If you have ever made an attempt to tighten up your finances and get a grip on your spending habits, you’ve likely heard of Dave Ramsey. After all, he is one of the most well-known financial gurus of our current generation.
Ask almost anyone who has searched for advice on improving their budget, and Dave Ramsey will come up. Many people have successfully gotten out of debt, thanks to Dave’s programs. He has produced several over the years, but perhaps none is as famous as his 7 Baby Steps program.
In today’s world of instant gratification, it’s easier than ever to find yourself swimming in debt. But what happens when it comes time to pay off all the debt that you have accumulated? At that juncture, many people find themselves surrounded by other responsibilities that take precedence, such as raising a family or saving money for their kids to go to college.
These things are hard enough, let alone trying to do them while chipping away at debt. If this sounds like you, 7 Baby Steps could be just what you need to get your finances back on track. Now, most people who hear about financial advice programs tend to run in the opposite direction.
And there might be some legitimate reasoning for doing so. It’s not uncommon for fads and trends to hit the scene in an attempt at a cash-grab on desperate individuals. But Dave Ramsey has a track record that speaks for itself.
That’s why we want to share 7 Baby Steps with you. It’s a tried-and-true program that has helped many people enjoy financial freedom. If you are ready for a change and are willing to commit, Dave Ramsey may very well hold the keys to your freedom.
What Are the 7 Baby Steps?
Before committing to anything, it’s crucial for you to understand what’s going to be asked of you. Dave’s programs require action on your part. He gives you the puzzle pieces and shows you where each piece goes. Your job is to follow his instructions and put them together.
So with that, let’s jump right in, starting with the first baby step.
Baby Step #1: Save for an Emergency Fund
Emergency funds are necessary for everyone. It’s a form of financial security and one that will ensure you are protected in the event that you are faced with a crisis. Dave’s first baby step wants you to work toward saving up $1,000 for your emergency fund.
Who knows what kind of curveballs life will throw at you? It’s better to be prepared so that you don’t have to rely on credit cards and loans to see you through your troubled times. If you can comfortably save more, great!
But try to set aside a minimum of $1,000. This will provide the assurance you need to help you out if the unexpected arises.
Baby Step #2: Pay off Debt
This is debt that doesn’t include your home. To help to be successful in doing this, Dave recommends using his famous Debt Snowball method. This includes paying off all of your outstanding credit cards, student loans, and vehicle payments.
There is a strategy to doing this, and it starts with making a list of your debt, starting with the smallest and most manageable. Tackle the easiest debt first and work your way up to the most expensive. This is the Debt Snowball method in action.
There is a fantastic sense of freedom when you finally become debt-free. What is most empowering, however, is that you did it!
Baby Step #3: Add 3 to 6 Months of Expenses to Your Emergency Fund
Now that you are debt-free (aside from your home), it’s time to start padding your emergency fund. To do this, you want to take that money you were using to pay your debts and put it into your emergency fund. The reason for doing this is to ensure that you don’t get yourself back into debt.
If your vehicle breaks down or you lose your job, you will have the financial support to stay afloat without having to resort to loans or credit cards again.
Baby Step #4: Invest for Retirement
This is a big one that will give you even further financial security. Regardless of your age, it’s never too early to start saving for retirement. Dave’s formula for doing this is simple: Set aside 15% of your household income.
Take advantage of your job’s 401(k) and make sure you are getting the full employer match. The rest of your remaining 15% should go into Roth IRAs. If you’re married, create one for the both of you.
If you aren’t eligible for 401(k), that’s OK, too. Find something to invest in that will grow your money. Just make sure that the money you use to fund it is part of the 15% of your household income.
Baby Step #5: Save for College
Regardless of whether you are planning on having children someday or you already have children, you should work toward saving for their college fund. The beautiful thing about reaching Baby Step 5 is that you should be in a position where you can plan for yourself and others.
Dave recommends that you take advantage of an ESA (Education Savings Account) or 529 college savings plan. Even if you end up never having children, imagine the money you will have saved up.
This can be used for any number of things down the road. With that being said, it’s essential to continue working toward improving your children’s future. You never know for sure what surprises life might bring you. And if you are surprised with a child, you will have successfully prepared for their future.
Your getting into college may have been easy or it may have been challenging. Either way, you want to make sure that your child doesn’t have to struggle to get the education that they deserve.
Baby Step #6: Pay Your House off Early
This step is a monumental one for most people. Paying off your mortgage early will feel like the weight of the world has been lifted off of your shoulders. Try to picture what your life will look like not having a house payment.
Paying off your home early does more than just provide relief. It can potentially save you thousands and thousands of dollars in mounting interest. Depending on your APR, this could make all the difference in the world.
The money that you will have leftover every month that would have normally gone to your mortgage payment will provide you with funding for other projects and needs.
Baby Step #7: Build Your Wealth and Start Giving
The wonderful thing about being debt-free is that you can now do just about anything you want. The 7th and final step is the most exciting of them all, as it means you have made it to true financial security and freedom.
And when you have reached this zenith, you will be in a position where you can start giving to others. Before you balk at such a request, it’s important to consider that most people who freely give often get much more in return.
The Bible says as much, and whether you are religious or not, there’s no denying that helping others comes back to you even more so. If nothing else, you will have the finances to provide for your family, grandchildren, parents, and so on.
Are the 7 Baby Steps Right for You?
To someone who has never made an attempt to get out of debt and save money, these steps can appear to be overwhelming. But Dave Ramsey is a master at simplifying what is usually deemed difficult.
Make no mistake; you are going to have to put in your fair share of hard work to see these steps through to the end. But when you finally do, there are few emotions and feelings that can match what’s in store for you.
Let’s take a moment to observe what makes 7 Baby Steps such a doable program, even for first-timers who are just starting down the road to financial freedom.
The Steps Are Easy to Follow
There’s no denying that each of the 7 Baby Steps is easy to understand. The endgame to every step has been laid out in a straightforward manner so that there isn’t room for confusion. You won’t find any convoluted instructions here.
Just straight and to the point. You know what you have to do, and Dave makes sure of it by providing clear direction in each of the seven steps.
The Steps Are Free!
Possibly the most attractive part of 7 Baby Steps (other than the financial security they offer) is that it’s free to follow. There isn’t an underhanded attempt to get you to buy additional material to get you through this program.
Now, that’s not to say that Dave’s other resources won’t be a benefit to you. But if you aren’t in a position to invest in his other works, no worries. What you see is what you get.
Search for “7 Baby Steps success stories” for all the proof you need that this program works. You could be one of many who have successfully climbed out of debt and are now living comfortably.
The evidence is undeniable, so if you’re serious about improving your quality of life and enjoying a debt-free lifestyle, 7 Baby Steps is worthy of your time and consideration.
Are You Ready?
If you’ve made the decision to take advantage of 7 Baby Steps, you might be wondering how to get started. Fortunately, it takes nothing more than the will to succeed to begin Step 1. If you need some help with this, it’s best to formulate an action plan.
Start with why you want financial freedom. It’s helpful to be clear on your motivation for seeking financial freedom. This motivation will act as your guide on days when you might feel overwhelmed or unsure of yourself.
If you feel like giving up, think back on why you need this in your life and what financial security will mean to you and your loved ones.
We mentioned that it isn’t a necessity or prerequisite that you have to buy Dave Ramsey’s books or programs. However, that doesn’t mean that you can’t borrow some of his work from your local library.
You’ll be amazed at the insight he can provide to you if you just take the time to read his books. This will help you better understand his vision for financial freedom and may even give you the push you need to see his steps to completion.
Make the Commitment
This involves carving out the time every day to apply each step to your life. While it’s true that there isn’t a lot of extra time needed to start implementing the 7 Baby Steps, you may need to give yourself some time to research how to best make them work on your budget.
What’s more, you need to remain committed to making it all happen. This means that you’re going to have to make some radical changes to your spending habits. This can be very difficult for many people.
But if you are committed to the cause, you can find new ways to tighten the reins on your spending so that each step is more manageable.
Perhaps the most important thing that can be imparted to you as you start your journey to financial freedom is to be patient. Completing the 7 Baby Steps isn’t something that can be achieved overnight.
In fact, it’s something that you’re going to have to practice and apply for the rest of your life. The great part is that the more you do it, the easier it will become until eventually, it’s just a regular part of your everyday routine.