Dave Ramsey’s Baby Step Hacks to Stop Being Broke

Baby Steps & the Debt Snowball


Who is Dave Ramsey?

Dave Ramsey is a financial guru that has been through it all. He was a millionaire at age 26 but lost it all, only to turn it around and come back stronger at a net worth of around $55 million.  Dave made it his mission to help others learn from his mistakes and to leave debt in the past.

Dave often uses biblical references to teach people about money. Moreover, he is known to quote Proverbs 22:7 stating, “The rich rule over the poor, and the borrower is a slave to the lender.”  After losing it all Dave has quickly built up his wealth, maintained his marriage, and now helps people learn the value of a dollar. Nonetheless, he teaches people how to pay down debt with his debt snowball methods.

Not only does Dave have New York Times Bestselling books he also created a class called “Financial Peace University” where he teaches live or video versions of his baby steps method for becoming debt-free and building wealth.

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Dave Ramsey Hacks to Stop Being Broke

His ideas vary from other personal finance writers, that may tell you to pay off your high-interest bills first. Dave, however, advises people to start with their smallest debt amount to feel a sense of accomplishment. He advises using his “Baby Steps” to help pay off debt and build savings. After paying off that first debt, continue paying your next smallest debt but add the amount you were paying in the first, hence the term “debt snowball.”

In his book Financial Peace, he discusses these steps and emphasizes and explains his Baby Steps method. His class “Financial Peace University” expands on his baby steps and the debt snowball method.

He also runs a truly successful radio show called “The Dave Ramsey Show” and is heard by over 8 million listeners a week. I truly believe Dave has a fool-proof method to help the average person get out of debt and I highly recommend his methods. To check out his amazingly helpful website click here.

Suggested Reading: Get out of Debt: 11 Actionable Steps to Live Better

Note: This post is only a short summary of Dave’s 7 basic principles of Ramsey’s Baby Steps, and is not meant to replace Dave Ramsey’s books or website. For free additional information on his 7 Baby Steps please click here. I am in no way affiliated with Dave Ramsey or the Lampo Group. 

What are Dave’s Baby Steps? 

On Dave Ramsey’s website he discusses his baby steps to financial freedom which are:


#1. Pay the minimum on all bills until you can get $1000 in savings

He recommends building the “mini emergency fund” up right away in case you run into any mishaps while trying to pay down your debt. Also, if you are low-income, Dave will settle for $500. It is better than no emergency fund.

#2 Start your “Debt Snowball” to pay down debt

This method involves paying off your smallest debt first. After paying off this debt, you will have a sense of accomplishment.  Then put the money you were using to pay off that first debt towards your next debt accumulating more money for each payment, like rolling a snowball in fresh white packing snow.

For example, if you have a credit card bill of $2000 and another credit card bill of $3000, pay the $2000 debt off first while still paying at least the minimum on your other debts. Then use the money you were paying toward the $2000 debt to now pay off the $3000 worth of debt. So you are essentially adding more money to the higher debts as you pay off the smaller debts.

Hence, if you were paying $300 toward credit card A and a minimum of $100 on credit card B, after paying off credit card A, you will now pay $400 ($300 + $100) total on credit card B until it is completely wiped out too.  Continue using this “Snowball” method until all of your debt is gone.

#3 Larger Emergency Fund

You will still have a mortgage, but now you will begin setting aside money for a larger emergency fund. This should include enough money to pay for three to six months of your salary. If there is an emergency, you need easy access to this money.

Related: Use My Sinking Fund Method to Save

If you are in need of extra money to build your emergency fund,  you can find a side hustle to help build up your savings.


✅ Need a safe place to start an emergency fund or savings account? Learn why we recommend CIT Bank with their above-average interest rates.

#4 Save for Retirement

You are now ready to contribute to retirement. Calculator 15% of your gross household income and begin to fund a 401(k) or 403 (b) if your employer matches; however, if your employer doesn’t match the 401(k) or 403(b) contribute to and fully fund your Roth IRA. Also, check your insurance. Are you covered if something were to happen?

Savings Builder

#5 Save for a College Fund

After you have completed the above steps, it is now time to start thinking about college. Start contributing to a college fund for your little one. You can use a 529 savings plan or find high yield savings account to help you earn more interest on your money.

I like to use sinking funds to help save for bigger purchases and put my money in a high yield savings account.


✅ Need a safe place to start an emergency fund or savings account? Learn why we recommend CIT Bank with their above-average interest rates.

 Learn More about CIT bank’s current rates.

#6 Try to pay your house off early

Try to gather any extra money you can and begin to pay off your house. After paying off your house, you will be completely debt-free! My husband and I are working on this now and we are almost there. This may be one of your biggest debts, so don’t give up. Try putting a little extra each month toward your house payment. Eventually, you will pay your house off early and save so much money on interest.


#7 Build Wealth & Give

Awesome! You have made it to the end of the baby steps and it is now your turn to earn a piece of the pie. Use your extra money to invest in mutual funds, real estate, annuities, and opportunities! This is how the rich get rich, according to Dave. Once you have built wealth give back.

Dave Ramsey’s Baby Steps

Related: Best Personal Finance Books to Change Your Money Mindset


Is Ramsey’s Snowball Method worth it? 

Dave has helped thousands of people get out of debt and improve their financial situations. He is very adamant about following the steps in this exact order. If you skip a step, you will end up going back.

Some arguments against Dave’s methods include keeping your “good debt” which would be a mortgage at a low rate and invest your money to earn a higher rate of interest. Yet, It is really a personal preference if you want to leave your debt in the past. Dave advises people to become totally debt-free and then save money to pay cash for larger items like a car or a house. However, others feel it is wiser to keep a mortgage payment at a 3% (for example) interest rate and invest your extra money in the stock market at a 12%(for example) interest rate return on your money.

Also, some feel you should pay your highest interest rate bills first contradicting Dave’s “debt snowball” method. Essentially you will be paying more money as those higher-interest rate credit cards are left only paying the minimum. Yet with the “snowball method,” you are paying your bills on time and making a dent in your debt. You have a sense of accomplishment and are leaving the overwhelm in its tracks. 

Summing up the Debt Snowball

Dave Ramsey Hacks to Stop Being Broke Conclusion…

In conclusion, it may seem like a near to impossible feat to dig your way out of the big hole of debt. However, Dave has proven to help many people manage their money and become successfully deb free. Following his snowball method can help you free yourself of debt and begin to save for an emergency fund, retirement fund, and begin to pay cash for your purchases.  Dave Ramsey is a dedicated individual we can all learn from. His story gives the average person hope. If this bankrupt millionaire can turn around his financial situation, so can you.

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Please leave me a comment on your thoughts on Dave Ramsey’s baby steps. I would love to hear from you.

Take care – Sarah

Dave Ramsey’s Baby Step Hacks to Stop Being Broke

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