From day one of following Dave Ramsey’s Baby Steps, something about Baby Step 4 has rubbed me the wrong way. Saving 15% of our income has always felt like too much. I get that we want to be able to retire someday, but couldn’t we do that without waving goodbye to 15% of our income?
I sat down to do the math. This plan has been nothing but spectacular for us so far, so I thought that if I really looked at it, it would easier to yes to this next step. At first, it only made things worse. The first (and only) things I wrote down were:
- Saving 15% of our income in retirement investments
- Spending 25% of our income on housing and housing related costs
- Giving 10% of our income because we tithe
I paused there. We were already at 50% of our income, and we hadn’t budgeted for food, clothing, anything related to the car, or anything fun.
Honestly, at this point, I pretty much resigned myself to the fact that we would only follow the plan until Step 4, and then it would be time for our own thing. There was no way we would ever be able to have any FUN on this plan. We’d never be able to “live comfortably” I thought.
Not long after this, Cody and I had a nice long chat about our budget and our goals for our quarterly meeting, and we realized that 15% was INCREDIBLY doable for multiple reasons. What had seemed insanely far-fetched, especially buried under over $100K of debt, suddenly felt attainable! I just had to step back and see the bigger picture.
Reason 1 saving 15% of our income is totally doable
We were in a slump and needed some motivation, so we were looking at our budget to see how far we had come.
It turned out, each month we were putting an average of about 50% of our income towards paying off our debt. We were already living on roughly 50% of our income for EVERYTHING including any saving, giving, and spending!
Making the switch to having 50% of our income going towards our current baby step to only 15% percent of our income going towards our saving wasn’t as outrageous as it sounded! In fact, it’ll free up about 35% of our income!
Reason 2 saving 15% of our income is totally doable
We had to look ahead to where we want to be at Baby Step 4. We realized that the other percentages weren’t quite accurate either! Currently, our goal is to pay for our future house in cash up front. It’s a LOFTY goal, but we are working hard to make it happen!
If we pay for cash for our future house, we won’t have a mortgage! That means the expected percentage of 25% for all housing related costs will be much lower for us!
The Final Verdict
While we were still in debt, it felt crazy to be putting 15% or our income to retirement. Today, we have seen what is possible when we truly focus our efforts with money. If we can put 50% of our income for 3.5 years towards debt, 15% into a savings account is no big deal. With debt, that money is gone and our interest goes straight to the banks. With the 15% into a retirement account, that money is still ours and is actually gaining interest for us! We get to be content and happy deciding what to do with the other 35% of our income that we have freed up by getting out of debt for good!