Dave Ramsey Baby Steps: Everything You Need to Know
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You’ve likely heard of this financial expert before. And most people that have heard of Dave Ramsey know his policy on debt and how he encourages people to live without borrowing money.
But what is the method he uses for money, what are the Dave Ramsey baby steps, and most importantly, do they actually work? Find out more here and see if the baby steps are the right choice for you.
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Who is Dave Ramsey?
Dave Ramsey is an expert on avoiding debt. He has books, classes, a podcast and show, and more.
Dave Ramsey teaches people that debt is something to stay away from at all costs. He shares his personal story about debt, how he got out of it, and how much better off he and his family are because of this.
Due to his extreme methods, he’s attracted his fair share of attention from YouTubers and other financial experts wondering if his way is best. However, his methods have helped millions of people to build wealth and leave debt behind forever.
Regardless of the controversy, there are significant results from his baby step method.
The Team and Business
Dave Ramsey has his own radio show and podcast where people call in with questions about finance. He and his team help struggling families overcome mountains of debt and find answers to their financial questions.
He isn’t the only personality on the team. Others include his daughter, Rachel Cruze, along with George Kamel, Kristina Ellis, and others. Paying off debt is their main mission, but he and his team discuss many specific topics, including paying for college, careers, and more.
He is a bestselling author who’s written multiple books, including The Total Money Makeover and Baby Steps Millionaires. Ramsey offers practical advice for people who are unclear about budgeting and struggling with debt.
In addition, he offers a budgeting tool, an app called Every Dollar. It helps people budget their money to the last cent, so all of it is accounted for. It helps you to stay on the right track with your money goals, stick to a budget, and pay off loans and credit card debt.
Ramsey has built his team and business over the years and worked hard to be where he’s at today. There are a lot of benefits to his method; let’s learn more about it now.
What is the Dave Ramsey Method?
The Dave Ramsey method is actually called “The Baby Steps.” It’s a set of 7 steps that help you achieve freedom with your money. It starts with protecting yourself with an emergency fund, moves into debt payoff, and then helps you build up your money savings.
The entire plan focuses on not owing money to anyone or using credit cards. Rather you save up for what you need and plan for emergencies and purchases in advance instead of using debt to handle them.
How Do the Dave Ramsey Baby Steps Work?
There are seven steps in the Dave Ramsey method. You follow these steps to save money, pay off debt, and achieve your financial goals.
They are in a specific order and must be done according to their rules. Otherwise, it may not work very well. It’s a pretty strict system, but it has been known to get results.
I can say that the baby steps DO work since it’s how my husband and I were able to get out of debt. We joined a local Financial Peace University class to be around other like-minded people on the same journey.
Related: My Review of Financial Peace University
What Are the Positives of Dave Ramsey’s 7 Baby Steps?
There are a lot of great things about this system. Starting with it being a method that gives people the tools to take control of their finances. You’ll learn to manage your money properly, and you’ll know how much is in every budgeting category all the time.
It’s also a proven method. It works, and there are a lot of happy families that talk about how it’s changed their lives.
It really does help people to pay off debt and eliminate financial stress. If results are what you want, this method will get you there.
Last, the baby steps are manageable. Some take a short amount of time, and others take longer, depending on your finances, but it is broken down into seven steps for a reason. These small accomplishments keep you from feeling overwhelmed while also making actual progress with your money.
What Are the 7 Baby Steps of Dave Ramsey?
There are seven steps that you must take to complete the Dave Ramsey method. Here are the seven baby steps to financial freedom.
- Save $1000 for emergencies.
- Pay off all of your debt including credit card debt and student loans. Everything except your mortgage. Use the snowball method which means focusing on paying off the smallest debt first, regardless of the interest rate.
- Save 3-6 months of living expenses.
- Invest 15% of your income in a retirement account.
- Save for your kids’ college education.
- Pay off your mortgage.
- Build up wealth and be generous.
Frequently Asked Questions:
This method is quite straightforward, but there are still some common questions that you might have about starting the Dave Ramsey baby steps. You might be wondering about:
How Long Should Baby Step 3 Take?
Some people wonder how long this step should take. After all, when can you take a vacation and pay for fun things again?
If you put all of your extra money and all of your effort into it, baby step 3 shouldn’t take too much time. It will likely take somewhere between half a year and a year and a half, depending on the numbers.
Is a 3-Month Emergency Fund Enough?
Now, how do you know how many months your emergency fund should be for? Are 3 months enough?
Three months is really the bare minimum for an emergency fund. It will protect you from most temporary emergencies.
Still, it won’t work as well if you lose your income or if you need to pay for something expensive. Therefore, aiming for a 6-month emergency fund is preferable. Depending on your family’s circumstances, you may even feel more secure with a 12-month emergency fund.
However, saving up three months of expenses is also great and should be celebrated! It’s not easy to do and takes time. And it does provide you with some extra money in the event of an emergency.
How Much Money Should I Put Towards My Emergency Fund Per Month?
You might be wondering how much money you should put towards your emergency fund savings each month. Take your budget into account first, but really, as much as you can until you reach your goal.
So look at your expenses and if you have any extra money, try to add that to your monthly savings. At this point, you’re almost there, but not quite.
Even though it’s tough, just a little bit longer, and you’ll have money saved up in case anything happens. So do this for your future, and keep saving, focusing all your efforts on that until you reach your goal.
Related: Savings vs Emergency Fund – What’s the Difference?
Is Baby Step 4 Gross or Net?
Baby step four is all about retirement. This Baby Step recommends saving a percentage of your income so that you’ll be ready when you retire with money saved up.
Investing your money for retirement takes quite a bit of time and cash, so do you save 15% of your gross or net income?
Dave recommends saving 15% of gross earnings, which is more because it’s the amount you have before taxes.
How Long Does it Take to Finish Dave Ramsey’s Baby Steps?
Maybe you think the baby steps make a lot of sense, and you’d like to try it. But exactly how long of a time are you committing to? How many months or years could this take?
Keep in mind that any time frame is very subjective because it depends on your level of determination, your income, and how much debt you have. So no time frame will be exactly the same, but there are a few guidelines you can follow.
First of all, baby step 1 should be accomplished as quickly as possible. This is because you need some money saved up for emergencies.
After that, it comes down to how serious you are about debt payoff and wealth-building and what comes up in your life that influences your decisions.
For example, suppose you are super focused with a decent income and about $20,000 in debt. In that case, you might be on your way to building wealth within a year or so, especially if you take on a second job.
However, if you are only somewhat focused and don’t work extra hours, it might take you a few years to pay off the same amount of debt, even if you make more money.
But if you do the steps the way they’re supposed to be done – with total focus – you should be able to get through the first few fairly quickly.
For help staying motivated paying down your debt, check out these debt payoff trackers.
Does Dave Ramsey’s 7 baby steps work?
The big question – this method seems time-consuming, and a bit difficult, so does it actually work? The answer is yes, it does. Many people have found their way out of debt and now excel with their finances due to this method.
While it isn’t easy, the Dave Ramsey baby steps are very simple, and it’s a proven method that works. It can get you on track and back in control of your finances.
Some say that they don’t like the method or that it isn’t for them, and that’s fine. This plan is extreme and not for everyone.
But it is one proven way to pay off your debt and get rid of those annoying payments once and for all. And many people have built wealth in this way.
Who Should Consider Doing the Baby Steps
If you are in debt and are unsure how to get out, you should consider the baby steps. The structure is simple and can help you pay off your debt fast, even if you have a lot of it. But the program is intense and requires a lot of commitment.
You may also benefit from the baby steps if you don’t have debt but are unclear on the direction of your finances. If you aren’t sure how to build wealth or win with money, you should definitely check out the baby steps to help you invest, give, save for your kid’s college, and more.
Who Shouldn’t Follow the Baby Steps
The baby steps are a lot of work and require total commitment. If you are unsure whether you want to get out of debt or don’t want to commit to the program, you shouldn’t follow the baby steps. Without total focus and maximum effort, you won’t get much in way of results.
You may also not want to do the baby steps if you’re already debt-free, have an emergency fund, and are saving for retirement. In this case, you’ve already completed many important steps. You may find the baby steps to be unnecessary.
Other Methods to Pay Off Debt
Suppose you want to pay off debt, but you aren’t sure that the baby steps are the right choice for you. Maybe it seems too extreme, or you aren’t sure you can commit every single extra dollar to debt payoff. Whatever your reason, there are other ways to pay off the debt in a timely manner.
Set Aside a Percentage of Your Income
Another choice is to set aside a percentage of your monthly income to pay off debt. You could do a simple, straightforward amount, like 10 or 20% of your salary. That way, you’ll see progress on your debt but in a more relaxed way.
Use Bonuses and Windfalls to Pay Your Debts Instead
You can keep making the minimum payments on your debt and then use any bonuses, pay increases, or extra money to pay off more towards your debt.
This method has the benefit of you not having to disrupt your lifestyle at all, and you may not even notice you’re paying off debt. However, this method will only work if you have a small amount of debt to pay off, preferably not more than a few thousand dollars.
Following Dave Ramsey’s 7 Baby Steps Can Help You Build a Better Financial Future
The baby steps are an interesting and fast way to pay off your debt and get back on track financially. They aren’t easy, but they are effective.
You will look back in a relatively short amount of time and will likely be happy with your progress and where you’re at with your goals.
It can completely turn your financial future around, and these steps make a big difference. They are very helpful, and many people have successfully used the baby steps!
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