The Dave Ramsey 7 Baby Steps: Pros & Cons of His Method

By Todd Kunsman

Financial Independence

Published on

Updated on

If you have been looking for financial advice, then you’ve probably come across the name Dave Ramsey and his 7 Baby Steps in your research.

Over the years, Dave has quickly become one of the most popular financial “gurus” in the space and has offered helpful advice to thousands of people.

But there are plenty of people offering financial advice out there that it can be difficult to know who to trust and what methods are worth following.

He can also be a fairly controversial figure, which has garnered him some flack about his workplace policies and methods. However, I’m not here to judge him on these aspects.

Instead, I’m exploring his 7 Baby Steps and if they are worth following to better your finances. 

Who is Dave Ramsey?

Financial freedom guru, radio presenter, and businessman with a big following; Ramsey specializes in helping individuals complete their own total money makeover. 

He covers all aspects of personal finance; including credit cards, interest rates, student loans, Roth IRAs and daily budgeting. His unique emergency fund and “debt snowball” methods have garnered him a huge following around the globe. 

After finding his family in a whole host of debt, Dave worked hard to pull them out and keep their books in the green. He began on Nashville radio in 1992, with a vision to counsel others into financial security.

Dave has since had his own tv show, “The Dave Ramsey Show” and filmed an acclaimed documentary called Maxed Out. It follows the predatory practices of the credit card industry and credit card debt.

Dave Ramsey, "What were you thinking?!" gif.

Additionally, Dave Ramsey’s current net worth sat approximately around $55 million+ in 2019. Other sites put his net worth up closer to $200 million!

What Are Dave Ramsey’s Baby Steps About?

Before you begin your total money makeover, Dave Ramsey has set out 7 Baby Steps in order to specifically tackle different areas of your finances. The process helps build good money habits and enforce the discipline for many who haven’t previously been able to stick with it.

The 7 Baby Steps break your financial plan into manageable financial goals and actions. And they’ll allow you to feel accomplished without being overwhelmed by the mountain of work to be done.  

What are the 7 baby steps of Dave Ramsey?

  1. Save $1,000 in an emergency fund
  2. Pay off all debt (except your mortgage)
  3. Save 3-6 months of expenses in an emergency fund
  4. Invest 15% of your household income for retirement
  5. Save for your children’s college fund
  6. Pay off your home early
  7. Build wealth and give

Baby Step 1: Save $1,000 in an emergency fund

Unfortunately, unexpected expenses happen and can put a real dent in our finances, so having an emergency fund can come in handy. It is crucial to get this amount saved as soon as possible, even by cutting your usual expenses for a few months to get there.

Do this by cutting your subscriptions, meal prepping, or even sell your unused items (like vehicles if possible). Being frugal will be your new motto!

$1,000 sets you in good standing to then move on with the other baby steps, knowing you can afford to continue with them even if something unexpected occurs, like a water heater breaking. 

Tip: A great way to prep for the baby steps or any financial plan, is to ensure you have a simple budget. To get started, use my budgeting 101 guide.

Baby Step 2: Pay off all debt (except your mortgage) using the debt snowball method

Dave recommends a specific method for paying off all your debts. Since some of us can have thousands of dollars in debt through student loans, high interest credit cards, and more — this step stops the interest from piling up.

Dave recommends tackling the smallest debt first; whether this is a credit card for $200 or a piece of furniture you put onto a payment plan.

For those who need it, seeing the debt gone can bring huge motivation to carry on the challenge and really hone in on their debt snowball.

Immediate results are likely to be helpful to those who have large debts that will take a long time to pay off. Some spend years on paying off debt; so don’t expect to wipe out your debt overnight. But if you want to be financially stable for the long-term, then getting out of debt is key (and staying out of debt from then on!).

Baby Step 3: Save 3-6 months of expenses in an emergency fund

Once all of your debt (except the mortgage) is gone, you should focus back on your emergency fund. Now you’ll want to have 3-6 months of expenses in a savings account.

This will go towards larger unexpected expenses, such as job losses and large medical bills. Now, if paying down debt took many months then this step should be a breeze. 

Let’s say you spend $2,500 per month on living expenses, including groceries, car running costs, childcare, etc.

Three months of savings would put $7,500 into your emergency fund, but for more security, you are looking at saving approximately $15,000 for six months worth of expenses.

If you manage to increase your income through various side hustles and passive streams, this may take you even less time than expected. 

Baby Step 4: Invest 15% of your household income for retirement

Building a diversified investment portfolio is key, and Dave Ramsey’s beliefs hold no exception. He encourages you to put 15% of your income into a range of retirement accounts so that you can max out your retirement savings.

If you qualify, he recommends utilizing a Roth IRA alongside your tax-deferred 401(k) or 403 (b). 

In reality, you can probably never have “enough” for retirement, but if you are looking for a goal, a total of 25x your annual expenses invested is an excellent place to start for some financial peace.

I try to use more than 15% personally when investing, but this is a good baseline to start. Additionally, you can invest with less money in platforms like Stash, Acorns, or Ally Invest.

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

Since Dave Ramsey’s philosophy is all about living debt-free and using cash to pay for everything; it’s only natural that this will extend to your children.

Note: I actually don’t agree with using cash for everything, but if you have debt issues or find a spending plan hard to follow, then it’s a great tip to follow.

Once your retirement savings are in check, you can start contributing to a 529 college fund to help ease the financial burden on your children.

This type of account also gives you a tax-advantage, but there are other savings plans available for your children’s college funds. These include custodial accounts or Education Saving Accounts (ESA). 

Baby Step 6: Pay off your home early

Paying off your mortgage as early as possible massively increases your financial freedom. As with any debt, your monthly house payments are likely holding you down where you could otherwise be living a much higher quality of life.

So Dave recommends increasing these payments by as much as you can afford in order to get rid of the burden. Not to mention, the sooner you pay this off, the lower premium you will be paying due to interest. Think about all the money you could save! 

Baby Step 7: Build wealth and give

Once you have hit all of Dave Ramsey’s baby steps; you can begin to build wealth and give. Dave himself is a Christian and advocates for charitable donations alongside leaving an inheritance for family members (Generational Wealth).

But more than that, with step 7 comes true financial independence and the freedom to spend your money on what actually matters to you.

Whether this means more frequent travel and vacationing, or investing in real estate, for example. 

How long do Dave Ramsey’s baby steps take?

Dave Ramsey’s 7 Baby Steps can take you anywhere from a few months to a few years to complete. It will depend on your personal finances, income, and how aggressively you stick to the process and track your money.

While that may seem like a long time, the process of fixing your personal finances does not happen overnight.

The Pros and Cons of the 7 Baby Steps

With any money strategy or financial plan, there are always pros and cons. And similar, the 7 Baby Steps with also have positives and negatives. Below are a few to keep in mind before diving into his method.


  • Commitment: As you tick off each of these steps, the motivation can snowball to keep going. The baby steps included in Dave’s plan means that each time you tick something off the checklist, you’ll be more committed to continue
  • It Makes Sense: It’s hard to argue against the need for an emergency fund or the order of the steps. Dave’s plan makes financial sense overall and should save you in times of emergency.
  • Builds A Stable Financial Future: It’s great to create generational wealth and create a good base for your children. This will ease their financial burden and can also teach them good money habits from a young age. 
  • Gives You More Financial Freedoms: Once you reach step 7, you can really start having fun with your money. Spending within your means, continue to build your net worth, and removes financial stress from your life.
  • Money Doesn’t Own You: I think one of the most significant pros of the 7 Baby Steps is you take ownership and you control money. Often, we let money make decisions instead of us taking action and control. His steps put you in the financial driver’s seat.


  • Only One Debt Payoff Method: Instead of paying off debt from the least to the most; it might be smarter to work with the highest interest account first. As the sooner you tackle this, the less your debt piles up which means that it becomes easier to tackle. Dave’s method focuses on the feeling of paying off debt, instead of the most logical way.
  • Ignores Investing Earlier: Dave’s 7 Baby steps also fail to realize the power of compound interest; as you are not saving and investing for retirement from the beginning. Even if steps 1-3 take you just five years to accomplish, these few years could have added exponential growth to your investment account value. 
  • Amount To Save And Invest: Only saving 15% of your income for retirement also limits the age you can retire. For most of us, we need 25 years’ worth of annual expenses saved up before retirement, but doing this with just 15% saved would take 35 years. For increased flexibility, you could (and should) put away more of your monthly salary.
  • Not Much Personalization: The framework is very rigid and does not leave much room for individualization, even though we are all starting from different places. The 7 Baby Steps will definitely work for some, whereas others are likely to find better-suited action steps and routines towards financial freedom.

Should You Follow the Dave Ramsey 7 Baby Steps?

Why the 7 Baby Steps Work

Regardless if you are familiar with Dave Ramsey or don’t agree with all his advice, the 7 Baby Steps have indeed have helped tons of people with their finances and can for you as well.

If you aren’t sure where to start and his steps speak to you, then give his method a shot. This can be the financial plan you need to get out of debt, improve your financial health, manage your money better, and start accumulating wealth.

But don’t be afraid to tweak these steps to better fit your personal needs or add other steps you think might be missing. Regardless, having the initiative to work on your finances is a big step and you should be proud of wanting to take action!