What Are Dave Ramsey’s 7 Baby Steps For Financial Success
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Improving your finances can be hard when you have no idea where to begin and no process to follow…that’s where Dave Ramsey’s Baby Steps come in.
My husband and I used to struggle so hard to budget, save money, and stay afloat.
In March of 2023, our home was in pre-foreclosure due to not budgeting and poor spending habits.
It was then that we decided to finally get serious about Dave Ramsey and his proven 7-step process to help people save money, pay off debt, and build wealth–the Baby Steps.
And since starting Dave Ramsey’s Baby Steps and using my Beginner’s Budget Blueprint budgeting method, my husband and I have paid off over 30K in debt in less than ONE year!
So, if you’re ready to improve your finances dramatically, get ready because in this post, we’re going to go over:
- Who Is Dave Ramsey?
- Dave Ramsey’s 7 Baby Steps
- How To Start Dave Ramsey’s Baby Steps Right Now
- How The Baby Steps Have Changed Our Life (+ How They Can Change Yours, Too)
And if you still want more, I have created the Beginner’s Budget Blueprint course that teaches you how to budget and track your expenses so you can change your life, too!
BEGINNER'S BUDGET BLUEPRINT
Ready to take control of your money for good?
Your step-by-step guide to stress-free budgeting is here!
So…Who Is Dave Ramsey?
Dave Ramsey is known for his on-air antics on The Dave Ramsey Show, the founder of Ramsey Solutions, and author of the Total Money Makeover.
The Total Money Makeover dives deep into Dave’s 7-step process to completely change and improve your finances—the Baby Steps.
While some find him controversial, these steps have helped thousands of people improve ther finances.
Dave Ramsey’s 7 Baby Steps
The Baby Step formula for saving money, paying off debt, and building wealth has helped people pay off over 1 BILLION dollars in debt since Dave Ramsey began teaching it.
Let’s go over them now!
Baby Step #1: Save A $1000 Starter Emergency Fund
The first Baby Step is to save a $1,000 STARTER emergency fund.
This step can be pretty controversial because of the low amount.
However, this step is not supposed to cover any and all emergencies or expenses that come up. (You will see in later steps that we build a rather large emergency fund for extreme emergencies.)
This emergency fund is supposed to help alleviate stress while paying off debt as fast as you can.
If you need to use your emergency fund during this process, pause whatever step you are on so that you can refill it back to $1,000.
I have some tips to help you save your first $1,000 in this blog post!:
Baby Step #2: Pay Off All Consumer Debt (Besides Mortgage)
The second Baby Step is to pay off all consumer debt, except for your mortgage if you have one, with the debt snowball.
I dive deeper into the Debt Snowball in this post, here:
But with the debt snowball, you make minimum payments on all your debts except for the smallest debt.
With that smallest debt, you put all your money into attacking it and paying it off.
Each time you pay a debt off, you roll the minimum payment from the first debt to the next debt’s minimum payment to help pay it off.
And so on and so forth, making a “snowball” as your minimum payments increase with each debt.
Dave Ramsey highly recommends the snowball method because it keeps you motivated throughout the process, and you can see your “shovel” or debt payments get larger and larger!
My husband and I have learned that having a solid budget is the KEY to paying off debt quickly.
Since my husband and I became serious about budgeting and learned how to make our budget work for us, we were able to pay off 30K in debt in less than one year with my Beginner’s Budget Blueprint method and the debt snowball payoff method!
If you don’t have a budget in place, have no idea how to begin, or your current budget doesn’t work for you, check out my Beginner’s Budget Blueprint course!
BEGINNER'S BUDGET BLUEPRINT
Learn how to budget step-by-step with 4 modules, over 15 video lessons, a 40 page course workbook, + budgeting spreadsheet!
Baby Step #3: Save A 3-6 Month Emergency Fund
The third step in the Baby Step Program is to save a 3-6 month emergency fund.
This step is more personalized and unique to each household, depending on income, career, medical history, and personal preference.
Many people view this emergency fund as if they were to lose their jobs or incur a substantial medical expense.
My husband and I wanted to max out our fund at six months because we would feel better with a larger emergency fund.
We also included huge buffers and assumed we would continue to live the way we do now, so we plan to save around $30,000 in our emergency fund.
Can you imagine seeing $30,000 sitting in a High Yield Savings Account with YOUR name on it?
It may seem daunting now, but we already paid off over 40K in debt, so we can definitely save 30K! And so can you!
Not everyone has emergencies funds as big as we plan to. Some people only save enough for bills and necessities like groceries. Some only save 3 months, some may even save more than 6 months! The amount is entirely up to you!
Wanting to know the best High Yield Savings Accounts to grow your emergency fund? Check out this blog post here:
Moving on… Steps 4-6 are usually done together and are unique and personalized to each individual, just like Baby Step 3.
Baby Step #4: Invest 15% Of Income Towards Retirement
Once you’ve paid off your debt and saved your fully-funded emergency fund, you will probably have more disposable income, and it is recommended that you put 15% of your income towards retirement in Baby Step 4.
To make this short and sweet, Dave Ramsey says that “401K beats Roth IRA and Roth IRA beats Traditional IRAs.”
Some people, like my husband and I, do not have 401Ks through our employers, making this step a tad more complicated.
At this point, I recommend speaking with someone about your retirement goals and having them set you up with a plan that works best for you, especially if you are not comfortable planning your retirement alone!
If you do feel comfortable investing in your retirement alone, I have recently started using Charles Schwab and have opened a Roth IRA for myself! It was super simple and quick.
I definitely recommend!
Once you establish how to fund your retirement, you can generally have your employer automatically deduct the 15% from your checks and send it straight to those accounts!
Baby Step #5: Save For Higher Education
Baby Step 5 is all about saving for higher education. This step, I believe, is entirely up to you.
Some people don’t want children, some don’t want to attend college, and some parents have already put their kids through college or dont plan to pay for their children’s education.
Make this as unique to you as you want.
My husband and I do not plan on having children and will not be doing this step.
However, we are currently cash-flowing my college degree, and if I am still continuing my education when we get to this step, we will fund the rest of my degree!
While there is a proven path to follow along the Baby Steps, they can also be used in a way that works best for you.
Baby Step #6: Pay Off Home
The second to last step is to pay off your mortgage!
Dave Ramsey suggests paying this off last, as we know our homes are an investment and usually cost much more than our other consumer debts (+ it is an appreciating asset!).
There is a step I did not mention, generally called Baby Step 4b, which is to save for a down payment on a home if you do not currently own one and want to buy.
He also recommends getting a 15-year mortgage compared to a 30-year if possible.
Once you pay off your home, you will be officially DEBT-FREE and can move on to Baby Step #7.
Baby Step #7: Build Wealth + Give
The last step is about living life and reaping the rewards from the seeds you sewn along this journey.
Go on those dream vacations you never thought you could, take a risk, build that business you’ve always wanted, and spend more time with family and friends without worrying about your bills and finances.
But now, let’s talk about what you can do RIGHT NOW to get started!
How To Start Dave Ramsey’s Baby Steps Right Now
First things first, get current on your bills.
When our home was in preforeclosure, we were obviously behind on bills so that was PRIORITY #1.
Dave Ramsey says to ensure your four walls–Food, Utilities, Shelter, Transportation–are taken care of before doing anything else.
Next, create a budget.
Look at your finances right now and make a budget for the rest of the month.
If you don’t have a budget in place, have no idea how to begin, or your current budget doesn’t work for you, check out my Beginner’s Budget Blueprint course!
BEGINNER'S BUDGET BLUEPRINT
Learn how to budget step-by-step with 4 modules, over 15 video lessons, a 40 page course workbook, + budgeting spreadsheet!
And lastly, start saving toward your first $1,000!
Sell things on the marketplace, pick up a side hustle, and eat at home all week instead of going out for dinner three times (like my husband and I used to.)
Whatever it is, ensure you get that $1,000 built up fast to keep the momentum going!
The most important thing at the beginning of these steps is to keep your momentum and motivation up.
This process is life-changing in many ways, not just financially, and I know you can change your life if you want it badly enough!
How The Baby Steps Have Changed Our Life (+ How They Can Change Yours, Too)
Dave Ramsey’s Baby Step Process has changed our lives in less than a year, and I know it can do the same for you!
Now that we have been budgeting and doing the Baby Steps, we have have paid off over 30K in debt in less than ONE year!
The peace and contentment that come with having your bills on autopay, knowing you can afford minor emergencies that arise, and knowing you are making a lasting change in your life is unmatched.
It’s freeing. And I want you to feel that way too!
Because I believe in this budgeting method SO much and want to help others get out of debt, build wealth, and create the lives of their dreams, I have launched my course, the Beginner’s Budget Blueprint, to dive deeper into budgeting to help you do just that!
In this course, I take you step-by-step through overcoming your false money beliefs, setting your financial goals, organizing your finances, creating your budget, staying consistent with budgeting, and SO. MUCH. MORE!
If you’re ready to improve your finances, learn how to budget, get out of debt, and create your dream life, you need my Beginner’s Budget Blueprint course!
BEGINNER'S BUDGET BLUEPRINT
Ready to take control of your money for good?
Your step-by-step guide to stress-free budgeting is here!
I genuinely hope I have ignited a fire in you to pay off debt, save money, and build wealth.
This process may be challenging; you will change a lot, but like Dave says, “If you will live like no one else, later you can live like no one else.”
Sign up for my email list and receive 5 FREE budgeting templates to start your journey today, or enroll in Beginner’s Budget Blueprint to start your budgeting and Baby Step journey today!
