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Ask Dave

Wants Aren't Emergencies

Emily asks where in the Baby Steps home improvements fall. Dave says they're a want if they aren't an emergency.

QUESTION: Emily in Utah asks where in the Baby Steps home improvements fall. Dave says they’re a want if they aren’t an emergency.

ANSWER: Home improvements are a want if they’re not an emergency. I would like a nicer kitchen. I would like nicer windows. I would like new carpet. Those are wants. They are not needs. They are not an emergency, so they would fall after Baby Step 3. I’d like a new couch. I’d like a better car. I’d like to go on vacation. These are wants. They happen after Baby Step 3.

Baby Step 1 is $1,000 cash in the bank. Baby Step 2 is pay off all of your debts except your home with great focused intensity, listing your debts smallest to largest, attacking them in that order right down the debt snowball. When you’re debt-free—everything but the home—then you move to Baby Step 3, which is to take your $1,000 account and raise it up to a fully funded three to six months of expenses. So when you’re debt-free but the house and you have a fully funded emergency fund, you’ve completed Baby Step 3. Once you’ve done that, then you’re able to save and do some other things, and that would include home improvements.