Dave Ramsey’s “7 Baby Steps” Bring Financial Peace

Bobby and I are living in a much different financial world today than this time last year. No, we didn’t win the lottery. But we did find something that has been life-changing. We started following Dave Ramsey’s 7 Baby Steps, and what we’ve found is something we didn’t even know we were missing: Financial Peace.

We Were Average Americans

Let me back up a little. A little over a year ago, we were living like most Americans–paycheck to paycheck, with very little in savings, a couple credit cards, student loans, 2 car payments, and a loan for our home (in our case, a home on wheels.) We were also still in recovery mode, financially, from each of our divorces a few years ago, and trying to get established as newlyweds.

We didn’t feel particularly stressed about money. But we probably should have been! We just wished we had more of it, along with more freedom to do what we loved. Worries about retirement were in our peripheral, but we figured we would start dealing with that once we got our feet under us.

If Something Can Go Wrong…

Then Murphy came to visit in a big way. You know, Murphy’s law–if anything can go wrong, it will. Our Murphy came in the form of a Federal Government Shutdown. Since Bobby is an “essential worker”, he was required to go to work, but did not receive a paycheck for nearly a month-and-a-half.

Meanwhile, I was only working part time as a tutor, making about $700-800 a month. I had been looking for a full-time job since leaving work as a public school teacher but hadn’t found the right opportunity.

Six weeks doesn’t sound like long, until you have to pay all your bills and live on $700 and whatever you have in savings, immediately following the holidays! We were fortunate to live in a wonderful community who took great care of the local federal workers with food and gas card donations, but having to call all our creditors and ask for extensions on our due dates was a demoralizing experience.

We waited week after week for things to get back to normal, meanwhile watching our meager savings dwindle to nothing. It was an awful feeling, being at the mercy of our creditors, the Government, and neighbors. It was a position we promised ourselves we would never be in again, no matter what it took.

“Have You Ever Heard of Dave Ramsey?”

On a recent visit out of state to see my daughter, I had seen a card on her fridge with a simple list of 7 items, all financial in nature. I had asked her what it was, and she said, “Have you ever heard of Dave Ramsey? It’s his Baby Steps program. We learned about it in my personal finance class.” My curiosity had led me to a Google search and a brief look at what it was all about. It looked like something I should learn about, but I never did anything about it.

So now, in an act of desperation more than anything, I called up my daughter and asked about Dave Ramsey again. I had a lot of questions. She told me about a book he wrote, called Total Money Makeover, that explained it all in detail. I went the next day to the local library and checked it out.

Bobby agreed to read it with me, and we read a little each night. The book tells about Dave Ramsey and his own personal financial journey and how he developed the Baby Steps. Then each chapter explains a different step to “Financial Peace,” as Dave likes to call it.

The Baby Steps

There’s really a “pre” Baby Step that comes before anything else. That is to sit down as a couple and make a “zero-based” budget. What this means is that you account for every last dollar, down to zero. With a zero-based budget, you account for everything, so that every dollar has an assigned job. The idea is to see where you stand and also see where you can make cuts to free up some money each month.

Also, an important part of the budgeting process is paying 10% tithing. This appealed to me, as a Christian who has always believed in the blessings that come from paying tithing.

Once you have your budget in place, you begin the official Baby Steps:

1–$1000 “Starter” Emergency Fund

Dave recommends building up $1000 that you can set aside immediately for minor emergencies. This would be for things like car repairs, broken bones, or attending the funeral of a close family member. These are things we usually don’t think twice about putting on a credit card. This emergency fund is not designed to carry you through a major emergency, like getting laid off of a job or a long-term illness. But it will keep the wolves away for most minor things that may come up.

When you have to use money from this fund, you stop your Baby Steps process, return to step 1, pay it back as quickly as you can, and then continue on.

2–Pay off Debt

In this step, you cut up your credit cards and begin paying off debt. You do what’s called a “debt snowball”. This is where you list out all your debts, smallest to largest. Pay the minimum amount on all of them, except the smallest. On this one, you throw every spare dollar you’ve got at it. If you don’t have any spare money to dig your way out, you need a “bigger shovel”. This might mean selling things, cutting more in your budget, or getting a part-time job.

You pay off the smallest debt just as quickly as you can. Then, you apply the amount you’ve been paying on that debt every month to the second-smallest debt, paying it down faster. Then apply that to the next-smallest, and so on. The goal is to get out of debt (except for your home mortgage) as fast as possible, preferably in a couple years or less.

3–3 to 6 Month Emergency Fund

After your debt is all cleared, you will have much more breathing room each month. The first thing to do is build up your Emergency fund to cover 3 to 6 months’ worth of expenses. This will take care of you in a larger emergency, like I mentioned above.

After you complete this step, if you don’t already own a home, you would do a Step 3B, which is saving for a down payment.

Steps 4-6 Happen simultaneously but are listed by priority:

4 Fund your Retirement

Dave recommends contributing 15% of your gross income to retirement funds. He goes into great detail in the book about the types of funds and investing he recommends.

5 Fund your Children’s College

At this point you would pay into your children’s college funds, at whatever rate you determine, based on your specific situation.

6 Pay off your Home Mortgage

Whatever is left each month after paying towards steps 4 and 5, goes to your mortgage, so you can pay it off as soon as possible.

7 Live and Give like No One Else!

In this step, you continue to accumulate wealth and are “outrageously generous” in giving. You get to enjoy the fruits of the sacrifices you made in earlier steps, as well as bless the lives of others.

We Decided to Go for It

This plan made sense, and we knew we needed to do something. Neither of us have never been very comfortable with money, but this plan gave us a step-by-step system we could understand and do. And Financial Peace sure sounded like something we could use.

We were fortunate to get our Baby Step journey kick-started when Bobby got his back pay from the Government Shutdown. We had enough to catch up our bills, with about $1000 left over! Baby Step 1. Check.

Debt Snowball

Having Step 1 automatically out of the way, we started in on our debt snowball. At the time, we had just under $100K in debt! We actually were shocked at how much we had, having accumulated a lot of it separately before we were married. We listed them all out, smallest to largest.

Our smallest debt was a cell phone. This is something you might not consider as a “debt”, but if you make payments on a phone each month, it is a debt. We were able to shave enough out of our monthly budget and selling a few things to pay this off that first month. Bingo! We now had an extra $30/month to put towards our next largest bill.

After selling some more things and creating extra income from additional jobs, we were able to pay off my car in a few short months. Getting rid of this one major bill every month had a huge psychological effect. It was really motivating, and we were really gaining momentum!

Of course, Murphy came to visit a few times along the way, like when our dog had an emergency vet bill for $800. But we were thankful to have our starter emergency fund to take care of whatever came, without adding additional debt.  Not panicking over these minor emergencies was my first experience with financial peace that I can remember in my adult life.


A year into this process, we have paid off about a third of our debt, and are now able to contribute nearly half of our monthly income to debt payments. We have had so much help from God along the way, such as finding extra side gigs to do or being able to sell things. Our goal is to be 100% debt free, including our motorhome, by the end of 2021.

Yes, that still is a long way off, but we already are feeling so much more in control and at at peace with our finances. We know we are on a track to being better stewards of our money, and we have a clear plan for our financial future. It has become almost exciting to go to work each day to get ourselves a little bit closer to our goal.

Give it a Try!

If you would like financial peace in your life, we highly recommend Dave Ramsey’s plan. Even though it takes hard work, it is so simple and straightforward in its approach. You can find out more about it by reading Total Money Makeover, listening to The Dave Ramsey Podcast, or attending a 9-week course, called “Financial Peace University.”

We are not at affiliated with Dave Ramsey nor do we get compensated in any way for sharing this message. But it’s something we believe in. We share our journey with others to help them find the financial peace we are already experiencing, and also to keep ourselves accountable.

So feel free to ask us how we’re doing on our Baby Steps journey! And I will try to keep you updated in this blog!

What’s Your Experience?

Have you ever tried Dave Ramsey’s Baby Steps or another system? How has it worked for you? Share in the comments!

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