My husband and I are following your plan, and we’re in the middle of saving up our emergency fund. When do you recommend buying a new car in the process? Do we have to wait until we’ve finished all the Baby Steps?
I never advise buying a brand new car, unless you have a net worth of at least $1 million. At that point, you’ve got enough assets that you won’t get rocked by the ridiculous depreciation that comes with buying a new vehicle.
Now, you don’t have to drive a beater until you pay off your house or anything like that. I advise people to drive the minimum they can in terms of a car until they complete my first three steps. Baby Step 1 is a beginner emergency fund of $1,000. Baby Step 2 is paying off all debt except for your home. Baby Step 3 is fully funding your emergency fund with three to six months of expenses.
After you’ve accomplished these first three steps, then you can move up to a nicer car. Notice that I didn’t say move up to a new car. I want you to save up cash, and get a really nice used car. That’s what the typical millionaire does, and I want you to model your financial behavior after people who are in the position you want to be in some day!