Finance expert Dave Ramsey’s 7 ‘baby steps’ to becoming ‘very wealthy and outrageously generous’

Many people have fallen on hard times financially in the past few years and the situation may seem hopeless. But amid the frustration, a financial expert shares his recipe for financial success.

Dave Ramsey, a personal finance expert, recently shared a clip on his TikTok channel featuring seven steps to financial success and subsequent philanthropy.

Ramsey claims his seven “baby steps” have helped more than 10 million people fix their financial woes.

@daveramsey 7 steps. That’s it. A simple plan, and it works every time. But it is not easy. To accomplish these, you must decide to do it. You must be sick and tired. Day after day, you draw a line in the sand and you’re not going back. No more excuses. You are in control of your actions and your life. You are ready to make your money work for you, not the other way around. #Moneytok #daveramsey #getoutofdebt #moneyadvice #Moneytips ♬ Original Sound – Dave Ramsey

Finance expert Dave Ramsey shares the 7 steps to follow to become super rich and generous:

Of course, as with most things in life, Ramsey’s guidance is easier said than done. Life rarely allows you to follow a perfect plan, but as long as you are intentional about getting your finances in order, the journey will be easy.

Calculator and notepad on top of money Carolina Kaboompix | Pexels

1. Save $1000

Ramsey explains that when he started giving financial advice, this step didn’t exist.

Ramsey explains that people who don’t have his methods work because they have car trouble or a medical emergency and don’t have the money to cover these expenses because they put all their money into paying off debt.

It made him realize that an emergency fund was an integral part of the process, providing something of a safety net for people to fall back on. So now that you don’t have an emergency, you’ll be prepared.

@daveramsey Baby Step 1 Save $1,000 for your starter emergency fund. When I first started doing this, I didn’t have it as Baby Step 1. “Shut up and get out of debt” I have. But then people have a $350 alternator blowout on their car and they have no money because I told them to put all their debt on them. So they would sit there and say, “I’m broke, I got to work. Screw you, Dave, it won’t work. And they left. And I went, well, we’ve got to have a little bit of a pad between you and life’s emergencies, but we can’t build a big pile of money when we’ve got this huge pile of debt. That didn’t make sense either. So we’re going to get a little starter emergency fund. The funny thing is, 30 years later, people are now saying, “Dave, you need to adjust this because of inflation.” It was never meant to be enough. $1,000 is not enough. And by the way, $2,000 is not enough. So it doesn’t matter, because you won’t live here for long. It’s $1,000 just to catch the little things, so you don’t lose your emotional momentum. Because we’re running a behavior-modification program here, emotional momentum is important. #moneyadvice #moneytips #daveramsey #babysteps #debtfreejourney #emergencyfund ♬ Original Sound – Dave Ramsey

Surprisingly, according to the Consumer Finance Protection Bureau, a special emergency is what they call the “first step” toward real savings. Because if something unexpected happens, like your car breaking down, it won’t cause irreparable damage to your credit and it will be much easier to bounce back.

2. Get out of debt using the debt snowball

A debt snowball is a debt-reduction method that allows you to pay off your expenses from least expensive to most expensive.

According to Citizens Bank, the debt snowball can be broken down into a few stages of its own. (Step-by-step?! Yes, it may seem like a lot, but it’s the most efficient way to get things done.)

Put debts in order from least interest to highest.
Pay off the first loan above the minimum to bring it to zero balance more quickly.
Submit the minimum payment for the remaining loans. Eventually the debts will be paid off.
Move on to the next loan and repeat the process.

Following these small-steps can help you get out of debt as quickly as possible.

3. Save 3 to 6 months of expenses for a fully funded emergency fund

Now that your loan is paid off, you can take the money you set aside to pay it off and put it toward creating a fully funded emergency fund. If you don’t use the initial $1000 you can add to it!

The woman is happy with her finances BartekSzewczyk | Canva Pro

Now, instead of having a small backup like in the first step, you have a solid backup plan that will see you through any difficulties.

It’s best to create a timeline for how soon you want to set up your emergency fund. This ensures you stay on schedule and keeps you accountable.

4. Invest 15% of your family income in retirement

Ramsey’s next step is about the future. With no debt and a fully funded emergency fund, you can invest in retirement now. Putting 15% of your household income aside for retirement means you don’t have to work all your life.

Many companies offer financial security for the future by guaranteeing that their employees will match their contributions to the company through a 401(k) or 403(b). However, if your company doesn’t have retirement savings, it’s a good idea to look into a Roth IRA (Individual Retirement Account), which gives you more control.

5. Start saving for kids’ college

College isn’t going to come cheap, so it’s smart to make sure your kids have money for their higher education.

Some options for college savings include a 529 College Savings Plan or ESA (Education Savings Accounts). When deciding between the two it may be helpful to look at the differences and see which one best suits your needs.

Obviously, if you don’t have kids, you’ll skip this step.

6. Pay off your house

This is the hardest step of all, but it’s also the most liberating. Not having to pay the mortgage is the real end of your debt. But this step is very labor intensive and requires clear planning.

You need to figure out how much your monthly payment will be and how long the entire process will ultimately take. You can meet with a financial advisor to work out the details of your long-term goals, or even use Ramsey’s own mortgage payment calculator to determine the best payment plan to pay off your home quickly.

7. Nothing to do now but become very rich and outrageously generous.

Now you are in the clear! You can do whatever you want with your money, be it getting richer or sharing your wealth with others.

As mentioned earlier, this all sounds much simpler than it really is. Life throws all kinds of obstacles at us and some financial burdens may be worse than others so the road to financial security is tough in itself.

But what’s important is that you start the journey to give yourself the life you deserve: you’re debt-free and wealthy.

Sahlah Syeda is a writer for YourTango, which covers entertainment, news and human interest topics.

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