DAVE RAMSEY: Following a plan is no get-rich-quick scheme

Q: I’m about to complete Baby Step 3. I’ve been very intense about following your plan, but I was wondering if there’s ever any kind of frustration or letdown after you’ve come this far.
A: You’re right. The beginning three Baby Steps are very intense. First, you get $1,000 in the bank – $500 if you make less than $20,000 a year – for a beginner emergency fund as fast as you can. Then, pay off all your debts, except the house, from smallest to largest, and after that you finish out your emergency fund with three to six months of expenses. This is a real whirlwind of activity because everything should be wrapped up in an aggressive, we’ve-got-to-get-this-done kind of attitude.
I guess if there’s a letdown it could come from the feeling that once you’re out of debt except for your house, things should kick into overdrive and you’ll become instantaneously wealthy. That just isn’t realistic. But it does remove a ton of stress from your life and you’ll experience a sense of freedom that you’ve never felt before. Just think about it: Try to imagine how it would feel to have no payments on anything except your home. There’ll be no more credit card bills and no more car payments. How great is that?
As for frustrations, they’ll be fewer because a huge cause of stress and frustration will disappear after you gain control of your money and get out of debt. You may feel like things aren’t moving fast enough, but things never seem to move fast enough when you’re intense and really into what you’re doing.

Q: What’s the best financial gift for young grandchildren?
A: Well, it’s definitely not savings bonds. You get nothing in the way of a return from those things. I get mad just looking at them! I’d suggest opening up an Educational Savings Account in a mutual fund in the child’s name. You can put up to $2,000 a year per child into ESAs and they grow tax-free.
If you started when your grandchild was born, and set aside $2,000 a year for 18 years, you’d have saved $36,000. But if you go the ESA route, and figure 12 percent average growth over that time, the kid could have about $126,000 waiting when it comes time for college. That’s a pretty sweet gift!

For more financial help, visit daveramsey.com.

Dave Ramsey

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