Dear Dave,
Do I set aside six monthsí worth of paychecks or the amount of my bills for six months when itís time to save up my fully funded emergency fund?
Dear Steve,
In my plan, Baby Step 3 is when I advise people to save up three to six months of expenses in a fully loaded emergency fund. This is set aside and not touched for any reason other than a true emergency. Itís not a Bahamas fund or a new living room furniture fund. Itís an emergency fund. Itís not an investment or fun money; itís insurance. Think of your emergency fund as a protective barrier that keeps you from going into debt or cashing out investments when life throws bad things your way.
How do you decide where to land in the three to six month range of expenses? That depends on how much risk your household has. If thereís only one income in the equation, you have more risk, so you should skew things toward six months. Being self-employed or a commissioned salesperson is also a situation where this would be true. If there are two incomes, and both come from steady, dependable sources, you could fall into the middle of that range or even more toward the three-month side.
Make sure your emergency fund is easily accessible too. A simple c with check-writing privileges works fine. You want to make sure you can get your money quickly when the need arises!

Never take out an adjustable-rate mortgage

Dear Dave,
Should I ever consider a 5/1 adjustable loan if Iím buying a house and plan to pay it off in five years?

Dear Anonymous,
No! The reason is you can never be assured that youíre going to pay it off in five years. If you go into it with that mindset, then youíre basically saying you can predict that the future will be exactly how you want it to be. Thatís pretty naÔve. Your future will never be what you think it will be. Itís either going to be better or worse, but your future will never turn out exactly the way you plan for it to be.
If you canít buy a home with cash, you need the stability of a 15-year, fixed rate mortgage in your life. Weíre living in the lowest mortgage interest rate environment in about 50 years. I saw a 3.02 percent 15-year fixed rate mortgage just the other day.
For those of you who have not refinanced, if youíre staying in your home or youíre sitting on an adjustable rate, this is a great time to change that. Still, people are sitting around yawning like these kinds of rates are going to be around forever. Itís gone on for a while now, but donít let that fool you into thinking those kinds of rates are normal. Theyíre not going to last forever.
No, I would never under any circumstances take an adjustable rate mortgage. Was that unclear? I hope not!
ó Dave Ramsey is Americaís trusted voice on money and business, and CEO of Ramsey Solutions. He has authored five New York Times best-selling books. The Dave Ramsey Show is heard by more than 11 million listeners each week on more than 550 radio stations and digital outlets. Daveís latest project, EveryDollar, provides a free online budget tool. Follow Dave on Twitter at @DaveRamsey and on the web at