The Famous Dave Ramsey’s 7 Baby Steps

By | May 2, 2021

Dave Ramsey is a famous businessman and a financial writer. He has written many books but he is famous for his 7 baby steps that help people to get rid of debt, to become financially stable and to build wealth for them and their family. So today we will discuss about Dave Ramsey’s 7 baby steps so that you could get off your debt and could build the empire you want. By following these 7 steps many people around the world have paid off their debt and now are able to live a life where they don’t have to worry about money.

Before starting these 7 baby steps you should make your mind clear by asking yourself a question that why you want to do this? Everyone has its own reason for following these steps so when you want to take a start the first thing you must be doing is that you should be asking yourself this question and then you will be able to follow and complete these steps with a motivation.

One thing you must keep in mind is that you won’t be able to complete this steps in nights. According to Dave it will take at least 7 years to complete these baby steps and this will test your determination many times. In these 7 years, there will be a lot of difficult times when you will think to put these steps aside. But these are the times when your why’s will help you. In these times you should remind yourself that why you were doing this and this will motivate you and help you to get back on the track with full enthusiasm.

Now let’s start these 7 baby steps one by one.

1-Emergency Fund of $1000.

So the first baby step is to save $1000 as an emergency fund. I am sure you will be amazed that the first step is not about paying debt. Having an emergency fund has its own reasons that could help you in many ways. Instead of increasing the amount you are paying for debt, you will be saving for an emergency fund and for this Dave has a reason that is that many a times you get in to situation where you need cash in big amount. It could be a car repair or home maintenance that is necessary to be done. So in that case when you will need a big amount of cash and then the only way to pay the cash will be taking more debt. But if you have this emergency fund then you will not have to take debt and you will be able to pay off the cash from your emergency fund. Dave thinks that when you are paying for debt these type of unexpected expenses come more often. So whenever a situation like that arises you should pay the cash from your emergency fund and then again save till it reaches a 1000 dollars. This could help you to develop a habit of saving and will train you to counter these unexpected expenses.

When your emergency fund is completed you can increase the amount you are paying for debt and by this little step your credit card balance will go down eventually. Another important thing that you can do is to open a savings account and save your $1000 in that so that you could also earn some extra money on that by the time you are paying off the debt.

2- The Debt Snowball

The Debt Snowball is considered one of the famous and easiest method to pay off the debt. This method is very interesting and will keep you motivated towards paying your debts off quickly. Paying the debts according to the highest payments could help you save money but this Debt snowball method will help you to be motivated and paying the debts quickly and easily. By this method you will get some wins in the start and it would make the journey much easier for you.

First you will have to make a list of all the consumer debts that you have to pay from the smallest one to the biggest one in an ascending order. Now you will have to pay the minimum amount that you could pay for all the debts expect the smallest one and for the smallest one the thing you should do is to put up some extra cash in that payment and increase the amount that you were paying for that. This will help you to pay off the smallest debt quickly. Now after you have paid the smallest debt fully, you should move to the next smallest debt and for that you should pay the maximum amount and also add the amount that you were paying on the previous one too. By this you will be able to pay this debt quickly too. For the other debts you should pay the lowest amount. By following the same strategy for the other debts one by one and adding all the amounts you were paying for the previous debts you will be able to pay that debt quickly.

So as you saw it is easier to pay the smaller debts quickly and these quick wins can keep you motivated towards your goal and when you will mark fully paid on the list it will help you strengthen your faith that you could pay the others quickly too.

3- Increase The Amount of Emergency Fund.

Now as you have finished with your debts other than the mortgage, you should not fall in to the lure of buying new things and waste your money on that. For that Dave tells you to increase your emergency fund and put the money you were spending on paying the debts in to your emergency fund. In the step 3, your fund must contain that much amount that you can use up to 3 to 6 months for your household expense. This fund will act as a protection for you and your family because if you get in to a bad situation like losing a job or a damaged house. If you get in to situations like that this fund will help you to not get in debt again and pay off these expense by cash from your emergency fund. This routine will help you to learn the art of saving money and you will be able to save more by the time.

4- Retirement Saving

The 4th baby step of Dave is to maximize your retirement saving by putting your 15% income to retirement savings account. Now as you are finished with the first three steps and you don’t have any debt now and you also have an emergency fund for 3 to 6 months. Now it is the time for you to invest for your golden years. Dave asks you to invest 15% of your income to the retirement savings account and you can do that easily as you do not have to pay any debt now. This could help you to retire early and make your future life more comfortable.

5- Building your Kid’s College Fund

The 5th important baby step that Dave suggest to you is that you should build a fund for your kid’s college. For many parents it is an important thing to send their kids to college and universities for higher studies and if it is also important to you then you should also save money for that too as it is not easy to pay a big amount for your kid’s college. One thing that Dave has cleared that the college has nothing to do with the success of your kid. So it is important to know the benefit for you kid while you are paying a big amount. By this you will be able to afford your kid’s education easily.

Other than that you could also consider some alternatives for your kid’s college and it will help you to save a big amount. Your kid could be happy to do a trade over a desk job so you should also consider a trade school for your kid as they are much cheaper and your kid can also get high paid jobs. You could also help them look for scholarship as you can get many. Other than that community colleges can also help to take many courses and they are much cheaper than the universities.

6- Pay the Mortgage

The 6th baby step of Dave Ramsey is to pay the home mortgage completely after you have paid the consumer debt. After having an emergency fund, being consumer debt free and also saving for your retirement and kid’s college. The next thing you should be doing is to get rid of the last debt that you have to pay is and that is the mortgage. The amount you were spending to build an emergency fund and paying for the consumer debt should be used to pay the mortgage quickly. To make if faster you should all the unexpected and unusual incomes like bonus or tax refunds in to mortgage payments. After paying the last debt now you are free and able to move in to the last step.

7- Building your Wealth

Now as you are free man and you don’t owe a penny to anyone now it is the time for you to build your wealth. You can build your wealth by investing the money in real estate or stocks or in to mutual funds. You can also put your money in to high yield savings account. You could use this money to fulfill your dreams and could live the life you wanted to live. As this is the final step and you don’t have to pay anyone now.


So these are the famous Dave Ramsey’s 7 baby steps. These steps have helped many people around the world to pay off their debt and build a wealth. Do comment in the comment section below and let us know how motivated you are to follow these steps in your life.

Have a good Day!

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