Personal finance 101 – Dave Ramsey’s baby steps

by Tsh Oxenreider

Tsh is the founder of this blog and just finished traveling around the world with her husband and 3 kids. Her latest book is Notes From a Blue Bike, and believes a passport is one of the world's greatest textbooks.

This is the first part in my series on Dave Ramsey’s Baby Steps, a proven personal financial plan. My goal is to explain a really solid money management plan in plain ol’ English, for intelligent yet financially “average” home managers.


I’m a firm believer in being debt-free. Not only do I think it’s honoring to God and good for the soul, it’s also a lot more fun. When you don’t owe anybody, you can use money as a tool that benefits your family (and not the bank), and you’re free to live in ways unimaginable when you’re in bondage to debt. You really can live simply and freely. Well, at the very least, it’s a lot easier than for the person in debt up to their eyeballs.

To be honest, I’ve been a bit lost in the fog for most of my adult life when it comes to personal finance. I never found tools that worked for me, I never made it a huge priority to be proactively involved in our funds, and quite frankly, I found the topic boring. I mean, I wanted to have enough money, but I didn’t want to learn how to deal with it. I wanted it dealt for me. Because crunching numbers and balancing accounts is BO-RING.

This past September, I discovered Dave Ramsey and his method of using Baby Steps to control personal finances. Now, we’re still still exploring and tweaking our personal philosophy, but so far, there’s not much the guy teaches that I disagree with. And best of all, he explains money in a way I – a regular Jane – can understand. I’m hooked, and what’s more, I now really like the topic of personal finance. I’ve learned a lot more outside the realm of just Dave Ramsey, and I’m learning more every day.

You can find tons of stuff on the internet about Dave’s method, and there are countless blogs that hype his teachings. So my Cliff Notes version of his thoughts won’t be new. But my plan is to walk through his plan on this blog over the course of a few weeks, for my clarity of mind, if anything. And maybe it will encourage someone out there.

I think I’ll summarize each of his “Baby Steps,”, walking through their basic benefit and end result, and possibly divulge a little of our family’s plan for each.

As an introduction, his Baby Steps are as follows:

  1. Quickly save $1,000 in a Baby Emergency Fund.
  2. Become debt-free using the “snowball method.”
  3. Fully fund the Emergency Fund from step 1 with 3-6 months of your living expenses.
  4. Contribute 15% of your income to retirement.
  5. Fund your kiddos’ college education through an ESA or a 529.
  6. Pay off your mortgage.
  7. Invest money and give a bunch of it away – live like no one else.

As Dave often says, “Live like no one else, so that later you can live like no one else.” We hope we can. His financial plan lines right up with the idea of living simply. And if your goal is to live simply, Dave Ramsey could be your man. I highly recommend looking into his financial advice. You can download the first hour of his daily radio show for free on iTunes. I usually don’t miss it.

Missed other parts of my series?

photo by mydrblog

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  1. I appreciate Dave Ramsey and all he does for the people who listen to him. But I disagree strongly with a few of his baby step tactics. He talks about how risky debt is, but he opens his followers to some pretty hefty risks with his plan.

    $1000 went pretty far for an emergency in 1990. Today, it won’t cover the average transmission repair. I think the baby emergency fund needs to be more than $1000, and the amount needs to be decided based on each individual family’s needs. If you have no health insurance, you need more saved than if you have insurance, for example. You at least need an amount equal to the cost of transmission in your car or at least the deductibles for your home and car insurance policies. Your BEF needs to be based on your reality to keep you from having to borrow when something goes wrong.

    I also disagree with Dave strongly about stopping retirement contributions while getting out of debt. I can agree with dropping down to a lower percentage of gross pay while getting out of debt, but never go below the company match. The loss of compounding and company match for 2-3 years can be devastating to your future. I call that loss really stupid tax.

    Dave’s plan and his counselors are not independent or impartial either. I’m bankrupt. I’ve consulted two attorneys and two separate, highly recommended debt counseling services and they went through all my paperwork and told me I needed to consider bankruptyc unless I had a plan to start making triple or quadruple what I’m making now starting next week or sooner. I consulted with two of Dave’s counselors and neither looked at my numbers and the first words out of their mouths was “you’re not bankrupt”. Bankruptcy isn’t for a lot of people who do file, but for those of us who really need to file, it should be on the table and counselors should look carefully at all financial information before they make any judgment whatsoever.

    I listen to Dave’s show and I agree with a lot of what he says, but on the above points I strongly disagree with him and his organization.

    Good luck with getting out of debt, but don’t sacrifice your future to be Gazelle Intense.


    Debt Free or Bust – Sherri’s last blog post…Sponsorship Opportunity on Debt Free or Bust!

  2. I love Dave Ramsey! Taking the Financial Peace course at our church in June of 2007 has totally changed our lives! We were headed down a terribly scary path with no clue! We have now taken control of our money and are working toward paying off our debt, we have paid off $25,000 in 14 months and still have that much left…but soon we will be able to LIVE LIKE NO ONE ELSE too!

  3. We are big supporters of Dave Ramsey. We appreciate his no nonsense way of putting information out there. We just finished baby step 2 and are working on our emergency fund.
    May God bless you as you try and glorify Him by taking control of your finances. It’s such an amazing opportunity to do some good!

  4. Your situation sounds similar to many: Most believe in being debt free, but are ‘lost in the fog’ when it comes to personal finance. At least your blog is helping to clear that fog…

    Thank you for your take on the baby steps.

  5. avatar
    mrsjprince says:

    We didn’t have a lot of debt, but we paid off a car note & school loan with this process. We also paid cash for our “new” (used) car using Dave Ramsey’s BabySteps. It wasn’t easy all the time, but it works.

  6. I like his work too, he makes some very valid points

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