Baby Step 1 of Dave Ramsey’s Plan is to very quickly save $1,000 to be used as a starter “baby” emergency fund.  This is to be done first, before paying extra on any debts.  The reason for this is so that you have a small cash reserve on hand to cover emergencies that spring up while you embark on the next baby step, paying off all of your debts except your home.

My wife and I embarked on Baby Step 1 on August 1, 2003.  We were fortunate in that we already had $585 in a savings account, so we only needed to save $415 more.  We accomplished that and started Baby Step 2 within the first month.

In Financial Peace University, Dave Ramsey says that when you make the decision to change your life and get out of debt, God will send a test your way to make sure that you are really serious about working the plan.

Our test came on the very first day of Baby Step 1 in the form of an alternator going out on my 1998 Pontiac Grand Prix.  In the past, when an alternator went out, I would take my car to a dealership and pay, or rather put on a credit card,  $400-500 for the repair.  Working Dave’s plan forces you to seek alternatives to the way you used to do things.  Instead of taking the car to a dealership, I went to Advance Auto Parts and purchased an alternator for $87.  I then called my father-in-law who is good with cars and he came over and installed the new alternator.  We passed our first test with flying colors.