The 7 Things I Did Similar to Dave Ramsey’s 7-Baby Steps

Dave Ramsey is a radio host, author, and businessman. But more importantly, he is a teacher and a financial coach. He has a daily, top ranked podcast and YouTube channel where he is mostly famous for teaching on attaining financial freedom specifically through what he calls the ‘7-Baby Steps’. The 7-Baby Steps are a step-by-step plan where a person goes from getting out of debt to becoming financially successful and independent.

The Baby Steps are as follows:

1. Save $1000 for an emergency fund
2. Snowball your debt from your smallest debt to your largest debt
3. Save 3–6 months of income
4. Invest 15% of your household income into retirement
5. Save for your children’s college fund
6. Pay off your home early
7. Give generously

When I turned 18, I got my first credit card. They told me that I would only have to pay $10 a month for the card. I was thinking that it was too good to be true. So I went out and got a $1,000 stereo system for my car. Yes, a THOUSAND DOLLAR stereo system! It looked something like this:

Totally unnecessary but definitely so cool and so loud. I eventually maxed out my card and got another card with a higher balance. I ended up transferring my first card to the next one. But it was totally okay because I was ‘building up my credit”. Using credit cards became a way of life. I would use them for gas for my car, for dinners and anything else I could use it on. I had a system down and it was working; just pay the minimum. Years later, I had accumulated thousands of dollars of debt and now it was starting to become a problem. But where did I learn this type of behavior? I don’t ever remember being taught about finances in school. The only thing I can really remember is how to count and add money; nothing ever about budgeting, savings, retirement, debt, etc. Even my parents, who were great never taught me about that aspect of money, they just taught me how to keep up with my debt. Debt is so normalized in America that if people stopped taking our student loans and using credit cards that the fiscal ramifications would be huge. It’s a national problem and it seems like most of America is dealing with this. The average credit card debt in America is $16,000. Most Americans couldn’t even afford a $400 emergency. That’s a huge issue!

In my mid-twenties, I had accumulated thousands of dollars in consumer debt. I was at the point where I was sick and tired of it. Tuning on my radio one day, I came across the Dave Ramsey Show and he was taking calls from people who were in the same situation I was in, lots and lots of debt. He would give them advice on how to fix it; he would suggest the baby steps. But even before you start the baby steps, you have to make a paradigm shift in your mind. I began to listen to his show daily and I began to get really interested. One of the tag lines Dave would say at the beginning of each show was… “This is the Dave Ramsey Show, where debt is dumb, cash is king and a paid off home mortgage takes the place of a BMW as the status symbol of success.” Even in that statement alone, there is so much truth and depth. I started reading one of Dave’s books, ‘ Total Money Makeover’ and I began to desire this financial freedom that he kept talking about. People in debt are not free. When you owe someone else, you are not free. As a matter of fact, the number one reason why couples divorce is financial problems.

Fast forward to today. We are completely debt free and working on trying to build generational wealth. How did we get to this place? The Dave Ramsey plan definitely isn’t the gospel and I often disagree with a lot of things he says, but here is what my wife and I did to get out of debt:

1. We Started Living Off of a Budget- We realized that we were spending money on things that were not necessary. We were eating out every single weekend. The biggest thing that we were able to do here was learn to separate the needs vs. the wants. When you learn that you don’t need a lot of the stuff you think you do, it will change your spending habits. Part of living off of a strict budget involved us cutting up our credit cards (all but one). Yes, we did that. You’re probably thinking, why did you keep one? Well, we decided that if an actual emergency came up, we may need it (only to find our later that we didn’t).
2. We Saved $1000 for as an emergency fund— That wasn’t that hard to do. The hard part was leaving it alone and not touching it unless it was an actual emergency.
3. We Used the Envelope Technique — Once we did our budget, we put our money in envelopes and labeled them in categories (ex: gas money, groceries, leisure, etc.). We developed a discipline that once we spent the money in that envelope, that was it. For us, in the beginning, it was effective to actually see the money leaving our hands as opposed to using a debit card. There is more pain associated with spending when it’s cash. There were times that we wanted to buy things, but if we didn’t have the full cash, we weren’t able to buy it. Once we got the hang of it, we stopped using the envelopes and we back to using debit cards.
4. We Started to Snowball Our Debt — Debt snowball means, you attack the smallest debt while you pay minimum payments on all the rest of your debts. Once that smallest debt is paid off, then you take all that money and put it towards your now smallest debt, and so on. Dave doesn't recommend using debt consolidation, but for us, it was the best move. We were able to combine all of our credit card debt into one payment that we attacked that way.
5. Offerup, Letgo, Ebay, and Craigslist — We started selling everything that we could sell. Anything that we didn’t actually need was getting sold. All the money would go right towards our debt. At this point, we were beginning to see our debt go down drastically and it became a sport for me. I wanted to beat our debt.
6. Learning to Say No — This part is very important. While we were doing our debt snowball, we had to say no to a lot of things. We couldn’t eat out as much and our grocery shopping couldn’t be super elegant. We didn’t take big vacations. Although we did take small getaways occasionally to celebrate our small wins as they happened. We said no to cable. We said no to a lot of things so we could say yes to things later on. But sometimes, we didn’t say no. Sometimes, we did go out to dinner. We were working hard, and we would go crazy if we didn’t allow ourselves to do that once in a while.
7. Celebrated — We did it. It took about 3 years, but we paid off all of our debt, which called for a huge celebration.

Once our debt was paid off, now we are able to enjoy our money. We are able to give generously and live freely. You don’t realize how crippling debt is until you experience the freedom of being debt free. I never want to go back to that place. The 7 Baby Steps aren’t for everyone. But find your own way. I think Dave has done and continues to do a great job. I still listen to him daily. But each person has to do what works for them.