Dave Ramsey’s Baby Steps: A Proven Path to Peace With Money

Written By Ethan Dodd

Master the basics of money, eliminate debt, and build wealth with a clear plan!

Why Most People Struggle With Money

Money stress comes from not having a clear plan. Bills, debt, and everyday expenses can feel overwhelming, but here is the good news. You do not have to stay stuck.

There is a simple and proven system that thousands of people have used to take control of their finances, get out of debt, and finally feel secure. It is called Dave Ramsey’s Baby Steps, and it works.

Dave helped my wife and I get on track financially and created unity and peace around money!

Who Is Dave Ramsey and Why His Plan Works

Dave Ramsey is an author, entrepreneur, and radio host who built his reputation on helping everyday people take control of their money.

He’s not without controversy, but here’s what I like about his approach:

  • It’s simple. No jargon, no gimmicks—just clear steps.

  • It builds behavior. The system is designed to change your habits, not just your bank balance.

  • It creates peace. You stop stressing about money because you know exactly what to do next.

The Baby Steps (Explained Simply)

Step 1: Starter Emergency Fund ($1,000)

Before anything else, stash $1,000 in cash. This isn’t for vacations—it’s for flat tires, doctor visits, or life’s curveballs.

Step 2: Pay Off All Debt (Except Your Mortgage)

  • List your debts from smallest to largest.

  • Attack the smallest one first while making minimum payments on the rest.

  • Roll each victory into the next (the “debt snowball”).

  • Create a budget every month.

This momentum changes how you think and behave with money.

Step 3: Full Emergency Fund (3–6 Months of Expenses)

Save three to six months’ worth of living expenses. I keep mine in a Vanguard Cash Plus account, which pays similar to high-yield savings rate while staying liquid. To keep your investments and savings in one spot.

Step 4: Invest 15% of Your Income

  • Use tax-advantaged accounts like your 401(k) match or a Roth IRA.

  • Ramsey suggests diversification; personally, I keep it simple with VTSAX (a broad index fund) and max out a Roth-IRA since I have time to be a bit more “riskier” even though you’re betting on America.

Step 5: Save for Kids’ College (Optional)

If you have children, start setting aside money for their education. Ramsey reccommends a 529 plan or ESA’s etc.

Step 6: Pay Off Your Home Early

Once you’ve crushed debt, saved for emergencies, and invested consistently, aim to pay off your mortgage early. Imagine living with zero debt at all.

Step 7: Build Wealth and Give Generously

With no payments and solid investments, you’re free to:

  • Invest more (real estate, business, etc.).

  • Help family and community.

  • Actually enjoy your money without guilt.

My Take: A Bonus Step

I like to slip in a little side quest for Step 6:

  • Use $5,000 max, ideally less, to start a side hustle or small business.

  • It could be service-based, freelance, product creation, or even buying into an existing business.

  • If you don’t want the stress of running one, that’s fine, but investing in yourself creates leverage that could dramatically increase your income now that can be a better use of money over waiting for the stock market.

    • Just enough to get it started so that you can use the profit from the business to fund itself and pay yourself back in time. Ramsey advises to, “Grow at the speed of cash” (profit) and surprise surprise not to use debt.

Why This Matters

Debt isn’t just numbers. It’s stress. It’s tension in your marriage. It’s feeling stuck.

But when you follow a plan like this:

  • You know the next step at all times.

  • You gain motivation from quick wins.

  • You build habits that carry into your career, promotions, and long-term wealth.

I’ve seen couples on his Ramsey App making modest incomes pay off $50,000 of debt in a year by doing things like:

  • Picking up overtime

  • No-spend weeks

  • Selling unused stuff at home

The common thread? Focus and intentionality.

The Catch (and Reality Check)

  • If you’re already living paycheck to paycheck, this plan will take longer.

  • If you own “fancy” cars with loans or an oversized house, you’ll have to make tough choices.

  • If you earn below median income, Ramsey’s team will likely tell you to focus on increasing income.

But for most households making average or above-average income, the Baby Steps work if you stick to them.

The Invitation: Master the Basics

You don’t need crypto. You don’t need risky flips. You don’t even need “luck.”

You just need to:

  • Follow the Baby Steps.

  • Stick with them long enough.

  • Avoid distractions.

Winning with money is boring—but boring works.

Key Lessons

  • Debt steals peace—eliminate it!

  • Behavior matters more than math when you’re in a bad place.

  • Invest in the market, but don’t forget to bet on yourself !

    • Increase skills, create a product or a service that helps people and replaces your income, so that you can enjoy more time freedom and income over the course of your life instead of trading time for money forever and hoping that stocks perform well.

  • Consistency creates freedom.

Call to Action

If you haven’t already, take 30 minutes today to set up your first Baby Step: a $1,000 emergency fund. Then, write down all your debts from smallest to largest.

That single action can change the entire direction of your financial life.

Not sponsored, just sharing advice that has worked really well!

Read more about the 7 baby steps here and see which one you’re on!

Also using Dave’s budgeting tool ‘EveryDollar’ Plus has been awesome at making budgeting a breeze, especially with a spouse! You just drag and drop folks! Here

Closing Quote

“If you will live like no one else, later you can live like no one else.” — Dave Ramsey

Ethan Dodd
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