Dave Ramsey Baby Steps: Will They Work For You?

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Did you know that millions of people have followed and completed Dave Ramsey’s popular baby steps to financial freedom? It’s a clear path that is easy to follow, and statistics show they work. Or do they?

A quick Google search on Dave Ramsey’s Baby Steps will show you conflicting opinions on both sides of the argument, so who do you believe?

For example, we wrote a viral article on how Dave Ramsey is outdated and outlined our own 12 toddler steps to financial freedom. We have a reboot article titled 15 Dave Ramsey tips that will change your life forever.

Well, we’ve made it easier for you to analyze by laying out a few advantages and disadvantages of Dave Ramsey’s 7 Baby Steps.

The Baby Steps

If you’re reading this, you’re probably at least somewhat familiar with the seven baby steps and how they work. If not, no worries! Here’s a brief outline to refresh your memory:

  • Step One: Save at least $1,000 (or $500 for those with lower incomes) to have an emergency fund for unexpected financial events.
  • Step Two: Using the “Debt Snowball,” pay off all your debts except for the mortgage. That includes car loans, credit cards, lines of credit, personal loans, and even student loans.
  • Step Three: Strengthen your emergency fund and save at least 3 – 6 months of living expenses for unexpected events such as loss of a job, health expenses, etc. That is an essential part of the financial planning pyramid.
  • Step Four: Save at least 15% of your total household income and set it aside for retirement.
  • Step Five: If you plan on having children, and plan on paying for their education, save up enough to pay for their college expenses.
  • Step Six: Pay off your mortgage and any home loans early. This also includes second mortgages such as a home equity line of credit or home equity loan.
  • Step Seven: Continue to save and build your wealth while also giving to others.

The baby steps are laid out to attack the most urgent financial tasks upfront while making plans to save a large portion of your income for retirement and building wealth after that. View Dave Ramsey’s website for more details on the seven baby steps.

Dave Ramsey’s budget percentages are also a great place to start to get control of your finances.


As you can see, it’s a pretty straight forward plan. Seven steps to follow, easy to understand, and has worked for millions of people already! Some common advantages of using Dave Ramsey’s baby step system are:

It’s an Already Proven process

There are probably hours upon hours of study, organization, and analysis of basic personal financial priorities behind the baby steps. Don’t reinvent the wheel! What’s the point in recreating something that is already working?

Many people don’t want to deal with the hassle of meeting with a financial planner, calculating their forecasted savings growth, how quickly they will pay off their debt, etc. just to improve their financial situation. They want something that’s proven and easy to follow. That’s where the baby steps can be very advantageous because it’s proven, it’s easy, and it just works.

Little to No Financial Education Required

Anyone with a high school diploma (or even less than) can follow the baby steps. It doesn’t take complicated math; it doesn’t take having a background in personal finance, nor does it even take calculating where you’re paying the most interest on your loans!

Still not sure whether you know enough about personal finance? I’ll educate you in one sentence that will prepare you with the necessary knowledge needed to follow Dave Ramsey’s Baby steps. Here it is: Save for an emergency, pay off debt, save more and build wealth, then give to others. There you have it!

You Have Lots of Resources Available to You

Dave Ramsey started Ramsey Solutions in 1992 to help as many people financially as possible. That’s nearly 30 years of financial expertise from one resource, and it was all built around the concept of the seven baby steps he teaches. To say you have a lot of resources available to you when following his plan is an understatement.

Aside from the free website content, education, radio shows, podcast episodes, and free budgeting app, Dave Ramsey provides his audience with even more resources such as:

  • SmartVestor: a list of trusted financial experts that Dave has vetted and ensured they follow his same money beliefs.
  • Endorsed Local Provider (ELP): A list of trusted agents vetted by Dave and his team. This ranges anywhere from insurance experts, real estate agents, and even tax consultants.
  • SmartDollar: A financial wellness solution for businesses to teach employees financial behavioral change.
  • Ramsey Personalities: Many experts of Ramsey Solutions have partnered with Dave and written books, built courses, and even host their own radio shows are all available to Dave’s audience. Some experts include Chris Hogan, Rachel Cruze, Christy Write, Anthony O’Neal, Ken Coleman, and John Delony. Visit Dave Ramsey’s website for here info on each of the Ramsey Personalities.


Among those reading are dreamers, entrepreneurs, small business owners, and high achievers on a mission to change the world. Those of us who fall within these personalities or similar mindsets, there are some setbacks to following Dave Ramsey’s baby steps. Some of them are:

It takes time

Sure, most things related to money takes time before it blossoms. However, some ways may be quicker to build wealth than following the seven baby steps. For example, an average individual who makes $50,000 per year and wants to start on baby step one saving $1,000, it could take 3-6 months if you only have $200 – $300 each month to spare. The same is true when paying off debt and building your 3-6 months’ worth of living expenses emergency fund.

Someone might argue that consolidating your debt into one low interest-bearing loan both saves you time and money to pay off your debt. Others might say to have one credit card with a $1,000 to use as your emergency fund so you can focus on putting that money where it has a more significant impact. To each their own!

The Baby Steps Doesn’t Distinguish Between Good Debt and Bad Debt

It is advised within the baby steps to have zero debt – EVER. That means no mortgage, no small business loans, and no car loans. When following Dave Ramsey, all debt is bad debt. Sure, we may all agree on this to an extent. But someone may argue that they’d instead put their $15,000 in an investment that bears 7% – 10% annual returns rather than buying a $15,000 car in cash.

Where’s the financial harm when your net return is still 7% if you get a 10% return in the stock market with your $15,000 at the cost of paying 2.99% on your car loan? Where is the math terrible when you pay 4.99% on a $50,000 business loan that will result in increasing your business income by 30%? Would you pay 4.99% to make 30%? Absolutely!

Home Ownership Is Hard to Fit in With the Baby Steps

If you already own a home when you first start the baby steps, it’s advised that you either sell it, pay it off asap, or refinance it to a 15-year mortgage term. If you don’t own a home when you first start the baby steps, you’re advised to buy in cash or get a home on a 15-year mortgage that doesn’t cost any more than 25% of your total household take-home pay (that means your income after taxes have been withheld).

In other words, if you make $50,000 per year, your take-home pay will be close to about $3,200 per month. Following Dave Ramsey’s 25% rule, with monthly take-home pay of $3,200, you can afford a mortgage payment of about $800 per month. Depending on your mortgage loan interest rate, this means you can only afford a home in the price range of $160,000 to $180,000 at most. If you can’t fit within these parameters, Dave Ramsey advises that you rent instead.

What Path to Take

Who are the baby steps really for? You have to realize that Dave Ramsey caters to a particular niche audience. His listeners mostly consist of people living paycheck to paycheck, lower than average incomes, and poor credit scores. Don’t get me wrong, not EVERYONE who listens to Dave Ramsey fits this profile, just a large portion. In all reality, if someone who fits this niche profile wishes to take out a $100,000 business loan, would you think it’s a wise move? Perhaps that person should clean up their finances some first.

To determine the best approach for you, take an honest look at your financial scenario. What is your current income? How much debt do you have? How much do you have in savings? What does your credit look like? Be honest with yourself!

Next, look at your financial goals and financial beliefs. Where do you want to be five years from now or even ten years from now? Are you someone that believes that owning a home and having a small car payment at the expense of investing your money to get a higher return? The answer to these questions will point you in the right direction.

The bottom line: Dave Ramsey’s baby steps work. There is no question about it. It’s a proven system and has improved millions of people’s financial well-being. It’s up to you to determine how ambitious you want to be with your finances and wealth-building!

This article originally appeared on The Money Mix and has been republished with permission.

Dr Breathe Easy Finance is a pulmonary and critical care doctor by day, a personal finance blogger/debt slaying ninja at night. After paying off $300,000 in student loan debt, he started a mission to help other young professionals do the same.

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