Dave Ramsey’s Baby Steps (and Why They Work)

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I am a huge fan of Dave Ramsey’s baby steps. He outlines the steps in his book, The Total Money Makeover. The baby steps helped us get rid of $52,000 in consumer debt in just 18 months. And we’re not alone.

Millions of people have taken his course and used them as well. This means you can be confident that the baby steps will help you. If you use them right, you will build a strong financial foundation for you and your family.

Today we’re going to go over each step in detail. We’ll explain how they are vital to speeding up your path to financial freedom.

Dave Ramsey’s Baby Steps

  • Baby Step 1 – $1,000 in an Emergency Fund
  • Baby Step 2 – Pay off all non-mortgage debt using the Debt Snowball
  • Baby Step 3 – 3 to 6 months of expenses in savings
  • Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
  • Baby Step 5 – Fund College for children
  • Baby Step 6 – Pay off your home early
  • Baby Step 7 – Build wealth and give a bunch away

Sounds doable, right? It is. But first I’m going to suggest an activity.

Determine Your “Why”

One way to motivate yourself to do the Baby Steps is to write down your “whys.” Your “whys” are the reasons you want financial peace. Everyone’s “whys” are different.

Maybe you want more time with family. Or you want to travel the world. Maybe you want to become a missionary and help people. Or maybe you want to start your own business.

The nature of the why doesn’t matter. However, it’s important to choose whys that are important to you. Why is this important? Because they’ll be the driving force behind completing the Baby Steps.

Use Your “Whys” for Motivation

Completing the Baby Step system won’t happen overnight. Ramsey says everyone can do it in seven years or less.

But seven years is a long time. Things happen. The furnace goes out. You need to replace a car. Sometimes you’ll get bored and spend extra cash. You might get stir crazy and take an unplanned vacation.

These types of life circumstances cost money. And you’ll need to take from your savings to pay for them.

That means the baby steps get put on hold. You might find that discouraging. If you get discouraged, you might want to give up. It’s easy halfway during the process to stop. You think “I’m doing better than most people.”

The temptation to give up can get strong. When that happens, revert to your list of whys. Post them on the wall in your office. Add pictures for inspiration. Look at that picture of your kids when you want to give up. Remind yourself why completing the Baby Steps matters. Then, get back on track.

If you have a setback, don’t give up. Instead, get up. Brush yourself off, get up and resume course. Use your whys to get yourself back on track. Keep them in the forefront of your mind at all times.

After you’ve got your list of whys, you can move on to the steps. I’ve listed them all and explained them well.

The Breakdown of Each Step

We’re going to help you figure out where you are in the process. This is important. Let’s start with a breakdown of what each baby step entails. See where you’re at and jump in on the step from there.

1. Save $1,000

Dave calls this step the “baby emergency fund.” It might seem silly to start by socking a grand in the bank. After all, you could be putting that money toward reducing debt. But Dave has some good logic behind this first baby step:

“Unexpected expenses happen to everyone. And for some reason, they tend to happen more when you’ve just committed to getting out of debt. In order to avoid being tempted to use your credit cards to handle these unexpected costs, save a quick $1,000 and put it aside as a buffer from those emergencies.”

So what happens if you’re paying off debt and you have an emergency? Use some of the money in your starter emergency fund. Stop paying extra on your debt for now. Pay cash for your emergency from the fund. Then, put any extra money into your starter emergency fund until it reaches $1,000 again.

After it’s at $1,000 again, you can resume the debt snowball. Handling emergencies this way will help ensure that your credit card balances continue to go down. They won’t go up due to emergencies.

Bonus: The starter emergency fund serves as training ground for paying for emergencies in cash. It helps you develop a habit of saving money too. At some point, you’ll grow your emergency fund to a higher balance. After you do that, you can start making your money work for you. How? Just take $10 and open an interest-bearing savings account, like the Aspiration Bank Savings Account. They pay up to 2.00% interest on savings accounts and charge no service fees.

2. The Debt Snowball

The debt avalanche (paying off debts according to the highest interest rate) will save money in the long run. However, the debt snowball is often a better choice for debt payoff. Why? Because it keeps people motivated. Getting debt free is a long journey for many. The debt snowball gives you quick wins from the start. The quick wins can motivate you to stay the course.

What is the debt snowball method? You start by listing your debts from smallest to largest. Make the minimum payment on all debts, except the smallest one. Put any extra funds toward the smallest debt until it’s paid in full.

Then, you tackle the next smallest debt on your list. Pay the minimum payment on that debt. Add in the minimum payment you were paying on the smallest debt too. Next, take any extra funds and put that money toward the next biggest debt. Do this until it too is paid off.

Keep using this method with all debts. Pay the minimum on them. Then add the minimum payments from the debts you’ve paid off. You’ve already been paying those payments. This means you won’t have any extra cash outlay. The extra money you have during the month are bonus payments. However, they add up quickly.

It’s easy to coast with the smaller amount of payments due. However, keeping your payments the same means you will pay off your debt at a faster rate.

Bonus: Being able to mark those smaller debts as “Paid in Full” faster will motivate you. It’ll give you faith that you can indeed win the battle against debt.

Download the Debt Snowball form here.

3. Finish the Emergency Fund

Ramsey’s next suggested baby step is to increase your emergency fund. You’ll save until it contains 3 to 6 months’ worth of household expenses.  It might seem daunting to save that much money.

However, Ramsey has a method for doing it quickly. If you’ve finished Baby Step 2, you are free of consumer debt. The only debt you have left should be mortgage debt.

Next, you’ll take the money you were using to pay down debt. Don’t coast on your new, smaller payments. Instead, take the money and make a “payment” to yourself. Use the money that you were putting toward your debt snowball. Make regular savings account deposits with it. Doing so should help you finish your emergency fund faster.

A 3 to 6 month emergency fund will keep you and your family protected. You’ll have a nice buffer against major financial emergencies. Troubles such as job layoffs and major home repairs won’t require credit cards. Instead, you’ll pay for them with cash.

Bonus: Developing a habit of saving BIG money will make you into a rock star saver.  It’ll make it easier for you to save for big things. We put money into a separate countdown fund for expected major expenses.

Then we can pay cash for things like cars and vacations. Learning how to save big money helped us do that.

4. Maximize Retirement Investing

Look at you now! Your consumer debt is gone. You have an emergency fund that’s fully funded. It contains 3 to 6 months’ worth of expenses. Next, Ramsey suggests maxing out your retirement investing.

For 2018 this means contributing up to the legal maximum allowed by the IRS. That maximum is $18,500 a year for 401(k)’s and $5,500 a year for IRAs. Ramsey suggests saving 15% of your income.

If you can do that without going over the IRS limits, go for it. Note that those 50 and over can add more cash to retirement accounts.

  • $6,000 to their 401(k)
  • $1,000 to their IRA holdings.

These are called “catch-up” contributions. If you can make them, do it. Maxing out your retirement investing helps ensure your golden years will be secure. The more you save, the more comfortable you’ll be.

5. Prepare the Kids’ College Funds

There’s one thing I like about the college section of the Total Money Makeover book. Ramsey is clear that college doesn’t guarantee career success for your kids. He goes into great detail about how important it is to calculate the cost vs. the benefit of college. Do this before you send your kid out to spend $25,000 a year on schooling.

It’s important during this step to talk with your spouse. Decide how much money you can afford to set aside for your kids’ education.

The dollar amount is up to you. Be sure you research the different college saving options too. Make sure what you plan to contribute to your kids’ college educations is affordable for your family.

In addition, make your plan clear to your kids. They should know what to expect from you where college financing help is concerned.

As a final tip, consider college alternatives. You may end up saving big money in the process. Here are some ideas:

Consider Trade School

Your child may be happier in a trade school. He or she might be better suited for a trade. There is a shortage of workers in fields like:

  • electrical
  • plumbing
  • heating, ventilation and air conditioning
  • construction

And other trades. Because of the shortage, trade schools are often cheap. And they’re paying large salaries to those working in trade industries. Talk to your child regarding their interests. They might prefer a trade over a desk job.

Take Some Classes at a Community College

Your child may be able to complete general classes at a community school. Community colleges are cheaper than universities. See if your child can take some classes at a community college. But check with his/her university to ensure the credits will be able to transfer.

Research Scholarships

Foundations and companies everywhere offer scholarships. In fact, Well Kept Wallet has started its own scholarship program. Get the details on the Well Kept Wallet Scholarship here.

Your local college financial aid office can help too. Scholarships can go a long way toward paying for college costs.

Using these tips can help you minimize college debt. Or you may be able to avoid it altogether.

6. Pay off the Home Mortgage

So you’ve paid off all of your consumer debt. You’ve got a fully funded emergency fund. You’re contributing at least 15 percent of your income toward retirement. In addition, you have a plan for contributing to your kids’ college educations. What’s next? It’s time to dump the mortgage.

Can you imagine being mortgage free? Not owing anybody anything? They say the grass feels different under your feet when you own your home. Now it’s time to find out.

You’ve created a solid budget so that you know where your money goes. Now take all of your extra funds. This includes funds that were going toward your debt snowball. And the amount you were putting in your emergency fund.

Put it all toward that mortgage loan. Get it paid off in full as soon as possible. Put any extra money toward the mortgage loan too. Extra money could include:

  • gifts
  • tax refunds
  • work bonuses
  • overtime pay

And any other money you don’t usually get. Since it’s unexpected money, you won’t miss it. Don’t spend it on other stuff. Instead, use it to get that mortgage gone.

The less interest you pay to the bank, the more money you have. You can give it to worthy causes and use it to fulfill your dreams. It’s your job to find out what those dreams are. Which leads to Baby Step #7.

7. Build Wealth and Give a Bunch Away

Here’s the best step! At least in my humble opinion. You don’t owe money to anyone. And you’ve got a nice stockpile of savings. What does that mean? It’s time to start building some serious wealth.

That wealth-building can come in a variety of forms. You can invest in mutual funds. Or, you can invest in real estate. If you want, you can sock the money away in a high-interest earning bank.

The goal is to put as much money as possible toward whatever your financial goals are. That might mean traveling the world. Or it might mean building your dream home. Maybe you want to live life as a philanthropist.

You’re completely debt free. Now you’re working at having amassed a serious amount of wealth. The world is your oyster, and your dreams are unlimited. How does that sound? Good?

Start working the baby steps in your life today. Work toward achieving all of your life’s goals.

Have you started working Dave Ramsey’s Baby Steps? If so, what was your experience like? Leave us a comment on our Facebook page. Feel free to share this post on your social media accounts too. Let’s help others get financially free. 


61 responses to “Dave Ramsey’s Baby Steps (and Why They Work)”

  1. Abigail @ipickuppennies says:

    I don’t think we used the debt snowball when we had student loan and credit card debt because we just wanted to be done with the loans. But we tried to space the extra funds out a little bit to make sure we were making a dent in the credit card.

    Still, personal finance is contingent on a lot of psychology, and the snowball method really does help a lot of people keep making progress.

    We’re at the point where I’m finally able to worry about maximizing retirement, now that we saved the $25k for my husband’s dental implants. Unfortunately, right as we did that, our income took a hit. So before we can maximize retirement, we need to make sure we have a bit more padding in savings and that we’re not having to actually dip into the account. Then I’ll turn my attentions toward a SEP.

    • Laurie @thefrugalfarmer says:

      You guys are doing great, Abigail!! I’m so excited for you that you can focus on retirement now – Woohoo!

    • Deacon Hayes says:

      The debt snowball isn’t necessary to pay off debt, but it definitely worked great for us. My wife and I decided to take Dave Ramsey’s Financial Peace University class and after learning about the snowball method, we realized that was just we we needed. As you mentioned, it was the psychological benefits of paying off small debts quickly that made us stick with it and pay our debt off in 18 months.

      I’m glad to hear that you saved up money for your husband’s dental implants. Saving up $25,000 is no small feat.

      I hope that you are able to get your emergency fund padded soon so that you can start maximizing your retirement!

      • Paula says:

        1- I started baby step #1 but would always use it when necessary. But, now I put a block on my savings (I could put in but not take out). Do you think I did the right thing?

        2- Can I use my saved money for vacation/visit family (I do it once a year but first time thinking about saving)?

        • Deacon Hayes says:

          With respect to number 1, making the money less accessible is a good thing as long as you can get to it in the case of an emergency. As for number 2, you will want to create a separate savings account for vacations and not dip into your emergency fund.

    • Sarah Allen says:

      You did a great job! We used Dave Ramsey’s plan and paid off $50k in under a year. It was such a rush. And now we have a budget that allows us to spend. We have so much less stress! We were so inspired by the process that we became financial coaches. Dave is the man!

  2. Vickie says:

    We used the debt snowball to pay down our debt. We’re currently on Baby Step 3. It’s taken a while, but then again our debt didn’t happen overnight either. We’re never going back there again!!

    • Deacon Hayes says:

      That is great to hear, Vickie. The debt snowball was huge for us too. It gave us the motivation we needed to keep going even when things got tough. I’m glad to hear that you are never going back. We’re never going back to that “Debt” lifestyle either!

  3. Jenna says:

    We have not purchased a house yet. Where would we figure that in? After our 3-6 month expenses are saved should we start saving for the down payment? We are tackling debt now, but the house is the goal. 🙂

    • Deacon Hayes says:

      After Baby Step 2 you could start on saving up for a house. So, once all of your consumer debt is gone, then you would begin saving up for your down payment. This way you don’t have the burden of your consumer debt while making a mortgage payment. I hope that helps!

      • Jenna says:

        Thanks so much!!

        • Sarah says:

          No. After baby step 3, you start what some call bs3b, and save a down payment. First, fully fund your emergency fund to keep Murphy away, and then save for a down payment.

      • KB says:

        Actually, Dave has you save for a house after Baby Step 3. You would not want to move into your home without a fully funded emergency fund. After you have your 3-6 month emergency fund, you can work on saving for a down payment for a couple of years before you start on Baby Step 4 (saving for retirement).

        Keep in mind, when looking for a home, Dave’s guideline that you should only get a 15-year fixed rate mortgage and the total mortgage payment should be no more than 25% of your take-home pay.

  4. Naomi says:

    Would you suggest a balance transfer to a 0% APR card for 18 months and then start the debt snowball?

    • Deacon Hayes says:

      I would suggest starting the debt snowball today, not waiting 18 months. A balance transfer can be helpful, but it is a short term fix. We did consolidate some of our high interest debt, though, so that we could pay it off faster. I hope that helps!

  5. Naomi Miller says:

    Would you recommend consolidating my debts onto a 0% interest for 18 months credit card for the debt snowball?

  6. Omega says:

    I’m worried about waiting to pay off all of my student loans (my only debt) while only having $1000 in emergency funds. Can I increase that number or work on steroids 3 and 4 at the same time?

    • Deacon Hayes says:

      You can definitely increase the baby emergency fund to be more than $1000. But just keep in mind that the more money you save means less you have to put toward debt.

  7. Heather Craft says:

    Dear Mr & Mrs Deacon, I am interested in your $7 plan. I am a single mother of 3 boys with SLE (Lupus), Rheumatoid Arthritis, Chronic Fatigue Syndrome, Fibromyalgia, and severe migraines that require Botox injections. I miss 3 months of work, at least, every year due to illness, so I’m currently carrying 3 payday loans that I used just to pay utilities, rent, car payments and groceries. I want to order your plan in 1.5 wks when I get paid again. Please keep us in your prayers.

  8. U.M. says:

    For a fixed rate loan, should you put extra money toward the interest or the principal? Or, does the lender make the choice for you?

    • Deacon Hayes says:

      After the minimum payment is met, then you want to put any additional amount toward the principal. Most lenders will have an option to pay extra toward principal.

  9. Lacy says:

    I have been struggling with trying to get, and keep, our finances in line. I am feeling like I am getting nowhere. I just do not know where to start. We do NOT have any credit cards right now, but we do have 3 loans out that we are trying desperately to get rid of, plus rent, car, insurance, phone, etc. We are struggling to make those payments. My husband is the only one currently working as I was laid off a year ago due to the oilfield plunging. What would you suggest?

    • Lacy says:

      Adding to my comment above, my husband works offshore, so the way his checks come makes it hard. That is basically the difficult part. One check that he does get is a small one, because of crew change, comes on a Tuesday. So, the week he goes back to work is when that little check comes. With that being said, one month we will have 2 big checks – a 12 day check, and a full 14 day check. The next will be the 1.25 day and the 12 day. So, that’s why I can’t seem to get ahead, balance all our bills, or even save.

      • Deacon Hayes says:

        Hi, Lacy. That is great that you are looking to get a handle on your finances and pay off your debt. The best place to start is with a budget. I have a free one you can use right on this website. Once you have filled it out, the next thing I would do would be to put all of your debts on paper using the debt snowball. Any extra money that you have, use it to pay off the smallest debt and pay minimum payments on everything else. I hope that helps and keep me posted on your progress!

  10. Financiallyexhausted says:

    I’ve been in a financial rut for some years and can’t seem to get ahead. I barely make enough to pay my bills. Therefore, I don’t know how I can save another penny. How does one work your plan when living pay check to pay check?

    • Deacon Hayes says:

      That is definitely a frustrating position to be in. There are only two solutions: increase your income, or decrease your expenses. If you have already decreased your expenses, then the only thing you can do is find ways to make more money on the side. I have an article about 40 plus side hustles that can help you with that if you’re interested.

  11. Michelle says:

    I would really like to start this program. However, I would like a little advice about paying off consumer debt. I have 2 credits cards with small balances (probably around $2,500 total), one auto loan (about $10,000 remaining) and the rest of my debt is federal student loans that are currently defferred based on my income. There is a whoppin’ $76,300 remaining! Would you suggest that I pay all of that off before finishing my emergency fund and retirement fund? If not, what do you suggest?

    • Deacon Hayes says:

      The first thing you want to do is have a Starter Emergency fund of at least $1,000. If you have that, then you will want to start paying down any consumer debt like the credit cards and the car loan using the Debt Snowball method. At that point, you could consider investing in retirement if your employer matches. But when my wife and I got out of debt, we decided to tackle our student loans before funding retirement. Obviously, that is up to you, but you definitely want to knock out those other three debts before you finish your emergency fund or retirement fund.

  12. Sharon says:

    How long should it take to pay off $7800 in credit card bills with this snowball method?

    • Deacon Hayes says:

      It really depends on how intense you get with paying off your debt. If you were able to cut your expense $500 and then make $500 per month on the side, that would give you $1,000 per month to pay down your debt. At that rate you could pay off $7,800 in debt in less than 8 months!

  13. Veronica says:

    Would it be possible for a single mom to pay off part of her debt with this method? I’m making car payments and not even owing on a house, but paying rent, bills, and everything with no extra income or child support! Would there be any other help, maybe?

    • Deacon Hayes says:

      This is definitely the way to go in any situation. If you are paying car payments, you may want to look at selling the car, even if it is upside down, so that you can have that money to throw at your debt as well.

      • Robyn says:

        If this woman sells her car, how will she go to work to pay the bills?

        • Deacon says:

          Of course, I don’t know your exact situation, but there are a lot of alternatives. You could motorcycle, moped, walk, bicycle, ride with a friend, take a bus, ride the subway, or use Uber. Some of these might not be options that work for you depending on where you live. For instance, not everyone has access to Uber or a subway. The idea is to think outside the box to see if there ARE alternatives that work for you so you can put your money to work getting out of debt.

  14. Cindy says:

    Thank you for sharing. The state of Virginia collects personal property tax (on cars) annually. Where in the steps do I fund this expense? Also, where do I put money reserved for annual school tuitions for my children?

    • Deacon Hayes says:

      You would create what is called a “countdown fund” before Baby Step 1 since these are planned expenses. This is where you would set aside a specific amount of money into a bank account for that expense. For instance, if your property taxes were $1200 per year, you would put $100 per month aside so that when the time comes, you have the full amount to pay.

    • Karla Denton says:

      I started this “property tax escrow “type of account as my very first financial freedom step. I have a separate savings account just for once a year bills. Mentally, I consider that those funds are already spent, I just haven’t sent the payment yet. They can’t be used for anything else. They are committed.

  15. Miquel says:

    This is so helpful. Thank you. Do you recommend stopping 401k investments all together while tackling the initial steps, or just dropping to company match until you get to the 15% stage?

  16. Joelle says:

    We have just completed steps 1-3!!!! We really want to pay off our house and we do not plan to contribute to our children’s college education as we feel they can do that themselves if they don’t obtain scholarships. We do help with some living expenses but that can be figured into our monthly budget for them. Our first two have earned full ride athletic scholarships. The third already has full offers, and the next 4 will either do the same or we will advise community college/cheaper ways that they will have to pay for. That being said, must we begin 15% towards retirement BEFORE starting to pay off our house? We are ages 45 and 50. We are also interested in doing real estate investing as wanted to use that as our retirement income. Could we take 15% of our income and invest it in real estate vs funds? I am also wanting to return to school and finish my RN degree. That will require a few years expenses, but then my income could also serve towards retirement. We welcome your thoughts. Thank you.

    • Deacon says:

      Nice job on your progress so far! It’s a very personal decision as to what you do next. If you need advice you should consult a finance professional that can really dig into the numbers with you.

  17. Sarah M. says:

    I have been working the baby steps with my husband for several years now and we hope to have our home paid off before our oldest starts college in 3 1/2 years. I just discovered your book and have it sitting with my Chris Hogan book, “Retire Inspired”. Your book is so inspirational. Thank you for the great information and encouragement, Deacon! Good luck to you on your journey as well!

  18. ROBERT HAYES says:

    I disagree with paying your home off. That money should be invested elsewhere for maximum returns.

  19. Becky says:

    Through four job losses, a heart attack, and viral meningitis that paralyzed my husband for months, it has taken us over 3 years to finally have baby step #1 completed as of Feb 15th 2018. I only have income 9 months out of the year. I have opened up a side business of custom embroidery and sewing/quilting. Luckily I already had my machines so, there was no additional expense in purchasing them. However, that is what I have been socking away on top of paying for meds for 2 type 1 diabetic boys and my husband’s many medications. It can be done, some just may take longer than others. For us, it has taken 3 years.

  20. Maria says:

    My husband and I purchased a small $100,000 life insurance policy 20 years ago (I am 56 years old and my husband is 63 with a lot of maintenance medications). Since I am 7 years younger than my husband, they set up my husband as a rider. We are currently paying $133.00 a month, but I just received a letter from the insurance co that we need to discuss an increase in our payment in order for our policy to be keep up with the current fees and charges.
    Can you please advise if it is wise to keep the insurance or get a term insurance (I’m just afraid my husband can’t still get insurance due to health issues).

    • Deacon says:

      That really depends on several things. For instance, these days you can also use life insurance as an investment. So, before just taking out a policy blindly, I would seek the advice of a life insurance agent you trust. Also, you need to know what your financial situation is: how much you have already invested, when you want to retire, etc.
      We have a post on our site that might help you decide what to do. It talks about the different types of life insurance policies that are out there. Check it out. I hope it helps.

  21. Daphne says:

    Do you have any advice for starting behind the 8-ball here? I’d love to ‘save $1000’ – but I was sick for years, and only now just barely able to maybe work full time. I haven’t found a job yet that would allow me to save that much. I’m also a quarter of a million dollars in debt. Granted, some of that is student loans, and most is house, but still – it’s a staggering amount. Baby steps before the baby steps?

    • Deacon says:

      I would tell you to live on as lean of a budget as you can and throw as much toward your debt as possible. Work as much as you can and if you’re able, pick up a side hustle. While paying your debt won’t happen overnight, it is possible. Hang in there!

  22. Teresa Kenyon says:

    I’ve been using retail therapy to ease my grief and depression. The result is a lot of credit card debt. I’m in a rob Peter to pay Paul situation. Paying extra in credit card payments but then leaving myself short for everyday expenses. It’s driving me insane! I pray and pray for an answer.

    • Deacon says:

      It sounds like you need to make some changes. We have some posts on this site about consolidating debt and how to get out of debt quickly. There may be some others on our site that will help too, of course. You might also need to try to find additional ways to make money so you have more income to pay your bills. We have lots of helpful ideas on this blog, so check them out. I hope you find some solutions that work for you.

  23. Emily says:

    Does the 15% include the employer match, or is that in addition to?

  24. Karen says:

    I’ve been a single mom for a while. I have no more debt and I’ve saved my emergency fund. I have always maximized out my 401k retirement savings. I’ve got about $40k saved toward college for 2 kids that start in 3 and 4 years. I doubt there will be help for college from their dad. My kids will have at least a semester of college under their belts when they graduate from high school. I’ve been very aggressive at paying down the mortgage loan and only owe about $58,000 on my home (now valued at $450,000). The mortgage payment is about $750, but taxes, interest and insurance are still about $1250. I’ve also been contributing to a company stock purchase plan, and I actually have enough to pay off the house. YAY!! However, should I? Or, should I put it all towards retirement or my kid’s college?

    I was thinking I should pay off the house and put the extra $700 a month into the college fund. Then I could do a HELOC, if needed, for part of their college costs. What do you think?

    • Deacon says:

      I know this doesn’t give you a definite answer, and nothing can be guaranteed in life, but if I were you I’d start running the numbers. The right decision depends on how much interest you’r paying on your home loan, how much interest you could gain in the college fund, etc. I know it will take some work, but when you start comparing those figures, you might get your answer.

  25. Sheila says:

    Would a home equity line of credit fall under the debt snowball or home payment?

    • Deacon says:

      I would put it under home payment because home loans are usually for a larger amount. The debt snowball can still be used for a home equity line of credit if it is for a smaller amount, say a few thousand rather than tens or hundreds of thousands. The debt snowball is usually meant to pay off smaller bills and get the snowball rolling, so to speak, on paying off all of your debt.

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