Baby Steps 4, 5, 6: My Financial Journey as a Single Parent

Previous posts: 

Irresponsibility and Baby Step 0: Commit to No New Debt
Baby Step 1: Starter Emergency Fund
Baby Step 2: Debt Snowball
Baby Step 3: Fully Funded Emergency Fund



Baby Steps 4/5/6 are where we are right now.

These steps are done in order, but at the same time. That sounds convoluted!

• Start Baby Step 4; get it going consistently. 
• Start Baby Step 5; get it going consistently. 
• Finances stable doing those things? Keeping Murphy at bay? 
• Baby Step 6: get it going consistently and nail it! 

Easy-peasy! Debt is gone, committed to no new debt, definition of emergency is now narrowed down drastically, car and furniture replacement funds are in place along with 3-6 months of standard expenses, so we can really hammer these steps down hard! 

My journey: 

I wasn't sure if we were going to buy a house or not, so I had a goal set up for it but I didn't start actually funding it until I made the decision that yes home ownership would be the most appropriate experience for us. Before that decision was made in finality, I had already started saving for retirement. 

Baby Step 4: Start contributing 15% of your paycheck to retirement. 

• Participate in any match that your company provides. Max that out. 
• I am self-employed, so a SEP IRA is what I use. No match for me, but I have a set, relatively low amount that is contributed every year from the get-go. 
• Fund the ROTH IRA. 
• Max it out. 
• If that's not adding up to 15%, go back and add to your company's options or another plan. 
• For now, stop at 15%!!!

Baby Step 5: Save for your kids' college fund. 

• Use whatever options you have available to you do set aside some funds for your child's college. 
• In our home, we believe that college and other such higher education experiences should be the responsibility of the one benefiting from them. My son is expected to save some of this monthly allowance towards long-term saving which can include college. He is expected to bring in some sort of part-time income while in high school to save minimum half for college. He is also expected to prepare as well as possible for the SAT and ACT as well as actively seek scholarships and grants wherever possible. 
• He will work through college as needed. If he is making good grades, I will then fill in the rest of the gaps. 
• We worked these requirements out together. He's been raised on Dave Ramsey. He saw me paying down some ugly student loans. He's got it. 
• Thus, I am not really setting a significant amount of money aside just now. I am focusing on growing our family business, keeping my own retirement building and saving for a home down-payment. We have seen that these things will have the longest term positive impact on our finances. I will help cash-flow him through college as needed when the time comes. He has a good head on his shoulders and is currently applying for jobs, learning all about scholarships and has started investing some of his money. 

Baby Step 6: Finish paying off the house. 

• Well, I didn't buy one, so this is where I shifted "save for a downpayment."
• Right now, I have adjusted numbers to 18% for retirement since it produces a nice round number and the rest of our flexible money for the home down-payment. 
• I adjusted our budget to act as if we are living on 25% housing expenses (including utilities). Anything not spent in that category is automatically moved to the down-payment savings account. 
• I am blessed with a decent business and a low-cost-of-living area that allows us to do this. If I lived elsewhere, I would raise that percentage to a 5 or 10 number above our actual expenses in order to have some padding to send to savings. 
• This gets me used to living at that number already. 

Back to the statement that started this series of posts: 

I think it’s irresponsible as a primary parent to follow his plan to a T. You’re one person in charge of keeping yourself (and however many kids) afloat. You have to do things a little different than nuclear families because no one has your back when the ish hits the fan. Dave hasn’t lived that life.

What, in any of these steps, is irresponsible for a single parent to do????  


I'm not at Baby Step 7 yet, maybe that's where the irresponsibility of following the plan to a T comes in?