We have looked at Dave Ramsey’s Baby Steps (https://unstuckmoney.com/should-you-follow-baby-steps/). Before we had ever studied Dave, we studied with Crown Financial Ministries and later with Compass (https://compass1.org/).
We get asked all the time about the order of operations, saving, paying off debt, or investing. It’s good to have a template from which to work. Dave speaks of Baby Steps for his template. But what did Crown (later Compass) say?
Compass (as of their 2011 workbook, small group Bible Study, which is essentially unchanged from the 1980s/90s Crown materials) calls each step a destination on the path to “True Financial Faithfulness.”
Destination One: Save $1000 for Emergencies, Start using a Budget/Spending Plan, Begin Giving
Our take: we would like to see the $1000 number be closer to $2000 or $2500. The budget is a must! And we encourage Christians to begin or continue giving.
Destination Two: Increase Emergency Savings to 1 Month’s Income, Pay off Credit Cards.
Our take: Looks good here. The only issue is that credit cards may be unfairly targeted—if you have title loans or personal loans at a higher interest rate, those should be eliminated first.
Destination Three: Increase Emergency Savings to 3 Months’ Income, Pay off all Consumer Debt (auto, student loans, etc.)
Our take: We would like to see you begin contributing to any matched employer funds at this step, too.
Destination Four: Save for Major Purchases, Save for True Financial Freedom (retirement), Save for Children’s Education and save for a business (should you want to start a business)
Our take: We would like to get matching dollars before this step.
Destination Five: Purchase Affordable Home,Begin prepaying home mortgage,Begin investing
Our take: Most people have purchased a home well before now. It would be great to wait until now to buy a house, but it seems very late (depending on your family’s housing needs).
Destination Six: Home Mortgage Paid Off and Children’s Education Funded
Our take: Agree!
Destination Seven: True Financial Faithfulness
Our take: We hope we make it here! And for you, too.
What do you think? How do you like the destinations vs. the baby steps?
Source: Navigating your finances God’s Way, by Howard Dayton, Compass, 2011
