We’re out of debt & have an emergency fund. Now what?

If you have been coming to this blog for a while, you know that I’ve been sharing the story of how we changed our financial lives over the past three years. You can read the whole saga here, but the headline is this: Three years ago, we were $30,000 in debt; today we have no debt (other than our home mortgage) and 6+ months of expenses in a fully funded Emergency Fund.

To make such a radical shift in our financial position, we have been following the Total Money Makeover by a guy named Dave Ramsey. I’ve talked before about the fact that Dave is a Christian financial counselor and how we decided that, despite this, we — a modern Orthodox Jewish family — were going to use his 7-step plan to “financial freedom”. (You can read more about that decision here.)

Just as a review, Dave’s seven steps are:

Baby Step 1: Put $1000 in a savings account as your “Baby Emergency Fund”

Baby Step 2: Use the debt snowball method to clear all debt, other than your mortgage

Baby Step 3: Save 3-6 months worth of expenses in a Fully Funded Emergency Fund

Baby Step 4: Put aside 15% of your income into retirement savings

Baby Step 5: Save for your kids’ college (theoretically, this step can happen at the same time as Baby Step 4, if your income allows)

Baby Step 6: Pay off yourย  mortgage early (also theoretically, this can happen in tandem with Baby Steps 4 & 5, if income allows)9

Baby Step 7: Build wealth, so you can “live like no one else” — which includes giving (tzedakah) like “no one else”

When we started our Total Money Makeover, we stopped funding our retirement funds, per Dave’s advice. Until you are out of debt and have an emergency fund set up, he wants you to have as much disposable income as possible to focus on those two goals. Once you are finished with Steps 1-3, you step up your retirement savings big time.

As soon as we hit Baby Step 4 last summer, we were gung-ho to put away some serious retirement savings.ย  We set up an IRA account and started sending money to it every month. But then we hit a few snags.

Because we are self-employed, and therefore have to deal with variable income — which can range up to a $2,500+ difference from one month to the next — we don’t always have enough to save 15%. Sometimes we didn’t even have enough to save 5%.

So here’s what we’ve decided: When we are in an “income valley”, our retirement savings just doesn’t get fully funded. And all the money we are supposed to be funneling toward our kids’ college savings accounts? Well, that doesn’t happen either.

But when we have a “peak” month, we not only do Step 4, but we also do as much as we can toward Step 5. (Until our income increases — or we stop sending our kids to day school — Step 6 is going to have to wait.)

The other thing we have realized is that unlike paying off debt or saving up an emergency fund, Step 4 never ends — at least not until you retire. And Step 5 doesn’t end until your kids are through with college. Which means that the pace of our Total Money Makeover has radically changed. We went from an all-out sprint for Baby Steps 1, 2 and 3 to a laborious power walk for Baby Steps 4 and up.

For a goal-oriented person like myself, this slower pace can be extremely frustrating. Dave is famous for saying, “Live like no one else so you can live like no one else.” Translation: Cut your lifestyle down to nothing and eat the proverbial “rice and beans” diet so you can get control of your life. The implication, of course, is that once you have done this, you will be able to live large, eating “caviar” and sipping champagne.

Well guess what? I’m still drinking tap water! And my fanciest appetizer is still homemade hummus and pita chips!

The realization that we’re not living any larger than in our pre-Dave Ramsey days — and in fact, one could argue that we’re living more modestly — was very disheartening at first. But once I stopped whining and took a look at our budget, I remembered this simple fact of life:

We have a relatively modest income and a lot of financial obligations.

As self-employed freelancers, for example, our health insurance premiums are more expensive than our mortgage payment. Plus we have lifestyle commitments — the most obvious of which is that I work part-time hours, so that I can homeschool our kids.

Frankly, I don’t know when we are going to be able to crack open that bottle of champagne.

But that’s okay, because “living like no one else” has taken on a different meaning for us now:

It means we aren’t saddled with the burden of consumer debt.

It means we only pay cash for our cars.

It means I no longer hate my mail box, because there is nothing in it that can scare me.

It means I never have to worry about bouncing a check or getting charged late fees on a credit card.

It means that if there’s a crisis — if someone gets sick, or has a car accident, or loses a job — we deal with the issue at hand, rather than getting twisted into knots over the money part of it.

And it means that the things weย  choose to buy, the investments we choose to make, and the contributions we choose to give are truly a blessing to us and the people we love.

Now that I think about it, Dave was right: We are living like “no one else”.


This will probably be the last post in this series, at least for a while, since we’ll be trudging along with Baby Steps 4, 5 and 6 for the foreseeable future. If you have any questions or comments, though, feel free to leave them below or contact me personally if it’s something you’d rather not share publicly.

As I said back when I started this series two months ago, my goal in airing our most private financial struggles was simply to let any of you going through something similar know that you are NOT alone. You will get there – some slower and some faster than us. But it is not impossible. You can control your financial future!


  1. Mara – do you ever pay more toward your principal for your mortgage or do you continue to put that money towards savings?

    • Paying extra on principal would be Baby Step 6. But after doing 15% to retirement and putting away for college (plus, Bar/Bat Mitzvah funds, vacation funds (modest though they are), all of our “sink funds” — like home maintenance and car repairs, etc. etc.), we just don’t have enough left over at this point. When our income goes up, or our commitments go down, we will pay extra on principal.

  2. You are SO BRAVE, Mara! Debt is a huge problem in the Jewish community, yet nobody is willing to talk about it. Thank you for being honest about this struggle many of us are dealing with.

  3. Congratulations on finishing the series! I’m sure that was exhausting. You guys have clearly done an awesome job. It is so inspirational to read your list of “different meaning” points.

    Maybe sometime we can get together and split a bottle of champagne, and not feel so bad about spending the cash. ๐Ÿ™‚

  4. Thanks for posting this series. I was inspired by you to take out “The Total Money Makeover” from the library. I read half of it and I am now reading it to my husband and we are going to start on our journey. We hae step 1 in place (thanks to our tax return). I have to really focus on step 2 but it is hard to “be willing to live like no one else.” Wish me luck!

    • GOOD LUCK!!!
      I am sure you can do it!

    • Go, Frayda! That is wonderful and I’m so honored that my tell-all was the inspiration ๐Ÿ™‚ It *is* hard to live like no one else, but once you get into it — at least I found — it’s kinda fun, too. I’ve always been a bit counter-cultural ๐Ÿ˜‰

  5. Thank you for writing this series, Mara! We are on step 2 of the TMM and although it doesn’t always go perfectly, it’s comforting to just have a goal in place. I appreciate hearing your experience and hope to join you “living the good life” very soon! ; )

    • I can’t wait to hear your “debt free scream”… I bet I’ll hear it all the way out here in Kansas! Having a goal makes it seem do-able, doesn’t it? Keep at it, you’ll be there before you know it ๐Ÿ™‚

  6. I’m glad you’re posting on Ramsey – I’ve heard people mention him but I never looked into it because of, well, the whole evangelical C thing. I wonder how this would work for us, since we already have only mortgage debt. Still, I feel like we need a better budget and savings system. We’re also working with variable income, so it’s wonderful to hear about how you handle that. So much personal finance stuff I’ve read assumes a fixed income. Plus we have the same lifestyle commitments you mention. Thanks for sharing your experience – it’s so encouraging!

    Oh, and the new look – love it! You had me at rimon, and the colors are great too.

    • Good for you on having no consumer debt! Well, according to DR, that means you skip right to Baby Step 3, and start putting aside 3-6 months of expenses for an emergency fund, and then straight on to retirement, college, mortgage. Since you guys are planning to make aliyah, I’d make a Baby Step 3b, the aliyah fund (if you don’t already have it) — to include the lift, a new-to-us car, starter costs, etc.

      I was recently talking to another friend about variable income budgeting, so maybe I should do a post on that as well?

      Thanks for the nice comments on the new design. I am a “rimon” kinda person, so that — with the tagline — just seemed perfect to me ๐Ÿ™‚ Glad you think so, too!

  7. I am certain that someone else has asked this question. But I could not find it on your blog.

    You mentioned that you receive tuition assistance from your school. Won’t the school require you to spend down y0ur saving in order to continue to receive assistance? Have you found a way out of this trap?

    • Julie, Thanks for your question. That hasn’t been an issue for us until now, fortunately. Does your school require you to “spend down” retirement and college savings as well? We also have significantly lower tuition at our community day school than any of my friends in the Tri-State area have told me about. The school fund raises specifically for this tuition cut, which is across the board for all families, regardless of need. A year of tuition per child is right around $6500.

      (I know, I know, we are really lucky! Housing is much cheaper in Kansas, too, if anyone wants to move here ;-))

  8. I am so glad to have come across this site. So inspirational. I have been wanting to start implementing some of these principles for a long time.

  9. I was just rereading this post and I am looking forward to two of the things you mentioned 1)I no longer hate my mail box, because there is nothing in it that can scare me and 2) I never have to worry about bouncing a check or getting charged late fees on a credit card.

    • I missed this comment – sorry, Frayda! You WILL get there. And it will be such a relief for that to be normal. Keep on keeping on!

  10. Dave Ramsey does offer a great personal finance system to help eliminate “lifestyle” debt. And, true, living only on cash income is a wonderful goal.

    But we’re not all rock stars. We not all doctors, lawyers, or even Dave Ramsey. The realization that a career paying only a modest income is a lifestyle, too, doesn’t make living it always easy.

    Dave Ramsey does give us some of the personal finance tools we need to make decisions. Decisions which we hope are based on our own values, not decisions forced upon us by others. Now that may not always be pleasant, but at least that’s a lifestyle I can afford.

    Thank you for sharing your life with us.

    • Thanks for your kind comment, Myron. You are so right. Not all of us will earn millions a year, but we do all have the responsibility to live within the means we do earn. If I make $50K, I can’t live like I make $100K, yk? That’s hard to accept, sometimes, but it’s part of being a grown up I guess ๐Ÿ˜‰ (You are giving me good fodder for my next “Psychology of Budgeting” post. Thanks!)

  11. Mara, I just came across this today, and I have to say I listen to Dave Ramsey EVERYDAY! I think he has great ideas, but being an orthodox jew and sending 4 kids to private school ,I never thought it possible to do his program. My mom introduced us to him a long time ago, and we have been living on a budget for years now, but still seem to live paycheck to paycheck. Thanks for the inspiration! My husband did make out a spreadsheet with our bills smallest to largest to start tackling it, but last year we had our 5th child and that stopped a few things. however, we are starting up again. My biggest problem is writing the budget out and getting the cash to pay for everything, because I always say oh I can go over a little on food, or my kids need this etc..any suggestions on how to be better? thanks again

    RIvka for memphis

    • Rivka,

      I am so sorry I never noticed your comment. The “oh it’s only” mentality is really tough for me, too. One thing that has helped me is to go cold turkey. The little leaks kill us financially, so if I can’t trust myself to go through each and every one, the best way is to just turn off the water entirely. Does that make sense? It’s temporary, until you get past the hurdle and readjust the lifestyle. Hang in there, it’ll get better!

  12. Hi! I found you from Nony the Slob. I really enjoyed reading your Dave Ramsey Story and I’m looking forward to looking through your recent archives to find the rest of your posts on the psychology of budgeting. Your story was very convicting to me. My husband and I completed steps 1 and 3 of the program but have been dragging our feet to complete step 2. We opted to do step 3 first because we recently experienced a 6 month job loss (both of us at the same time) and want to be better prepared if we have to go through that again. We also only have a single low-payment, low interest school loan and our mortgage, so the financial impact of our debt on our monthly cash flow is minimal compared to a complete job loss. However, I think we’re too comfortable with that student loan. It really doesn’t feel painful to pay it each month, but the idea of “going gazelle” to pay it off does feel painful! I really enjoyed reading your story. I am not an orthodox Jew and I do share the same religious beliefs with Dave, so if you can do it after jumping that hurdle of differences between you, I should too! Thanks for the inspiration to get moving again!

    • Sara – Hi! Thanks so much for reading our story and for sharing your lovely comment. It is hard to get gazelle – and stay that way. But I know the rewards of being done with that debt will be SO worth it. Given what you and your husband went through with your job losses, I think it is so smart to have that fully-funded EF in place. While I think there is much wisdom in Dave’s plan – and certainly it can and does work for millions of people – it isn’t one size fits all. Good luck as you move forward and thanks again for reading and commenting ๐Ÿ™‚

  13. I just read your entire story it’s amazing!! My dream one day to have my own story to tell. Miracles do happen!! Now to baby baby step no#1… I’m trying to figure out how to begin couponing. Wondering if i should try to get newspapers from local library.
    I’m really motivated from your story.

    • Thanks so much for your comment Cmom. It sounds like you are really on your way. I know it seems impossible now, but you will get there!

      By the way, if you check for inserts at the libraries, just make sure you clear it with the librarians first.

  14. Mara,
    I’m so excited to find your blog! My fiance and I are also working the babysteps. We also ignored the Jesus stuff and I’m so glad we did. During the last 3 years we not only have lived in California on two non-profit salaries, but we have THRIVED! We dumped the debt, paid off my student loans, are saving for a wedding, and can afford to make a huge move to PA later this month, all because of the FPU plan.
    Thank you for sharing your story with the world and congrats on making it to baby-step 4!

  15. Hi Mara,
    Have been following your blog and enjoying it. In May, I told you that when my husband was downsized (read: fired because he was too old and too expensive) I took over the family finances. In the four years he was either out of work or under-employed I paid off both a second mortgage and our main mortgage. In addition, we stayed current on all bills.
    How? First and foremost, by cutting expenses to the bone. Then, by not being shy or coy about saying, “We can’t afford to,” when asked to join others dining out. NO paid entertainment outside the home (NO movies, NO shows, NO restaurant meals, NO Starbucks, etc.) NO junk food: NO chips, NO candy, NO store-bought cookies and cakes, etc. Popcorn was allowed as long as it was bought in bulk and popped on our stove. I became vigilant regarding food waste — no throwing out food just because the celery was limp, or the carrots past their prime – now they were frozen until I made soup and those “tired” veggies really enriched our soups. I couponed like mad — even joined a coupon club where we traded coupons!
    No new clothes for the adults, and for growing children the re-sale shop except for shoes.
    I cancelled all premium cable channels, kept only basic cable. Dropped our gym membership. Cancelled all newspaper and magazine subscriptions except for the daily paper (and got refunds on those that were prepaid.) We walked to the library for exercise and enjoyed those magazines there.
    I became more rigorous about sorting and recycling and really worked on that compost heap. (That meant we didn’t have to buy mulch each spring) and enabled us to eliminate the twice weekly garbage collection which was about $20.00/ month (in 1992). I brought what was left to the dump about 1/month for $2.00. I cut everyones’ hair and a friend trimmed mine for free. Made use of the free vaccinations offered by the County Health Dept.
    It’s been almost 20 years and I can’t remember all we did, but it worked!
    A side benefit — you learn who your real friends are — the ones who will come over to play Monopoly or Scrabble, and eat home popped popcorn rather than go out to eat.
    An ironic side note: Some of our former friends who pestered us to go out with them, “Oh, you can splurge once in a while,” are still working and trying to put funds away for retirement — while we retired early at 58 and 63!

  16. Marion Rosen says

    I’m just wondering how you stopped retirement savings in Israel. Where I work it’s through bituach menahalim, and my employer matches my contributions…I’m not sure there’s a way to just put a stop on it. Does this only work (in Israel) if you’re self-employed? Technically I think my bituach menahalim is also my emergency fund, as it includes my unemployment/termination benefits (should that ever happen). And also an insurance policy for my kids should something happen to me. I don’t see how it would be wise, if it was even possible, to suspend those contributions.

    • Marion – As you mentioned, my husband and I were both self-employed, so I’m not sure how it would work if you had an employer. As with everything else in our “honest discussion”, our story is not meant to be proscriptive, rather illustrative. My intention is not to give financial advice, but rather to share what worked for us! HTH.

  17. Mara – I’m so glad I’m not alone in feeling the momentary frustrations in “living like no one else”. We are also self-employed and lately, it’s been a bit more of a struggle than the past. I’m thankful for the emergency fund as it’s gotten us out of few binds; unexpected home repairs, medical for our son and a “new car” (paid cash -168,000 miles on it but it gets us from point A to point B!). I can’t help but wonder what we would be able to do if we were to still use credit cards on occasion but we’ve paid off $71,000 in debt and only have $4,800 left on a college loan to pay besides our mortgage (less than $100,000 now). Thanks for sharing!!

    • Yay Carrie – it sounds like you guys are doing great! Isn’t that emergency fund the biggest peace of mind you’ve ever had?!

  18. Chasya-Uriel says

    I have a question for you. When one saves 15% of their income for retirement, is that based on gross or net income?

    Thank you!

    • I’m not sure that there is a right or a wrong answer. We do it on gross minus expenses (we are self-employed, so we take off those expenses). And for us, 15% is a goal, not a reality. We do our best – and hope that one day soon, we’ll have more income and be able to do better. HTH.

      • Chasya-Uriel says

        Forgive me for not understanding completely…I think I need an example to understand your response.

        Say you earned $1000 gross a month, and your expenses were $800/month, so you are left with $200. You take 15% of $200, and that is what you save each month for retirement? Is this correct?


  19. I really enjoyed reading your story. I have become very interested in Dave Ramsey recently and was hoping to adopt his plan but kept getting frustrated with all the extra “orthodox” expenses that seem to make it impossible to get ahead financially as an orthodox Jew.
    My biggest question is: I was wondering how/when you were able to build up a down payment for your house in America? My family and I are still renting and we’re having a hard time saving money towards paying debt when my husband and I really want to save money for a down payment so we can purchase a home some time soon.

    • Selling our house in Israel! We got very lucky to actually make money on our apartment in Israel – so those earnings went right into our down payment.

  20. Such an awesome series I stumbled upon by accident looking for Kosher coupons. I’ve been inspired by watching Extreme couponing genius’s on TV! My question is, with a variable income, the financial responsibilities and bills to pay, following DR’s steps..we also have to add in Ma’aser and Tzedaka money..how?
    My income also vaires month to month as does my husbands’. Would love your thoughts and suggestions. Actually a suggestion for you, as a writer, it to write Mara’s plan..aka Jewish style following some of D.R.’s recommendations less the evangelical stuff.
    Be well and thanks again!

    • Thanks so much. I’m honored that you are enjoyed my posts. I’d love to write a more expanded version one day – thank you!

  21. G.A. Hadley says

    Congratulations on your success of reducing debt. I just found your blog via another blog and I find it fascinating.

    We are in our mid-60’s, originally from Lawrence, KS. Both my husband and myself were born and raised there and his parents still live there. We reside in one of the Western States.

    We have been debt free for quite a few years. While my husband was still working, I focused on paying extra on the principle of the house payment, so by the time he retired (actually before) the house was paid off. We saved up for vehicles and paid cash.

    Both our children went to college and we helped them with tuition, housing and cash. They, also, did alot on their own.

    Being debt free is vitally important, especially during these times. You are doing a wonderful job and I am sure you have blessed many people with your story. Thank you for your sharing, caring attitude and your blog.

  22. I was so glad to see your blog. I have been listening to Dave Ramsey for a while and my husband is finally coming around to his way of paying off debt. With Kosher food expenses, especially with Chagim coming up how can you budget for food, you cannot do rice and beans for Yom Tov and I haven’t had company in over a year since we just can’t afford it.
    Would love any advice you can give. We are on a very limited income since I am on disability and my husband was out of work for over a year.

  23. Melissa Meltzer says

    I know this was posted a while ago but do you follow his envelope system as well? My husband and I always pay off our credit card bill in its entirety each month and have a budget we keep to (thank Gd for excel and google docs!). The idea of keeping wads of cash in our home in the NYC area just scares me to no end.

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