Baby Step 3: Saving 3-6 months of living expenses

 In Baby Step 3: Saving 3-6 months of living expenses

You have finally kicked-off your debt in the last step. Now, Baby Step 3 will require you to save 3-6 months of your living expenses for an emergency fund.

We know it may sound pretty overwhelming, but we also have to make you see why it should be done. Let’s not get any farther. We are currently in the face of a crisis: the COVID-19 Pandemic and none of us were prepared for this. America is on shut down. Thousands of lives are being gone almost every day. Businesses are closed, and much worse, it paralyzed almost all income and work. For some who’s had savings and still is being paid by working from home, it may be less difficult. But how about for those who do not have any emergency fund? How are we to cope with ease?


Baby Step 3 will serve as your protection for the entire game. Having an emergency fund will relieve people’s worries. After Baby Step 2, you might feel doubtful and have lost motivation because you have found it hard to pay off all your debt. But we highly encourage you to not stop there. You did an impressive job and we best believe you still can.

Now that we are debt-free, our goal is to not fall back into debt again. Rachel has compared debt and savings, and it just makes so much sense. According to her, debt makes you pay interest, makes you take on risk, steals your future, and owes you. Savings, on the other hand, make you earn interest, lower risk, save the future, and own you.

Spending is exciting, but having no savings is very problematic. Crisis pushes us to save. For men and husbands, it should be of your knowledge that financial fear of lack of security is most likely the number one fear of your spouses. We are not supposed to live in fear.

Proverbs 21:20 says, “The wise man saves for the future] but the foolish man spends whatever he gets.”

Most Americans do not save. Eighty percent of the American population lives paycheck to paycheck. Meaning, if emergencies happen, people pay it through debt. For example, if your car tires suddenly tear out, you borrow money to fix it. In this instance, it no longer becomes a car problem but more of a money one. An emergency fund gives you cash to cover emergencies so you stay out of debt.

Chris Morgan, an insurance expert, highly encourages us to do baby step 3 to protect you and your family. Use the same intensity you have used to get out of debt, to build this emergency fund. If you don’t do this, you’ll always end up reaching for your credit card or in a bank for loans. You get judged or you steal from yourself by getting from the 401k. You activate drama. You steal from yourself for a situation you haven’t prepared for. View emergency fund as an insurance and not an investment.

Murphy’s law says that anything that can go wrong will go wrong. Emergency fund, however, will change the pace of things. It’s not a matter of if it will rain or not because it will rain. We have committed mistakes in the past but if we put ourselves in an uncommon scenario; we move forward and do not repeat mistakes anymore.

Now, Rachel has warned us of insanity as ‘doing the same things repeatedly and expecting a different result’. She says that if you spend the way you’ve always been spending, you will never develop a habit of saving.

If you are married and you and your spouse are a team of a spender and a saver,  you still need to work together towards saving. You should agree to the conclusion that no matter what, accomplishing baby step 3 is a priority because being debt-free is not the end. The only way to save and do it is to put it in on top of your list. If you want something badly enough, you can become a saver.

How do you pick between 3-6 months of an emergency fund?

  • If you have an unstable income, rely more on a 6-months emergency fund. The goal is for the money to be liquid, meaning you can have it when the need arises.


  • If you have a more stable income, you can lean on a 3-month emergency fund. It is not about your income but the monthly requirement to take care of your household.


Where to Store?

Store it in a money market account. It will give you a better return than a regular savings account. Talk with your spouse about what is being considered ‘emergencies’. Or get an accountability partner that loves you and wants you to be successful.


Enormous Mistake People Make

It is so common for people that after using the emergency fund; they leave it at that. You have to replace it. Develop this rule: if you use it, build it back up.


For parents, Chris advises learning to say no to kids who want everything. It is not a fun-fund or a vacation fund but a protection fund. Saying no to them now can mean big in the future. Prioritize what’s ahead and be wise.


Social Media Craze

On the other hand, on social media, you get a glimpse of everyone’s life. We are fancy about how they enjoy their time, where people go, dine, and have fun. At the end of the day, we are being brought upon a terrible ‘comparison game’. This naked truth does not steal only our joy but also our paychecks to live a life like everyone’s else’s


The only cure for this comparison game is contentment. It is impossible to save money if you are not content.


Philippians 4:11 says, “ I am not saying this because I am in need, for I have learned to be content whatever the circumstances.”


Instead of chasing what’s next, you must be content with what you currently have. You will never have to save if you don’t first know how to be content. Gratitude will lead to contentment. A heart filled with gratitude will not have any room for discontentment and comparison. Be thankful and grateful for what you have. Thank God for the journey you’re in and for everything God has done for you.


Baby step 3 is not about just saving 3 to 6 months of your living expenses. It also deals with hearts and emotions. This step will push you towards your financial goals but also make you learn to be content and grateful, hence, the true financial peaceful life.

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