Treat Debt Like the Emergency It Is. Debt is not a lifestyle — don't let it become one.

Every month you carry it, interest quietly drains the future you're trying to build.

 Left unchecked, it doesn't just hurt your finances — it chips away at your confidence and dims your biggest dreams.… Continue Reading

In his book, The Total Money Makeover, the personal finance expert presents seven ‘baby steps’ built to help people get out and stay out of debt while also achieving long-term wealth.

Understanding each step is crucial to seeing how each one helps you look at and achieve the big picture financial goals. 

So, we did a brief overview of Dave Ramsey's concepts to see how they can help you get a better plan for managing your money. 

There are seven baby steps that Dave Ramsey has developed.

First outlined in his book “Total Money Makeover,” they have since become a staple in many households to help families:

The premise is pretty simple.

You start with Baby Step 1 and then move to Steps 2 and Step 3. Steps 4-6 are usually done at the same time. Baby Step 7 is the final step that you stay on for the rest of your life. 

Baby Step 1 - Save $1,000.

The first Baby Step is to save $1,000 as a small emergency fund.

The goal is not to save an entire emergency fund but enough that if you are on Baby Step 2 or 3, you won’t fall back into debt if something happens. Most people can finish this first step in a month or two.

Baby Step 2 - Pay off all debt.

Baby Step 2 is usually the longest baby step people stay in.

Depending on your debt, you could be in Baby Step 2 for years.

Baby Step 2 guides people to pay off debt through the Debt Snowball Method.

If you ever have a cost come up that you weren’t planning for, you need to use the $1,000 you saved up in Baby Step 1 and then go back to this first step to replenish that amount. 

Baby Step 3 - Save 3-6 months of an emergency fund.

After all of your debt is paid off, the next step is to save up for your emergency fund.

Since you already have $1,000 saved and no longer have any debt to pay off, saving for a three to six-month emergency should be a walk in the park. At this point, you should know how much you spend each month to understand how much you need to save up. 

Baby Step 4 - Invest 15% of your income toward retirement.

Once all of your debt has been paid off and you have a true emergency fund, the next steps are 4, 5, and 6.

These steps can all be done at the same time. For example, Step 4 is to start saving 15% of your income toward retirement. You only start this at Step 4 because, according to Dave Ramsey, you shouldn’t be contributing toward retirement while on Steps 1, 2, or 3. You need all of the income to go towards your debt and emergency fund. 

Baby Step 5 - Save for your children’s college.

If you have children, the next step is to save up for their college.

This should be done only if you are debt free and are able to save up for your own retirement. It’s a wonderful thing to be able to pay for your child’s college, but it’s not something you have to do if you are in debt.

While saving up for retirement, you can also save up for this college fund. Obviously, if you don’t have children you can skip this step or come back to it if you have them later on. 

Baby Step 6 - Pay off your home early.

The last major Baby Step is to pay off your home’s mortgage.

This is usually a much larger debt than consumer debt, and that is why it is its own step. Only after you have paid off debt and have an emergency fund can you start to pay off your home.

Then, you’ll have more money to put toward your home and the discipline to pay off such a large amount of debt. 

Baby Step 7- Build wealth and give.

Once you’ve completed Steps 1-6, you are officially on the last Baby Step, which is where you will stay forever.

Step 4 is the only other Step you may still “be” on, but it should be something passive as you’ve most likely automated all of your savings.

This Step is the ultimate wealth-building one, where you have the luxury of being able to give your money and time to help others. 

💸The Wealthy Thinker: 15 Ways to Feel Like You're Not on a Budget, While You're Still Paying off Debts

💸The Wealthy Thinker: The Top 7 Best Personal Finance Books for Beginners

📖Thriftbooks.com: Save on Dave Ramsey Books

🗞️Millennial Firestarter Blog: A Review of Dave Ramsey’s Baby Steps

Dave Ramsey’s Baby Steps is a well-built and commonly used tool to help people get out of the habit of using debt to pay for their lifestyle.

It helps you re-evaluate your spending, work harder to pay off debt, and finally enjoy your wealth and help others.

Money Is My Tool. Peace Is My Goal.

Wanting more doesn't make me greedy — it makes me driven.

I understand money. I respect it.…Continue Reading