If you’ve ever looked up how to get out of debt then you’ve come Dave Ramsey. He is the author of countless books on personal finance and focuses much of his advice on how to get out of debt fast in order to live a better life. Live like no one else so you can live like no one else, as he often says on his popular radio show.
I’ve been listening to Dave Ramsey’s radio show podcast every day for months and I’ve even taken his Financial Peace University class with my husband! Along the way we picked up a lot of good advice including learning about the baby steps.
The Baby Steps To Financial Peace
So what are the baby steps in Dave Ramsey’s program? Why do they work? Watch the video below for a summary or keep reading!
There are 7 baby steps to financial freedom in Dave Ramsey’s program. The steps are designed to help you get out of debt forever, save for emergencies, and build wealth.
Baby Step 1
Save $1,000 for your starter emergency fund.
This step is designed to get you off of the roller coaster of using credit in order to float any unexpected expenses that come up in your life.
Baby Step 2
Pay off all of your debt using the debt snowball.
The debt snowball method of paying off debt is where you pay off all your debts from smallest balance to largest balance. It’s designed to help you get wins quickly by eliminating some small debts very quickly.
Baby Step 3
Save 3-6 months of expenses in a fully funded emergency fund.
Saving up an emergency fund is critical to living life without debt. Saving up a funded emergency fund prepares you to handle any emergencies of financial crisis situations that come along like a job loss.
Baby Step 4
Invest 15% of your household income into retirement.
Once you are debt free and prepared for emergencies then it is time to start investing for retirement. This baby step is to help you provide for your future needs in retirement.
Baby Step 5
Save for your children’s college fund.
In baby step 5 you save for your children’s college expenses in the future. Because you will never take on debt again in the future you will need to save to pay for college.
Baby Step 6
Pay off your home early.
Baby Step 6 is all about paying off your home early and living a mortgage free life. Once you pay off your home you free up a lot of your income to use for the final baby step.
Baby Step 7
Build wealth and give generously.
The final baby step is one that will continue for your entire life. You continue saving and building wealth. You also give generously in this step as you earn and build wealth for yourself.
Those are the 7 baby steps in Dave Ramsey’s program and for many millions of people they have led them out of debt and into a stable and even wealthy position.
Good & Bad Advice From Dave Ramsey
Dave Ramsey is a polarizing figure in the personal finance community. People either love him or hate him … or get sued by him.
Personally I think he has both good and bad advice depending on people’s situations. He is wrong in his opinions just as much as the rest of us are wrong, but his advice has helped more people get out of debt than anyone else.
Here’s some of the good advice he gives:
- Paying off all your debt. Being debt free brings peace of mind and getting rid of high interest debt saves you a lot of money.
- Building up an emergency fund. Having savings for an emergency gives you the chance to survive any number of unexpected events and is a great idea for all people.
- He encourages a written budget every month. Obviously as a budgeter I love this advice because giving your money a job to do will help you be able to save up and achieve all sorts of financial goals.
Here are a few of the pieces of advice that aren’t as good that I don’t personally follow:
- He says stop your retirement contributions until you are out of debt even if you get a 401k match. Personally skipping a 401k match seems insane since you are generally getting that money with no risk and it’s part of your overall compensation package at your job.
- He says stop using credit cards even if you’re able to use them responsibly. The goal of having no credit is noble but it often makes people struggle with getting a mortgage or even certain jobs. Keeping our cards open and using them sparingly has earned us rewards and kept our credit scores high.
- He still encourages a $1,000 emergency fund which isn’t enough for most basic emergencies and this number has not changes in decades. At minimum I think a starter fund should at least have $1k per person in the household.
- He says you should never ever go on a vacation if you are in debt. I disagree as life is short and none of us know what will happen tomorrow. While we have the chance we plan to live our best life while still paying off debt. We also do all of our vacations in cash so we don’t add to our debt.
It seems like I listen to Dave Ramsey but don’t actually implement all of his advice, just some of it. In fact I often go out of my way to do the opposite of what he teaches because it makes more sense mathematically and for my life.
Unfortunately because we generally follow his guidelines instead of exactly following them, he would insult us. He’s go on a rant and call us stupid and that’s one thing I really disagree with regarding his style. He routinely insults and is rude to people who don’t follow his advice exactly even if they are successful. This turns a lot of people off his advice and his show, but hopefully they find ways to take the good without the bad.
Who Is Dave Ramsey?
His radio program, The Dave Ramsey Show, is heard on more than 450 radio stations throughout the U.S. and transmits Ramsey’s inimitable financial advice to millions of listeners each week.
Overall he has helped millions of people get out of debt and build wealth through his radio show, live events and personal finance books.
What Is Dave Ramsey Good For?
Dave Ramsey is great for motivation.
I listen to Dave Ramsey because he is a great motivator. He has spent years learning how psychology and how to motivate others to take action.
Listening to his show keeps me committed to accomplishing my financial goals. I might not be paying off debt and saving in the same way he teaches but I am paying off debt and saving. We don’t have to agree on the details on everything to agree on the big things. His show keeps me motivated on the big things like getting rid of debt and building wealth.
I truly love listening to debt free callers to his show. I love hearing how they’ve paid off so much debt and the ways they have cut down their lifestyles and made sacrifices in order to achieve a big goal. Often they had paid off way more than I’ve paid off! I re-listened to his special show where people who had paid off everything including the house called in and that was super inspirational to me. I want to pay off my house one day.
Ultimately I love Dave Ramsey’s motivation because I do want to live without any bills. I want that freedom. I want to life life without having debt hanging over me. With no debt comes no risk. When things get bad you don’t have to worry about that debt.
In conclusion, Dave Ramsey is good for inspiration. And perhaps the occasional idea. At least that’s what he is good for to me!
Get Inspired By Dave Ramsey
You can get inspired, motivated, and fired up by Dave Ramsey and his advice in many ways.
I recommend doing one or all of the following:
- Read his book: The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness
- Read his book: The Total Money Makeover: A Proven Plan for Financial Fitness
- Read his book: Financial Peace Revisited
- Read his book: EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches
- Get his Deluxe Executive Envelope System (Dave Ramsey’s Financial Peace University) and start budgeting
- Listen to the Dave Ramsey show on your local radio station or I Heart Radio
- Watch clips of Dave speaking to groups on YouTube
Whichever way you decide to listen, enjoy! He offers a ton of great info for free on his daily radio show and youtube channel so you never had to pay for the financial advice and motivation if you don’t want to do so.
Dave Ramsey will definitely inspire you and motivate you to take action to improve your personal finances and your entire life.
Mary is the founder of Pennies Not Perfection where she shares her journey to build wealth through online income. She quit her day job in 2021 after she paid off her debt and doubled her 9-5 salary.
Mary's favorite free financial tool is Personal Capital. She uses their free tools to track net worth and work toward to financial freedom.