It’s probably a solid guarantee that if you were to ask anyone who’s heavily (or even lightly) in debt, they’ll tell you that it’s stressful.
Ask anyone who isn’t in debt if they’d like to go back into debt. They’ll probably just send you packing, like the crazy person you must be to even ask that question.
So let’s face the music: everyone in debt wants to know how to pay off debt. The biggest question, however, is “where do I start?”
This is where you need to find a financial guru. Someone who has a solid plan that has been shown time and time again to help people just like you.
We are big fans of Dave Ramsey tips and teachings, so this is where his advice comes into play. He has created his very own get-out-of-debt strategy for the masses. They are called the Dave Ramsey Baby Steps that are absolutely a proven and successful method to get out of debt.
You don’t have to just take our word for it, so we will break down Dave Ramsey’s 7 Baby Steps for you below so that you can see just how effective his plan is.
Who is Dave Ramsey and Why Should You Listen to Him?
Dave Ramsey is basically every drowning-in-debt person’s hero — a real “Cinderella story,” if you will.
Well, not really a Cinderella story, because there was no magic involved in his results.
To make a long story short, he worked hard to come back from bankruptcy. As a result, he has become a national bestselling author and the host of a popular radio show and podcast.
He is a true financial expert who helps millions of people to achieve true financial freedom.
You can read all about his journey and his epiphanies along the way in any one of the many Dave Ramsey books. He also uses these books to share inspirational stories from others, advice to live a more frugal lifestyle, tips on how to manage your money more effectively, and of course, how to save money in general.
Before You Start Dave’s Baby Steps Get Motivated!
One of the very first pieces of advice, as you dive into the Dave Ramsey baby steps, is to make what we’ll call a Dave Ramsey budget.
The two main features of a Dave Ramsey budget are:
- a zero-based budget (meaning you assign a “job” to every single dollar of income you bring in each month)
- cutting out as much of the “extras” as possible.
As Dave always advises in regards to how to save money on groceries, for example, is to eat just “beans and rice, and rice and beans.” That’s not to say you literally need to eat only that, but the point is to cut out the fancy foods and survive on what’s healthy and cheap enough to meet both nutritional and budget needs.
But it’s hard to stay motivated when you’re trying to figure out how to budget AND stick to it. So what are some tricks to staying motivated?
Understand Your WHY
Nothing you ever endeavor to do in life will truly see results unless you have a solid, motivating, TRULY compelling reason WHY you’re trying to do it.
Maybe you’ve had a bad week at work and just want to go out to dinner on a Friday night. You’ll need something more convincing in order to stay home (and within your budget) and NOT go out instead.
If your car needs a big repair, you may start to wonder if this is your chance to just go get what you want instead of fixing up your “old clunker.” You need a strong voice in your head reminding you why you aren’t driving your dream car yet.
Whether your big goals are debt freedom, buying a new car with cash, or simply saving up for a comfortable retirement AND having a nice inheritance to leave behind for your kids, you need a “why” to keep you moving. You need to have something compelling enough to keep you focused when your debt pay-off journey gets hard.
Create a Support System
First, you’ve determined what your big, epic financial goals are. Now it’s time to come up with a plan B, just in case.
How will you deal with any setbacks? There is always a chance that you just might not handle it as well as you thought you would. You might be tempted to back down from your efforts and just accept where you are in life as your reality.
As soon as you decide to start a debt payoff journey, make it known to those closest to you.
Share your why with them. Share your debt specifics if that’s within your comfort zone. Make sure to find a group of people who are willing to have frugal fun with you. Maybe they, too, enjoy free hobbies like hiking instead of always wanting to go out for drinks on the weekend.
We all need a little help and encouragement sometimes, and your financial efforts are no exception.
There is really ONE visual that by and large will make the biggest impact on your success as you work through the Dave Ramsey baby steps.
A solid, easy-to-use, visually-based budget template.
What do I mean by that?
I mean a quick-hit template that you can update on a minute’s notice. Hang it on your fridge door and you’ll visually know if you’re on track or not each month.
If you’re the type that prefers a digital budget, that’s totally fine too. You might consider something like Mint or Personal Capital to help you keep track of where your money is and what it’s doing for you.
But if you don’t use a visual budget and keep it visible, then consider trying a different debt tracking chart. Something even as simple as the thermometer method — a simple way to track your progress where you can record every milestone along the way.
Make a Commitment to Change Your Life
The last way to stay motivated is to commit to staying motivated.
I know, it’s like asking you to go to the gym when you’re sick, right?
But combine the whys, the support, and the visuals, and put them all together with a vision board and you’ll have it made!
Got a dream vacation home in mind as a reward for the end of your journey? Print one out or cut from a magazine, and keep it in sight as much as possible.
Planning on a customized dream car, paid in cash? Put the picture plus a savings thermometer up on the wall. When you’re ready to start saving for it, track that progress and let it propel you along.
What Are Dave Ramsey’s 7 Baby Steps?
The main tenet of Dave Ramsey’s “get-out-of-debt” financial advice is to follow his baby steps.
He has put exactly what it takes to become debt-free and achieve financial freedom and breaks it down into more bite-sized pieces to work on.
It is, after all, much easier to take big tasks in smaller chunks than wondering what to work on next.
Baby Step 1: Save a $1,000 emergency fund
Let’s face it, life happens. The last thing you want to do when trying to get out of debt is to get into more debt. Having a small cash fund should help you avoid that scenario, most of the time.
Baby Step 2: Pay off ALL of your debts (except your mortgage)
This is the longest and hardest step, for sure. You’re going to put EVERY PENNY you have towards what you owe other people, and get them off your back. He prefers the debt snowball method, although any method is fine so long as you are always making the most progress possible.
Baby Step 3: Save 3-6 months worth of expenses in an emergency fund
Now that you’re bad-debt-free (more on that later), you’re sort of still in the “I owe money” mentality. Here you’ll capitalize on that by stashing away enough money to be able to pay all of your monthly bills in full, for 3-6 months. This will help soften the blow if you experience a big blow, like the loss of a job or a medical event.
Baby Step 4: Invest 15% of your income to retirement
You’ve paid off your debts and you’re feeling nice and secure in case of catastrophe. Now it’s time to make sure that your retirement won’t become a catastrophe in itself!
Baby Step 5: Save for your kids’ college fund
Are you the type of parent that plans to help your child cover college tuition costs? After your finances are in order and your retirement looks bright, you’ll start setting aside money for them.
Baby Step 6: Pay off your home early
With your financial picture clicking along nicely, you’ll get that last lingering debt off your shoulders – your mortgage. Just like you did with baby step 2, you’ll push any extra cash towards your monthly mortgage payment.
Baby Step 7: Build wealth and give wealth
This step is the one for you – now you’re ready and able to live how you want! You can donate money to charities, build up a nice inheritance for your children and/or grandchildren, and be more generous in many aspects of your life!
Why is it Important to Follow These Baby Steps in Order?
First, because the Dave Ramsey baby steps, when followed in order, have been proven to work time and time again.
It might honestly be borderline insanity to try to come up with something different. As the saying goes, “if it ain’t broke, don’t fix it!”
But more importantly, these baby steps have been carefully designed to work to your benefit.
By that, I mean that it’s quite hard to put 15% of your income towards retirement, for example, if you don’t even have that much not tied up in debt payments.
It’s worth noting that even baby step 1 can be a big hurdle for some people because it really can take quite a long time to get that first $1,000 set aside.
This is in part because when your spending is a mess and you need to keep working on cleaning up your budget, you might only have $25 or $100 each month to set aside. That’s a big mental hurdle to get past (and more support for why the Dave Ramsey baby steps really SHOULD be followed in order).
But it doesn’t have to be hard to start pushing past that first hurdle and making progress.
If your current income makes it seem like this plan is insurmountable for you, then it’s time to consider different ways that you can make more money (that don’t involve asking for a raise).
If you know us by now, you know how much we love a good side hustle idea! We used a side hustle ourselves — this blog, in fact, to not only pay off $25,000 in student loan debts in just 5 months but to completely change our lives.
Now, we both work from home, with our blogging business as our main source of income! All because we were able to pay off our debts!
Trust us when we say it, dreams really can come true if you’re ready and willing to put in the grunt and hustle required to make them happy.
Who Should Use Dave Ramsey’s Baby Steps?
If it wasn’t obvious to you yet, the Dave Ramsey baby steps are perfect for literally ANYONE.
Whether you’re a single parent, a retiree, or someone who doesn’t even have debt, you CAN make use of these steps. Just start with the earliest logical step for your situation. You really will see a difference in your financial health and stability.
Most people have some debt (even if it’s only their house) but could use help with balancing out all the other aspects of a good financial portfolio, such as retirement savings or an emergency fund. Typically, you’ll start with step 1.
If you’re finding these baby steps after you’ve already got your debts done and over with, then go back to step 1. Make sure you’re all set with that minimum $1,000 emergency fund. Skip over step 2 since you’re 100% debt-free (except your house, maybe), and pick up with step 3.
We have seen it for ourselves that even when we thought we had things under control, there was still room to learn from others and improve our efforts. Get started with changing your life today!