Dave Ramsey Baby Steps: How to Conquer Them!

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Imagine this:  You stand at the base of a giant mountain and look to the top, covered in clouds and mist.  You must get to the top, yet you don’t know how to start and it seems too overwhelming to challenge.  That is what facing your debt feels like, but you can conquer your financial climb by taking small steps – Dave Ramsey Baby Steps.  As Dave’s Endorsed Local Provider in the Northwest Arkansas and Fort Smith area, I want to provide you with the tools you need to conquer the Dave Ramsey Baby Steps program and gain financial freedom! 

Dave Ramsey Baby Steps – Step 1:

Save $1,000 to get an emergency fund started

To start off Dave’s Baby Steps program, you will want to kickstart an emergency fund and reach $1,000 – and fast. Now you may be thinking, “there’s no way I can save that much money in a short amount of time!”. Don’t worry, it is a lot less scary than you think! To find ways to save for an emergency fund, Dave recommends starting by creating a budget (you can use your own process or a setup like this. Once you have a budget, you’d be surprised at how many options you have to save! For example, some of Dave’s fans skip eating out, host a garage sale, or stash away loose change each day to reach the emergency fund goal as soon as possible. Taking baby steps toward an emergency fund will make a huge impact on your financial journey.

Dave Ramsey Baby Steps – Step 2:

Kiss your debt goodbye

With a plan for the future, you can focus on your current debt now. Dave uses the snowball method to tackle debt. In some cartoons, you probably have seen how the tiny snowball rolls and rolls to a massive, hulking snowball at the bottom of the hill. The same technique can help you with your finances! To kiss your debt goodbye, order your debts from the smallest to the largest balance left. Focus on the smallest balance first and pay as much as possible each month. However, don’t forget about your other debts – make sure you still pay the minimum payment required on the other debts. When you’ve paid off the first debt, move to the next one, and continue until you are debt-free!

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Dave Ramsey Baby Steps – Step 3:

Conserve funds for 3 to 6 months’ worth of expenses

Life is full of surprises, hiccups, and roadblocks, and preparing will make those moments that much easier. The rule of thumb is to have an emergency fund that could pay for three to six months of expenses. You may be wondering, “Which should it be: three or six months?”. It all depends on you and your household. If you have a two-income household and a stable job, you can probably keep it to three months of expenses. Have a one-income household, a commission, or a new job? You may one to prepare your emergency fund with six months’ worth of expenses. Are you like me and find yourself tempted to get in the cookie jar? If so, I recommend keeping your emergency fund in a separate checking or savings account.

Dave Ramsey Baby Steps – Step 4:

Invest in the future

Once you have conquered your debt (congrats!), you can focus on your future and your retirement. The goal is to invest 15% of your family’s income into retirement funds, but there are two ways to save for your retirement. First off, if your employer offers to match your retirement contributions, invest in their retirement plan enough to receive the full employer match. After that, invest the rest into Roth IRAs (unless your employer doesn’t have a retirement match – use all of the 15% in Roth IRAs). By spreading your money across different funds, you can diversify your retirement plan and reach greater gains for the future.

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Dave Ramsey Baby Steps – Step 5:

Keep for your kids

If you have kids or are planning to start a family in the future, you want to set them up for success. Whether you have a one-month-old or a ten-year-old, it’s never too early to start a college savings fund. There are several options to save for your child’s college expenses. Dave recommends using either a 529 college savings plan or an ESA (Education Savings Accounts). The great part about using a plan like a 520 or an ESA is that they are both tax-advantaged options and are designed for college savings plans. Each plan is different, so be sure to review each plan to find what would work best for you and your family.

Dave Ramsey Baby Steps – Step 6:

Pay off your home ASAP

Dave Ramsey’s Baby Step 6 can be daunting, but in the long run, it is going to allow you the financial freedom you are looking for! With your other debts out of the way, it’s time to tackle your home mortgage. It may take some time, yet it so rewarding to wake up in your own home and be debt-free! If you have any money left over after your allocating for your budget and savings, put it towards paying off your mortgage. Depending on your mortgage, you may consider refinancing to a 15-year, fixed-rate mortgage as well. This move could save you thousands in interest. Paying off your home is your last step to freedom from debt.

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Dave Ramsey Baby Steps – Step 7:

Grow it and give it

You made it! Baby Step 7 is all about continuing the Dave Ramsey Baby Steps and growing your wealth to give and invest in the future! Want to leave an inheritance for your children and their families? Do it! Are you passionate about donating the majority of your money? You can! You took the steps and built the habits to control your money and not the other way around.

Are you ready for financial freedom? By conquering these baby steps, you can embrace a new life without any financial burdens. If saving money on your insurance would help you reach your goals, get a free insurance quote and analysis from G&G Independent Insurance, the agency founded by Jordan Greer, Dave’s Endorsed Local Provider for the Northwest Arkansas and Fort Smith area.

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