 6. As a self-employed person who spent several years struggling financially, I didn't want to take chances not having enough. 
• In truth, our 6 months could last at least 9 months if I know beforehand that it will be needed, so preparations could be made (cut expenses down beforehand). 
• Some people need to start with 3 months, do the rest of the stuff in this step, then come back and fill in. Do what works for your family. 
• Start the car replacement fund: this does make sense to at this stage for most families. 
• In our case, I had just bought a van in cash and still had my car. The insurance cost difference was/is minimal, with the biggest difference in cost being registration costs and gas use. These were do-able. They are both Toyotas, so if we keep them maintained we'll drive them both to 300,000 miles. The van had 72K when purchased and doesn't have 100K yet! The car is at 120K (bought with 10K) and going strong! There just isn't a need for another vehicle for decades! So I am rolling car replacement into "car repairs" sinking fund. 
• Save 20% for home purchase: I am aiming for minimum 25% and I set this one aside for last. 
• Goal: 25% downpayment and 5% of the house value in cash for any immediate or find out right after repairs, etc. We then have the emergency fund of 6 months which will have been bumped upward to reflect the mortgage payment, taxes and any utilities changes. 
• Start furniture or other non-essential replacement funds. Again, makes sense at this stage. 
• But in our case: nah. If furniture goes bad, I can get by. Two years after making this decision, our couch cushion covers are shredding. It's a 30 year old couch and SO COMFY. I cover the whole thing with a nice blanket for now, but will sew up some fold-over cushion covers in the next few weeks here. If the cushions themselves go bad? Big flat pillows are cheaper than a whole new couch. The frame and springs are still sound. 
• Whole thing does go bad? I have a love-seat and can pile stuff on the floor to resemble a couch. It's fine! 
• Seriously. I am not buying new furniture until we've been in our purchased home for at least a year AND finances are stable AND furniture would bring more benefits than not having it. 
• Move up in the car if you really need to. 
• Yeah, we didn't and still don't need to. 

Yes, I made choices based on our situation. I don't yet see anything a single parent shouldn't do here. Or should do so significantly different that following this stuff would be detrimental.