What Are The Dave Ramsey Baby Steps? Do They Really Work?

If you need to get out of debt, you’re desperate to try (almost) anything. One of the first tips you’re going to find online are the Dave Ramsey Baby Steps. He has seven steps you can take to get out of debt and stop worrying about money. But just because millions of people know about these steps doesn’t give them a free pass.

Besides knowing what Dave’s baby steps are, do they really work?

Step 1: Save $1,000

Most Americans still need to complete baby step #1. That is, save $1,000.

If most people get hit with a $1,000 surprise bill, they have to rack up the credit card debt or borrow money. Study after study continues to show this. So yes, before you can fight debt, save $1,000.

This is the basis of your emergency fund. Hopefully, you can sell some unused items or put some extra money from your paycheck into a savings account.

You can also do these things to save $1,000 by spending less:

It might take two or three months to save $1,000, but you can do it. And, the sooner the better.

Step 2: Pay Off All Debt Using the Debt Snowball

When it comes to debt repayment strategies, the debt snowball is the most widely known.
Here’s  a brief summary if you’re not familiar with it:

  • Organize all your debts in order of the lowest balance first
  • Then, make extra monthly payments on the smallest balance first. (if there’s a tie, pick the one with the highest interest rate)
  • Continue doing this until your debt-free

At this point, you pay off all debt except your home mortgage. This means credit cards, medical debt, and student loans for now.

Some criticize this plan because it takes too long to get out of debt. For some people, maybe. But, if following this plan means you get out of debt instead of staying in debt, do the debt snowball.

Step 3: Save to 3 to 6 Months of Living Expenses

Once you’re debt-free, your monthly disposable income skyrockets. Instead of spending it to get in more debt, put it into your emergency fund until you have up to six months of living expenses. You already have $1,000, so you might not have much more to go.

If you’re living expenses are $3,000 a month, you need to save $9,000 to $18,000 in an emergency fund.

Step 4: Invest 15% of Your Income in Retirement Funds

Ok. You need to be saving some money for retirement even while you’re doing steps 1-3. It might just be getting your employer 401k match at first. That’s ok. After you’re set for today, you can start saving for tomorrow.

You only get one shot at retirement, so save early and save often.

Whether you choose a Roth or Traditional IRA is up to you. It depends if you want to pay taxes now or later on your contributions.

Step 5: Save For Your Children’s College

Once you get on track for retirement, start saving for your children’s college. Since the average student loan debt is north of $35,000, this isn’t an easy task.

Although Dave recommends a Coverdell Education IRA, you might go with a 529 plan instead.

Saving for college is up to you. Depending on your age and finances, this might not be a possibility. After all, don’t sacrifice your retirement to put Jr. through college. They have the rest of life to pay back the bills and save for their own. So, exercise common sense on this call.

Plus, if you’re still on Baby Step #1, this is still a few years down the road. Don’t worry about it for now.

Step 6: Pay Off Your Home Loan Early

If you still have a home loan, make extra mortgage payments. For sure, make sure you retire debt-free. If that means you switch Steps 5 and 6 to make it happen, you can do it. And, if you don’t have children yet, skip to step 6.

Also, you might decide to pay your home off early if you struggle to pay your monthly bills. Even if your credit cards and student loans are paid for. Finance is “personal” and you need to do what you need to do to avoid going back into debt.

Step 7: Build Wealth and Give

You can’t take your earthly possessions with you. Instead of being selfish, be generous and share your blessing. The same thing as the other steps, give to charity every month. But, after you know you can retire on time and you’re financially secure, share your blessings with others who need help. Maybe you can give someone the help they need to improve their finances like you’re starting to do right now!

Are the Dave Ramsey Baby Steps Legit?

If you do a quick search for Dave Ramsey, there’s a definite love-hate divide in the finance world. Either people love him or hate him.

Overall, Dave Ramsey gets lots of things correct. He gives you a plan to get out of debt and stop living paycheck to paycheck. You may not agree with everything he says (i.e. no credit cards), but nobody is perfect. And, you might not even use his envelope budgeting system.

Once you get out of debt, Dave may not be the best guide anymore. Once again, he has a plan to keep you out of debt, but you should still supplement from other resources when it comes to investing or saving for retirement.

Besides the seven baby steps, you might decide to read one of Dave’s books:


If you want to get out of debt and your option is the Dave Ramsey Baby Steps or nothing, go with Dave. Once you figure out money, you may decide you don’t need his advice as often as before. If so, great! And don’t forget, there’s plenty of free financial advice online. This includes The Finance Genie too!

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