Have you ever heard of Dave Ramsey? Have you ever heard of his baby steps?

Well if you haven’t, you’re about to. And if you have, let’s refresh.

Dave Ramsey is a multi-millionaire who went bankrupt only 25 years ago. He has a radio show, youtube channel, podcast, etc. Dave shares advice, stories of success and failure, his past, and more on all of these channels. He is most well known in the finance world for his 7 baby steps. These baby steps are what he bases most of his advice on and how he grew his wealth.

The Baby Steps

• Baby Step 1 – Save $1,000 for your starter emergency fund
• Baby Sept 2 – Pay off all debt (except the house) using the debt snowball*
• Baby Step 3 – Save 3-6 months of expenses in a fully funded emergency fund
• Baby Step 4 – Invest 15% of your household income in retirement
• Baby Step 5 – Save for your children’s college fund
• Baby Step 6 – Pay off your home early
• Baby Step 7 – Build wealth and give

Explanation

The $1k emergency fund needs to be done IMMEDIATELY. Not just a few hundred when you can, it needs to be done (or at least planned on how to get it done) before you finish reading this sentence.

The debt snowball is listing all of your debts you owe, outside of your mortgage, from smallest to largest balance owed (NOT interest rates). Start knocking out the debts one by one, while paying minimums on all of them. Many people during this step get a second job, sell everything you don’t need, sell your car and get a beater, etc. <— they call that “gazelle intense”.

The 3-6 month emergency fund should cover your living expenses for that time. Incase you get unexpectedly laid off, your car breaks down, you have to move unexpectedly, etc. Many people choose to keep their second job through the end of this step, just to get it done faster.

The 15% investment is meant to be based off of your household, not your ‘personal’ income. This should be invested in your 401(k) to get any match that your employer offers, and the rest should be placed into Roth IRAs (one for you and one for your spouse).

The kid’s college fund should be placed into a 529 college savings plan or an ESA (education savings account) because they will save a bundle in taxes and are specifically designed for this.

The mortgage comes next. If you have an adjustable-rate, interest-only or even a 30-year mortgage; Dave advises that you consider refinancing to a 15-year fixed mortgage and paying it off as FAST as possible.

The last and most exciting step is to build wealth and give. Building wealth can be achieved by maxing out your 401(k) and Roth IRAs, investing in rental properties, and really anything else that you choose. This is the time that you can live like no one else, because you have lived like no one else plowing through the baby steps.

Dave’s advice I (we) live by

My fiancé and I are obviously planning for our wedding (Sept. 14, 2019) and are saving for that. Right after we got engaged, my fiancé was able to pay off his last of his 6 credit cards and we have put a pause on the baby steps until after we cash flow this wedding. Dave advises to push pause temporarily if weddings, pregnancies, moves, new jobs, etc. come up in order to avoid going into more debt.

After we get married we plan to push play once again, pay off my last credit card, pay off my jeep and his truck, and pay off my dang student loans. With our plan we should be able to have this done as well as a hefty down payment for our first home within 5 years. Sure, that seems like a long time to be ‘gazelle intense’ BUT the amount we have been able to do so far, with having 2 rents and twice the bills has been such a motivator that we know it’s all worth it.

Of course we get the funny looks, the doubts, the “advise”, etc. but it’s obviously smarter to listen to a MULTI-millionare than Joe Shmoe who is 45 and still paying off their student loans.

Key points we have learned from Dave

⁃ Live like no one else, so later you can live like no one else

⁃ Lottery tickets = a stupid people tax

⁃ 79% of millionaires, didn’t receive any inheritance

⁃ 8/10 millionaires invested in their company’s 401(k)

⁃ Top 5 careers for millionaires: engineer, accountant (CPA), teacher, management, attorney

⁃ 62% of millionaires went to state college, only 8% went to prestigious colleges

⁃ Cash is much harder to spend when you have physical cash, rather than a debit card (though there is nothing wrong with debit cards)

⁃ If you can’t pay for it all upfront, you don’t need it

⁃ 0% of successful marriages have separate bank accounts from one another

⁃ If you actually WRITE down where EVERY dollar goes that you earn, it WILL scare you (before you start budgeting)

⁃ Once you start, it is so much easier

**The name Uncle Dave actually comes directly from Dave Ramsey. He gives advise as if everyone is his family. He sometimes says “Uncle Dave’s advice is…” So when someone asks if I want to buy/do ____, I sometimes say “Uncle Dave would yell at me if I bought _____” or “Uncle Dave says no”.

My dear friend Laura Trickett is the author of this post today. She is honest, open and freaking adorable! And will literally help you with anything she can and if she doesn’t know how she will find out how! If you have any questions or want more explanations either check out Dave Ramsey’s site or drop your questions in the comments and we will try to answer them!

If you also want to get some tips on traveling on a budget, check out this post!