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Dave Ramsey says: Start saving after Baby Step 3

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Dear Dave,

I’ve been trying to get control of my money, and the other day I was looking at your plan. Where does buying a house fit into the Baby Steps?

Stacy

Dear Stacy,

Let’s call it Baby Step 3b. Baby Step 1 is saving up $1,000 for a beginner emergency fund. Step 2 is paying off all consumer debt from smallest to largest using the debt snowball. Then, Baby Step 3 is where you top off your emergency fund with three to six months of living expenses.

Once you’ve done that, it’s time to save up for a down payment of at least 20 percent on a house. If you take out a mortgage, make sure it’s a 15-year, fixed-rate loan, where the monthly payments are no more than 25 percent of your monthly take-home pay.

Doing it this way may delay your dream of being a homeowner a little bit. But buying a house when you’re broke is the fastest way I know to become a foreclosure statistic!

—Dave

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