Following up yesterday, here are a few more specifics of where I fail to follow the Ramsey plan. This will include my reasoning/rationalization for why I don't get with the program. To quote guru Steven Covey, "when we rationalize, we tell rational lies."
Step 1: $1000 in the bank for emergencies. I like more. Seems like we're always on step one, always having to re-fill the emergency fund after some real or imagined emergency. I know that Dave points out that "Christmas isn't an emergency--it comes at the same time every year!" But in our world, there is not a separate line-item in the budget for those annual or unplanned events like appliance replacement, Christmas, or car repairs. We just toss money in savings and are happy we have it when we need it.
Step 2: Debt free except for the house. NEVER make a car payment. Pay off all consumer debt ASAP so you have that money for investment. I agree with all of these things, but it conflicts a bit with my alleged "plan" for step one. What little bit of consumer debt I have is so small that the payments are manageable (and we pay extra), but rather than load up and knock them out right away, it gives my personal "comfort meter" a boost to see the savings balance rise. I know the math of it is the same or even better Dave's way. But I personally experience more peace with more cash and the debt gradually disappearing. As for the car, I did take out a small loan to buy a van that was almost $4000 below Kelly Blue Book value. I could have bought another $1000 beater for cash, but it seemed then (and now) to be a long-term wiser decision to have at least one vehicle in my family that has a range of over 50 miles. I'll pay it off early and drive it till the doors drop off (as I have every car I have owned). In my mind, this is far different than having a never-ending car payment and swapping new cars every 3-5 years.
Step 3: The "full" emergency fund. This is the one that messes me up. I agree 100% that we should have this. However, my school scenario for the kids makes it impossible. Our financial aid package is based partly on our assets. If I were somehow to save $20,000 for "emergencies," it would just get snatched up for tuition, and we'd be back to square one. But, as I wrote earlier, private school is a high (essential) priority for us.
Step 4: Retirement funding at 15% of gross salary. My employer does 10% for me. I intend to gradually raise my own contribution, as well. But I don't have that much "extra" so long as I'm paying private school tuition and trying to stay ahead of debt and savings goals. Fortunately, my projections based on what I'm currently saving and future needs looks pretty good. We may not retire super-early or super-rich, but we'll be just fine.
Step 5: Kid's college fund. Same as the emergency fund. You can't save for future education expenses and still expect somebody else to pony up for your currrent educational expenses. I hope that the good education we are sacrificing for now, plus getting used to paying a significant sum every month for tuition, will set us up to where college isn't as big a shock for us as for some folks. But we'll have to cross that bridge later. I'm at peace with that.
Step 6: Pay off the house early (on a 15-year, fixed rate note, with a payment no more than 25% of your take-home pay). This is not a finance question, it's a geography and math question. If you take my income (which ain't bad) and start backing out the numbers to figure how much house I can afford on that formula, I have to move out of town. Charleston housing is steep, and teacher salaries are not. I took out a 25-year fixed rate loan (that pays off on time before my anticipated retirement) that has a payment in the 25% range. That's for a very reasonable house in a great location, and we've got good equity. Again, I am more comfortable with that quality of life decison than I would be with being financially further ahead but commuting an hour each way to work every day.
Step 7: take all that "saved" money and invest for wealth-building. Sorry. If I found myself with an extra $1000+ a month, I'd bank it and take my family on cool trips (debt-free, of course) every summer. I'm not looking to get rich, just to be comfortable and make good long-term decisions.
So, in summary, it looks like I pretty much screw up every one of Dave's baby steps. But really I'm in line with the big picture--live on less than you make, don't borrow to buy "stuff" you don't need, have savings between your family and the wolf at the door, invest for retirement, don't be house-poor. Got all of those. Quality of life (which for me includes a short commute, good education for the kids, summers off without working summer school or a 2nd job to meet some wealth-building or debt-retiring goal, and the ability to eat out occasionally at a place that doesn't deliver the food in a bag) trumps some of the wealth-building stuff, but I do have what Dave calls "Financial Peace."