Dave Ramsey’s 7 Baby Steps Plan

Hello and welcome an overview of Dave Ramsey’s 7 Baby Steps Plan. Dave Ramsey is one of America’s leading personal finance public figures.

I learned about his 7 Baby Steps from watching his YouTube channel and reading his book The Total Money Makeover, a book dedicated to explaining the 7 Baby Steps.

I’m taking what I learned from his book and his channel and writing them down right here on this blog.

My hope is to inspire people who want to take control of their money, because I if can do it, an average person with no formal financial education, then you can too.

Click here to skip to plan overview and instructions.

This is the plan I used to get out of $10,000 worth of debt, build a $15,000 emergency fund, and grow my wealth (aka net worth) at 26 years old.

About half of my debt was college debt and the rest was hospital and miscellaneous bills on my credit card. Thanks to The Baby Steps, it took me about 6 months to pay all of it off. I was living at home at the time so I was able to pay it down pretty quickly.

Soon after I became debt-free, I moved out to an apartment closer to my workplace and was able to save up for a 6 month emergency of $15,000. Admittedly, this may have been a bit overboard but I elected for a 6 month emergency fund as opposed to a 3 month fund because it gave me more peace of mind. 

I took comfort in knowing that should anything terrible happen, I had a nice sized emergency fund to help me get through it.

Time-wise, it took me about another 6 months to fully fund it.

After I hit my emergency fund goal I started investing into my 401k and began working on my FIRE (Financial Independence Retire Early) plan.

The 7 Baby Steps Plan Overview

Step 1: Build a $1,000 starter emergency fund.

Step 2: Pay off all your debts (except your house).

Step 3: Build a 3 – 6 month emergency fund.

Step 4: Save 15% of your household income into retirement.

Step 5: Save for your children’s college fund.

Step 6: Pay off your home early.

Step 7: Build wealth and give.


Follow these steps in order!

It’s important to work through these steps in the written sequence because this plan is designed to manage money in the most efficient way possible.

For example, this plan requires that one should first pay off their debt (Step 2) before building an emergency fund (Step 3). This is because the debt, like credit card debt, comes with interest. And interest is basically a tax on money borrowed.

This means that every day you’re in debt, you’re growing more in debt just by being in debt. Basically, if you’re living in debt, you’re losing money while you sleep.

In this example of skipping ahead, a percentage of money put toward an emergency fund before debt was paid off would essentially be cancelled out because of the interest owed on debt.

But, if you follow the steps in order, all of the money put toward an emergency fund would be 100% secure – to be used for emergencies only.

Make sense?

So, in order to work this plan correctly, only proceed to the next step if you’ve completed the previous one.

Think of it like working out in the gym.

A well-trained weightlifter doesn’t walk into a gym and start with a 500 lb squat. The lifter knows that behavior like that would guarantee injury and cause them to go back to their starting point. Essentially, sabotaging all their hard work.

Instead, a smart lifter would identify a calculated workout plan they could stick to. Start with the basics like proper warm ups and diet. Then, gradually build their strength and power over time.

If consistent, the disciplined weightlifter would eventually work their way up to a 500 lb squat.

I should probably mention that working out and eating right is important to me so you may see health and fitness related analogies sprinkled throughout this site haha.

Anyway, if you’re ready to start getting your money in order and like the way I explain money things, click over to Step 1.