Dave Ramsey Baby Steps: How they Work

Dave Ramsey’s baby steps can help you get out of debt. They’re intended to be followed in order to get you out of debt and stress and into a life of saving and giving.

This tried-and-tested strategy has been used by millions of people for some time now. You can do it, too.

Dave Ramsey Baby Steps

  • Step 1: Set aside $1,000 in an emergency fund.
  • Step 2: Using the debt snowball method, pay off every debt (but not your mortgage).
  • Step 3: Establish an emergency fund with 3-6 months’ worth of costs/expenses.
  • Step 4: Set aside 15% of your annual household income for retirement.
  • Step 5: Put money aside for your children’s college education.
  • Baby Step 6: Pay off your mortgage as soon as possible.
  • Baby Step 7: Create riches/wealth and donate

baby steps

1. Put $1,000 aside for an emergency fund

As per Dave Ramsey baby steps, an emergency fund is so important to your overall financial stability and success that it should be your first priority.

There are numerous reasons why you should maintain an emergency fund, the most important of which being that you never know when unexpected bills will arise.

Setting away at least $1,000 in a liquid fund will serve as insurance for life’s unexpected events, rather than relying on credit or borrowing from another source.

Remember, this is only the beginning.

The idea is to build up that emergency fund even more, but $1,000 is a terrific place to start.

2. Using the debt snowball method, pay off all debt

The debt snowball strategy is probably the most well-known of Dave Ramsey’s baby steps.

This strategy allows you to pay off all of your debt (aside from your mortgage) in a planned manner, including credit cards, auto payments, and student loans.

To begin, make a list of all of your debts and arrange them in order of least balance to greatest balance.

When using the debt snowball method, you ignore the debt’s interest rates and focus solely on the amount you owe.

You will pay off the smallest balance first, while making minimal payments on the larger obligations, using this strategy.

Move on to the next smaller balance when each tiny balance is paid off (while always making minimum payments on every debt) until all debts are paid off.

This is a step in the Dave Ramsey baby steps that I like.

3. Put aside 3-6 months’ worth of living expenses in an emergency fund

It’s time to get back to work on building up your emergency money.

You’ll most likely have extra cash to put toward your emergency fund once you’ve paid off all of your debt.

Increase your savings such that your liquid emergency fund has three to six months’ worth of spending.

You’ll be ready for practically any surprise that comes your way this way. For example, a job loss, illness, or significant house repairs.

4. Set aside 15% of your income for retirement

When it comes to investing for your retirement, there are a variety of options to consider.

It makes no difference what form of fund you invest in for this first phase.

It could be a Roth IRA, 401(k), or another type of account. All you have to do now is make sure that you invest 15% of your household income in that investment.

5. Put money aside for your children’s college education

It’s never too early to start planning for college if you have children or are considering having them in the future.

You will be able to focus not just on your own future (retirement), but also on the futures of your children at this point in your financial journey.

Custodial accounts, Education Savings Accounts (ESAs), and 529 college savings programs are all excellent options to consider.

6. Pay off your mortgage as soon as possible

By this point, you should have paid off the majority of your debt and only have your mortgage to worry about.

When it comes to paying off your mortgage early, there are a few things to consider. Knowing about possible prepayment penalties, for example.

Imagine the freedom you’d have if you were able to liberate yourself from house payments sooner than expected.

Read: Real Estate Investing for Beginners

7. Amass wealth and donate

You’ll be in the enviable position of accumulating wealth if you don’t have any debt, have a sizable emergency fund, a financed retirement, and money for your children’s school.

You’ll also be able to donate to causes that are important to you.

With no financial obligations to tie you down, you can live your life as you desire, without having to worry about money.

Why should I do the Dave Ramsey Baby Steps in this particular order?

1. To stay on track with your priorities

The present moment can feel like the most essential thing in the world.

That mindset may lead us to overspend on our child’s unicorn-themed birthday party, which includes a four-tiered cake with a fondant dancing unicorn and edible glitter rainbows.

Even if all those party photos seem great on Instagram, teaching your kids the value of saving and paying off debt is a greater gift than a large sparkling bow.

It’s actually a better present for yourself than those glitzy gold-trimmed headphones that remind you to do things like take out the garbage.

These Dave Ramsey baby steps will assist you in establishing and maintaining a better-life standard, one that extends beyond social media to what truly counts.

2. To stay out of debt forever

It’s worth noting that the first three Dave Ramsey baby steps are all about avoiding debt and paying it off.

Like a success rocket, they blast you into a debt-free living. The first $1,000 emergency fund serves as beginning fuel, keeping you afloat and secure as you pay off your debt.

And having a completely loaded emergency fund, as a result of Dave Ramsey baby step 3, means you always have cash on hand, so you don’t have to resort to borrowing.

Dave Ramsey's baby steps

3. To concentrate on a single aim at a time

It’s intimidating when you consider all of your financial ambitions in the future.


There’s much to accomplish, so little time.

But there’s still time, and there’s a tried-and-true method for breaking down your goals into manageable, doable chunks that will set you up for success.

Because, how do you climb a mountain? One step at a time.

4. To keep track of your development and congratulate yourself

It’s time to rejoice when you reach the end of one of those Dave Ramsey baby steps. Seriously.

Throw a low-cost party for yourself. Invite a friend or two.

You can see your progress, congratulate your accomplishments, and anticipate what comes next when you take one Dave Ramsey baby step at a time.


One Dave Ramsey baby step is followed by another.

Step by step, save after save, success after success!

Are you Ready for Dave Ramsey Baby Steps?

Should you follow Dave Ramsey baby steps?

If you want to get out of debt, plan for your future, and develop wealth, the answer should be obvious.

Committing to and putting this Dave Ramsey baby steps technique into action will undoubtedly assist you in achieving that goal.

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