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A Guide to Vacationing on the Baby Steps

Your old crew from college is begging you to meet up in Chicago, your spouse wants to whisk you away to a weekend getaway in the mountains, and your kids want to see The Wizarding World of Harry Potter—everywhere you look, vacation is calling your name!

But you’ve been following the Baby Steps, and now, you’re wondering how exactly going on vacation fits into the plan.

It can be confusing, but we’re here to help! No matter what step you’re on, here are some guidelines to follow for vacationing on the Baby Steps.

Baby Steps 1 and 2

If you’re on Baby Step 1, you’re building a $1,000 emergency fund.

If you’re on Baby Step 2, then you’re using the debt snowball.

Either way, your budget is pretty tight, since you’re paying off debt as quickly as you can. You’re laser-focused on either building that savings buffer or kicking debt to the curb forever, and every spare dollar needs to go toward your goals.

This means those dollars shouldn’t be funding your seven-day cruise or cross-country road trip. In Baby Steps 1 and 2, you shouldn’t be going on vacation at all.

Did we just ruffle some feathers there?

Sure, it might sound extreme, but if you really want to become debt-free, you’re going to need to get extreme for a while. Remember, a vacation is a luxury, not a necessity.

But don’t worry. These kinds of short-term sacrifices aren’t going to last forever. We don’t want you to be paying off debt for the next 10 years.

You need to ditch that weight as quickly as you possibly can, and this is part of what it takes to get there. A few years of hard work and discipline—sacrificing some of the expensive, fun stuff—is worth it in the long run.

But hey, nobody says you have to stop dreaming here. Do you want to trek across Ireland, go on an Alaskan cruise, and spend a week at Disney? Hang on to those vacation visions!

Use your goals and dreams to help you stay motivated as you work through the Baby Steps. Nothing beats the feeling of taking a vacation 100% debt-free!

Have Fun Without Spending Money:

Newsflash: You don’t have to take a vacation to create lasting family memories. Spending a Saturday night camping out in your backyard and making s’mores with your kids or hitting up the free activities in your own town is vacation enough while you’re on Baby Step 1 or 2.

You can still have fun without spending a dime on a typical vacation.

Guess what? The beach and the mountains and all the fancy resorts aren’t going anywhere. They’ll still be there when you’re out of debt.

It’s all about living like no one else now so later, you can live like no one else.

Baby Step 3

Congrats! You did it! You’re debt-free! After all that hard work, you get to take a little bit of a breather. Finally!

In Baby Step 3, you’re out of debt and starting to save up your big emergency fund (that’s three to six months of expenses). Now, you’re putting all that money you were using to pay off debt toward the emergency fund. It’s a great feeling!

But even though you’re debt-free, you still need to stay focused on building your emergency fund. Which means you can’t go over-the-top on vacation spending while still on Baby Step 3.

Still, because you’re debt-free, you’re in a great situation to save up for a little weekend getaway or local staycation. There are plenty of cheap vacation possibilities out there!

Vacation Tip:

As a motivator while you save up for your trip, find a photo of the vacation spot you want to go to for the weekend. Put it on the wall or refrigerator or your desk at work.

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Every savings goal starts with a budget. Create yours today with EveryDollar.

But remember, you’re still saving for an emergency fund here. Make sure you pick a location that isn’t over-the-top, and don’t go crazy on spending once you get there, either! Look for special deals, avoid wasting money on things like souvenirs, and stick to your budget.

Baby Steps 4, 5 and 6

When you’ve reached Baby Steps 4, 5 and 6, you’re in an awesome spot! You’ve started the process of investing 15% of your household income in Roth IRAs and pre-tax retirement (Baby Step 4). And if you have kids, you’ve begun saving for their college funds (Baby Step 5). And if you own your home, you’ve started tackling your mortgage debt, too (Baby Step 6). All at the same time! Go, you!

This is where you can really breathe a huge sigh of relief and feel great about all that you’ve accomplished on your journey so far. You’ve done the truly hard work of getting out of debt and saving up your fully funded emergency fund, and now, you get to reap the benefits of the sacrifices you’ve made.

At this point, taking a vacation isn’t on the “no-go” list anymore. Legitimate vacations, here you come!

But. That doesn’t mean you dive in without a plan. Be sure to put the vacation in your budget, save up for it throughout the year, and pay for the trip with cash (you know, money you already have). 

Your income will still be the deciding factor when it comes to the style of vacation you take. A two-week excursion to Dubai is probably out of the question for a while. See what you can afford on your budget, make a plan to save up, and go somewhere debt-free and enjoy yourself!

Just a little word to the wise: Don’t fall into the temptation of using a credit card to fund your trip and gather up the reward points. You’re out of debt! Why would you go back into debt just to earn some travel points? No, thanks!

Vacation Tip:

Before you ever hit the road for vacation, make sure you start a sinking fund to start saving up for it.

If you know the vacation you want to take a year from now is going to set you back $4,200, then you should be setting aside $350 each month to fully fund it. It’s not rocket science, but you’d be surprised at how many people don’t make a point of saving like that.

Baby Step 7

This is the ultimate! When you’ve reached Baby Step 7, your focus is on building wealth and giving a bunch of it away!

You’re totally out of debt, including your house, and you’re saving and investing to the max. You have nothing holding you back now. You’ll be able to save for really nice vacations quickly, especially if you’re still earning a good income.

So, you know where you can go on vacation? Wherever you want! Paris? London? Tahiti? A two-week African safari? A European cruise? The world is your oyster!

Vacation Tip:

Have fun, and enjoy living like no one else! Take some friends with you on some of your vacations. Be an encourager and a motivator to people who haven’t reached this point in their journey yet. Get generous with your money and even more generous with your spirit!

But don’t forget, you still need to budget for it! After all, Dave still budgets for his vacations, too.

Stay Focused and It Will Pay Off!

Vacations are awesome—it’s true. But if you’re still paying off debt or saving up for an emergency fund, stay motivated and focused on your goal, and don‘t let anything distract you—not even vacation. Stick to the plan, and know that vacations will be there waiting for you later. And, oh, what a happy day that will be!

No matter where you are in the plan right now, remember—everyone’s journey is different. Some people are able to blaze through the Baby Steps quickly, while it takes a lot longer for others. And that’s okay! This is your journey.

Whether you’re saving up for your big summer vacation or still working on your debt snowball, you need a budget. Tell each and every dollar where to go with our free budgeting app, EveryDollar.

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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