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Dear Dave, <\/strong><\/p>\n I just finished paying off all my consumer debt in Baby Step 2. It took a long time, but I finally did it. Now, it\u2019s time to grow my $1,000 beginner emergency fund to a full-funded emergency fund. I\u2019ve been working on this for a while, and I\u2019m glad I\u2019m doing it. But I was wondering at what point can you spend, and have a little fun, when you\u2019re following the Baby Steps plan.<\/strong><\/p>\n Mark<\/strong><\/p>\n Dear Mark,<\/p>\n Congratulations, buddy! The first couple of steps can be the hardest. I\u2019m really proud of you for sticking with it and making it happen.<\/p>\n I recommend completing the first three Baby Steps before you start thinking about spending money on fun stuff. In my mind, that positions you on pretty solid ground, financially speaking. So, at that point it\u2019s okay to have a little fun going on a vacation or buying something\u2014reasonably priced, of course\u2014that you\u2019ve had your eye on.<\/p>\n Like you said, Baby Step 1 is saving $1,000 for a starter emergency fund. Baby Step 2 is where you pay off all debt\u2014except your home\u2014using the debt snowball method. In Baby Step 3, you go back and fully fund your emergency fund with enough cash to cover three to six months of expenses.<\/p>\n But don\u2019t have so much fun that you forget about the other Baby Steps. Baby Step 4 means putting 15 percent of your income into pre-tax retirement plans, like mutual funds and Roth IRAs. Don\u2019t neglect saving for college if you have kids. That\u2019s Baby Step 5. And Baby Steps 6 and 7 are paying off the house early and building wealth and being outrageously generous. Live like no one else, so that later you can live and give like no one else.<\/p>\n Everyone likes having fun. And there\u2019s nothing wrong with spending some cash if you can afford it. I just want people to make sure they have their finances in order first. Remember, there are only three things you can do with money. You can spend it, save it and you can give it away. Following my plan will allow you to do all three without putting yourself in a financial bind.<\/p>\n Keep up the good work!<\/p>\n \u2014 Dave<\/p>\n