Another newbie Dave Ramsey Question

[Belia]

So if DH and I did the Total Money Makeover, we would be starting on step 3 because we already have $1000 in the bank and no debt other than the house.

If I'm understanding correctly, the next steps are:

* Emergency Fund
* Retirement
* College
* Mortgage


But we REALLY need to re-do the deck, and our kitchen is pretty non-functional, too. I mean, its usable, but it really needs to be overhauled.

Plus, we would eventually like to take a vacation (for the first time in years!) someday, too.

How does saving for these types of things fit in? These are not emergencies so I wouldn't access the emergency fund.... do I really have to wait to START saving for these things until the EF, retirement, and college is fully funded?


Please know that I'm not trying to find a way to have my cake and eat it too- I am fine with waiting and saving- I'm just trying to figure out how saving for big-ticket items that AREN'T emergencies or retirement or college fit in. (Bolded because I guess that's my whole question in a nutshell!)

[Maluhia]

Those would be sink-funds you would start saving for after you've fully funded your EF.

ie. After your EF is full you take the $300 a month (example) you were putting there and for a time put $100 into college funds, etc. while putting $200 a month into a sink fund for a vacation.

[Denvergirlie]

Yep, these are sinking funds.

Save the 3-6 month EF and don't touch it.

Then start saving sinking funds. This is where we are. Sinking fund for replacement car, sinking fund for maternity leave, sinking fund for land downpayment.

Currently we are not saving for retirement, but just stopped that in May when I got a salary reduction as well as company stopped matching 401K. But will restart retirement in 2010 and then reallocate my budget. The sinking fund for land won't gain as much, but it will still gain and knock on wood the car replacement fund and maternity fund will be full by the end of 2009.

[mtm]

We did some renos that we needed in bs2, we just saved for them in a separate account. We're in bs3 right now and we've got a good chunk of our ffef so we took off a few months to fund our vacation fund.

[Denvergirlie]

Originally Posted by Belia

... do I really have to wait to START saving for these things until the EF, retirement, and college is fully funded?

EF needs to be full, retirement and college will be an ongoing process. You will not fully fund these in one lump sum, but add to them on a monthly basis.

Example:

$XXX "left over" each month

"$x" for retirement
"$x" for college
"$x" for sinking funds (vacation, deck, kitchen, etc)

If still monies left over, then sent "$x" to mortage pay down

You'll need to create a budget, and figure out what you can do. Retirement is needed, but if 15% will be enough or way to much, only you will know depending on other current retirement savings, if you will have house paid off by then, if you will increase/ decrease lifestyle in retirement, etc, etc.
You can not take loans for retirement, but kids can take college loans, so that is your priority.

But creating a budget at this point is the key to everything.

good luck