It is a new year many people are looking to get their finances in shape. One of those ways is through Dave Ramsey’s Baby Steps. Dave Ramsey runs a popular personal finance radio show and has helped out millions of people that listen to the show, as well as read his books, get out of debt.
Whether you just need a little something “extra” to make sure your twilight years are going to be great, or you’re deep in the red and struggling to get out, listening to Dave Ramsey’s Baby Steps program is sure to help you out. With a total of seven steps, following his guide is sure to be able to help you out when you’re planning your financial future. Each of the steps is different; some of them are continuous, meaning you have to keep going at them, while others, once finished, are no longer necessary.
I believe that the process itself is about planning for the family’s own and the family’s future, paying off debts accrued in the past, and then setting up an emergency fund to plan for the present. If you are looking for a good debt management course, I recommend the 7 Baby Steps in conjunction with Ramsey Financial Peace University, which I think are worth the minimal cost. Get out of debt, build wealth, and give back.
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DEBT = BAD
If you have been reading personal finance blogs for some time, you have probably heard that this is a popular way to get out of debt. At the very least, I think it is an excellent experience, and if you feel you can make improvements in your financial management, I highly recommend this course. It is a great way to bring people closer to the importance of financial planning, debt making, and planning for the future.
- 1 What are Dave Ramsey’s Baby Steps?
- 2 Dave Ramsey’s Baby Step 1: Emergency Fund
- 3 Dave Ramsey’s Baby Step 2: Debt Snowball
- 4 Dave Ramsey’s Baby Step 3: Emergency Fund Extended
- 5 Dave Ramsey’s Baby Step 4: Invest & Build Wealth!
- 6 Dave Ramsey’s Baby Step 5: College
- 7 Dave Ramsey’s Baby Step 6: Paying Your Mortgage
- 8 Dave Ramsey’s Baby Step 7: Charity
What are Dave Ramsey’s Baby Steps?
You may be asking what are Dave Ramsey’s Baby Steps? The answer is that Dave Ramsey’s Baby has 7 steps. Ramsey’s steps are:
First, here’s an overview of Dave Ramsey’s baby steps:
- Save $1,000 cash in a beginner emergency fund
- Use the debt snowball to pay off all your debt but the house
- Set up a fully-funded emergency fund of 3 to 6 months of expenses
- Invest 15% of your household income into retirement
- Start saving for college
- Pay off your home early
- Build wealth and give generously
It’s seven small steps that anyone can take, once they’ve begun. The Baby Steps was created by Dave Ramsey, the man who worked his way back from bankruptcy and became the best-selling author of “Dave Ramsey’s Money Plan.” It is a big mistake not to invest your money and make sure that you work with it as quickly as possible. I can show you how to get ahead with money by using the plan of money expert DaveRamsey, so come here and read on.
There is much more to the course, although there are probably some baby steps that are not as obvious or obvious as most people know. Baby steps are the first step in the process of financial planning, debt management, and debt reduction.
There are a total of seven steps, some of which have already been completed and others are underway to change the way you view and control your money for the rest of your life.
Theoretically, it is possible to do them in any order, but Dave’s order is probably the easiest and most manageable. The most important part is being on the same page as everyone else in your household. It can be difficult, yes, but it is definitely the most vital. Once you get that out of the way, go ahead and start working on the other parts of spending money conservatively: stop excessive spending, selling extra stuff, maybe pick up a side job, and start following the plan.
Dave Ramsey’s Baby Step 1: Emergency Fund
Step 1 is very simple: make sure you have an emergency fund, in case of, well, emergencies. $1,000 is a good amount to save up for. Try to have 6 months of expenses saved up. Once you’re able to do it, make sure the account is in an easily accessible place, such as a savings account. Now, when I say emergency fund, I mean emergency fund. This isn’t to dip into for anything other than replacing a broken appliance, fixing your car, or another, terrible circumstance that calls for it. To quote Ramsey, “Christmas is not an emergency! Your kids growing out of their clothes is not an emergency! You knew those were coming!”
Now, the first step is definitely the easiest. For the average person, it shouldn’t take more than a month or two if you manage to budget properly, and maybe make some extra cash on the side. But, if you have different circumstances, this can take longer than that. But that is okay! As long as you’re aiming for this goal, you are in the right mindset, and should keep doing your best!
Dave Ramsey’s Baby Step 2: Debt Snowball
Step 2 of these is the famed “Debt Snowball” method of fighting debt. Don’t worry, it may sound terrible, but it’s actually a good thing! What you need to do is look at all of your debt, then list them in order from smallest to largest. Once you do that, do nothing but the minimum payment on your debts except for the smallest one. That one, you should pay as much as you can on each month. Then, when you pay off the smallest debt, take all the money you were paying on that debt and use it to pay off the second smallest debt. Then when you pay off that debt, move on to the next one. On average, this should take around a year to a year and a half to finish, but as always, this can vary due to how much debt you have and how much you make.
Dave Ramsey’s Baby Step 3: Emergency Fund Extended
Step 3: Now that you’ve got your debts paid off, the next step is to expand your safety net. Use your budget and extrapolate how much you need to cover anywhere between three months to half a year of expenses. Now that you don’t have to spend money on your debts, you can spend that extra money here. Depending on your circumstances, this should take around six months. That is, if you have already completed the first steps, and have also stopped your spending habits that are detrimental to this. We’re almost halfway there, so don’t stop now!
Dave Ramsey’s Baby Step 4: Invest & Build Wealth!
Step 4 invest 15: Now that your debts are paid off, and you’ve got yourself a safety net, it’s time to make your money work for you instead of the other way around. In other words, build wealth. If you can manage it, you should invest about 15% of your household income to get you ready for retirement. If you can, look into contributing to your 401(k). You can contribute a total of $18,500, the max, and if your company matches your contribution, the better! Once you get that maxed out, you can move on to another investment: the Roth IRA. This accepts $5,500 a year. Of course, this would be a good time to talk to a professional investor, to make sure it all goes smoothly. Now, this baby step is a bit different than the others. Investment is something you want to do as long as you can, so once you start, don’t stop!
Dave Ramsey’s Baby Step 5: College
Step 5: Now, this doesn’t mean that you should be heading to college, but it’s never too late to learn! No, what this step is for is investing in your children’s future. Student loans are only getting more and more outrageous, so making sure they can get through college without getting themselves into debt will only be a benefit. Now, this is one of the more variable steps; the more children you have or the higher education they are looking for, the more expensive this will be, and the longer it will take. Of course, if you don’t have any kids, or don’t plan on having them, then congratulations! You’ve already finished this step. Good for you!
Dave Ramsey’s Baby Step 6: Paying Your Mortgage
Step 6 Pay off your home early: With your debts paid, your investments running, and your children ready for college, it’s time to take care of paying your home early. Refinancing from a 30-year mortgage into a 15-year one can save you lots of money. If you can’t quite do that, you can also make an extra mortgage payment each quarter, which can save you up to ten years and more than $50,000 in just interest fees. Once you’ve managed to set that up, it can take anywhere from five to fifteen years depending on your plan.
Dave Ramsey’s Baby Step 7: Charity
Step 7: Now that you’ve come this far, it’s time to be a good person. With all the money you’ve saved and invested, it’s time to donate your money to deserving causes, now that you are plenty wealthy. As long as you keep your investments in control. With this, you can donate to charity, pay tithes in church, and help out friends and family in need. As with step four, this is also an ongoing step!