Baby Steps, Motivation, and Retirement

Photo Billy Alexander

Photo Billy AlexanderDear Dave,

I make $38,000 a year working in the trade show industry, and I’m about to start Baby Step 3. It took 14 months to pay off $8,000 in debt for Baby Step 2, so I’m wondering how long it should take to save up my three to six months of expenses. I’ve also not done a lot toward retirement. I’m 52, and I’m worried about that. How can I stay motivated in the Baby Steps and handle retirement worries?


Dear Donna,

The general time frame I look at for saving up a fully funded emergency fund is six months to a year. Your take-home pay should be about $3,000 a month, so three to six months of expenses will probably be in the neighborhood of $8,000 to $10,000. If it took you about a year to pay off that much in debt, then it should take about a year to accomplish this.

But if you start building retirement right now and have an emergency, you know what you’ll use? You’ll use your retirement. That’s why the emergency fund comes before retirement in the Baby Steps. The average household income in America, which is often two incomes, is around $52,000. I would challenge you to think about and work toward what you could be doing at age 60 that will make you that much or even more.

You’re probably working really hard for that $38,000. In your fifties, if you’re starting over — or if you start making a lot more — we call that an “encore career.” So I want you to start thinking fresh again. Don’t quit today, but you’re going to be making $38,000 eight years from now unless you start aiming at something else.

All this is as much an answer to your retirement fears as trying to leapfrog and start doing retirement without an emergency fund. Put your emergency fund in place over the next 12 months, and start doing some goal setting and thinking. Maybe you’d like to own a trade show or events company by that time.

Ask yourself, “What would I do if I could do anything?” Because you know what? You can do anything!


Dave Ramsey* Dave Ramsey is America’s trusted voice on money and business, and CEO of Ramsey Solutions. He has authored seven best-selling books. The Dave Ramsey Show is heard by more than 11 million listeners each week on more than 550 radio stations and digital outlets. Follow Dave on Twitter at @DaveRamsey and on the web at

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