When we first began the climb towards a debt-free life in the summer of 2009, our main focus (after saving our $1,000 Emergency Fund according to Dave Ramsey's Baby Steps during our very first No Spend Month), was kicking our credit card debt.
We finally did that in the summer of 2010, after moving across town to a place with rent that was significantly less than what we had been spending, and our second No Spend Month (gotta love the nice jump starts those give a budget!).
After that we began to throw our weight against my remaining student loans and opened an ING Direct Savings account to put our Emergency Fund in, while continuing to add a bit more to that every month. We also increased Matt's contribution to our 401K, knowing its more important to do that now--even for a few months--and lower it later if needed than to never do it at all. I've never opened a 401k with a company with the simple knowledge that I wouldn't be in one place long enough to be fully vested, whether it be from moving or leaving a job altogether to stay at home with my babies. So instead of each contributing, say, 4 or 5%, we have Matt contribute 10% towards his 401k, in which he'll be fully vested this year.
According to Dave Ramsey, we should have been throwing everything against my student loans at this point, but this nagging voice in the back of my head kept asking, "What if I get pregnant and we have to go to one salary?" Compared to most of the world, Matt and I are abundantly wealthy. But if we took away my salary and were still living in Seattle, pretty much all we could afford would be Section 8 housing in an unsafe neighborhood.
So we divided putting money towards my student loans and an emergency fund.
Then...surprise! In late November we found out we were expecting! And BOY was I grateful we had begun building our Emergency Fund!
Since then, we've spent just $50 more a month towards my student loans, and the rest that we can spare goes towards our Emergency Fund. Thankfully, by the time our little Tater Tot arrives in late July we'll have enough in savings for any unforeseen medical emergencies, or to help us through a few more months of Seattle's high prices if we don't move right away (there's a possibility Matt could get a job on the other side of the country and we'd move mid-August, just a few weeks after the Tater's arrival). We're definitely hoping for the move, as the median family income is $12,000 less there than it is in Seattle!
I guess all this to say that following Dave Ramsey's Baby Steps has definitely helped us dig out of our debt hole, but looking at our life situation we had to make choices that were better for us at the time. Knowing we won't be plunged deep into debt if Tatum needs to spend a night in the hospital is definitely a huge peace of mind.
