Take The FREE 60-Second Quiz - "What Type Of Side-Hustle/Online Business Is Right For You?"
About Blog Courses FREE Guides Become A Student Login

Dave Ramsey's Baby Steps To Financial Peace

I'm personally a huge believer in Dave Ramsey's "Baby Steps". These are the steps I followed to eliminate over $43,000 of consumer debt in just 2.5 years.

The financial discipline I learned following this system, absolutely changed my life, forever.

I've now been completely out of debt for over a decade and have been helping people do the same ever since. I'd love nothing more than to have you join us on the other side!

I discovered these principles at a very very low point in my personal and financial life.

Over a decade ago I changed careers from highly lucrative corporate sales to not-so-lucrative professional musician. I absolutely loved the professional musician part, not so much the broke part.

The problem was that I still had the "lifestyle hangover" of an upper middle-class corporate salesman.

To put it plainly, I had not prepared my mindset or lifestyle for the extreme fluctuations (mostly downward at first) that this carer change would entail.

Over the course of the following 3 years, this lack of preparation coupled with bad money habits put me in a world of financial hurt.

I had to learn the hard way that you can wander into a deep hole of debt, but you certainly can't wander out.

Rather, you have to determine use the despair this can often lead to, to become a hater of debt and a real debt "teeth kicker" in order to free yourself.

And like I mentioned, once I got sick and tired and sick of being sick and tired AND found Dave's Baby Steps, I was able to eradicate all $43,000+ of my debt in just 2.5 years.

It's been a game changer for me and I'd love for it to be a game changer for you as well!


Here's a little infographic to illustrate. Feel free to share on Pinterest if you find it helpful.


Time To Kick Your Debt In Its Teeth! 

We've probably found each other because you’re sick and tired of being sick and tired of your debt and financial situation, much like I was over a decade ago. Being in debt and living paycheck to paycheck put me in a constant state of desperation. 

I was pretty much sick and tired of being sick and tired but hadn't yet gotten a plan together.

I found myself with what I call "broke fatigue" due to the fact that I was super stressed out and on the verge of a panic attack every single month. How I was going to pay my bills became a constant and nagging question mark. Not a fun place, as you may well know.

And because of my exceedingly horrific money habits, any savings I had scraped together up to that point had pretty much been totally looted.

I was a complete mess and utterly exhausted from this unceasing sense of hopelessness.

When I  finally discovered these steps in 2004, I dove into them head first and with almost maniacal intensity. I followed these eight steps like a crazy man and eliminated over $43,000 in consumer debt in two and a half years! Best decision I ever made.

The process was definitely not easy. It was actually a grind-and-a-half at some points.

But I found that as I got more traction, my motivation level magically increased and my debt started to magically decrease. I was hooked!


Do you "get down" with Pinterest? Would you consider sharing this pin to one of your boards?


A Note About This Post:

I've used the content in this post to create a free downloadable guide that you can print out and use as the rock solid foundation for your debt elimination journey. You can download the guide "8 Steps To Erase Debt" (once you're in, just click on the "8 Steps To Erase Debt" (download)).


What's Your Number? 

Maybe your number is bigger than my $43,000. Maybe it’s smaller. It doesn’t really matter. The principles are the same regardless of the amount.

What I can promise you is that, if you totally surrender to these steps, you will kick your debt in the teeth for good and win your freedom.
And with that freedom, you will experience a joy and peace like you've probably never experienced before.
There is no way I can convey with words how amazing it is. You just have to experience it for yourself and I want to help you do that!
Is it hard? Of course it is. Is it worth it? YES!! I can honestly say that eliminating my debt is one of the best things I've ever done.
Being debt free for the past 10+ years has enabled me to do things I never would have been able to do with that load on my back (like traveling internationally for extended periods of time and having the opportunity to meet my wife on a long mission trip to Colombia, South America). 

As we get to know each other, you will notice that the phrase “trust me” is not a normal part of my vocabulary, except for when it comes to following these steps. So I will say, please trust me, they work!
Surrender to them and you’ll be able to experience the joy of zero debt!
I'm not one to beat around the bush so, let’s get into it and get you out of debt, pronto!

Surrendering To The Process... Totally

In all of my wife's and my years of coaching people to drop debt, we've found that there are 8 steps that, if surrendered to, work every single time.

And again, the more you're "sold out" to or surrendered to the process, the easier it will be.
Getting out of debt requires a very solid and consistent focus of effort.
In order to achieve this focus, it's best to follow a prescribed set of steps that have been proven to work for others in the past.
Once you've settled on those steps, it's time to dig in.
So, if you want to kick debt in the teeth, here are the 8 steps you’ll want to diligently follow:

The 8 Steps To Erase Debt

0. Stop All Retirement Investing (Until Step 4)

1. Build A Budget

2. Starter Emergency Fund of $1000

3. Eliminate Debts Smallest To Largest (a.k.a The Debt Snowball)

4. Full Emergency Fund of 3-6+ Months' Expenses

5. Invest A Minimum of 15% Income Into Retirement Accounts (and increase savings rate to 50%+ if possible)

6. College Funding (if applicable)

7. Pay Off The Home Mortgage

8. Build Wealth, Serve and Be Ridiculously Generous


The 8 Steps: In Detail


Step 0 - Stop All Retirement Investing (Until Step 4)

You've got to stop moving backward before you can start to move forward. 


If you are currently investing for retirement, I recommend that you stop until you’ve eliminated debt and have at least 3-6 months of expenses saved for an emergency (that is until you’ve completed steps 1-4).

"But Brad, what about my company match?!" "Match smatch”, I say!!
You’re never going to be able to build even the slightest level of financial momentum while your attention is divided and while your debt is literally stealing from you.
Yes, debt is a thief and it’s stealing from you every single day you allow it to linger in your life.
Who cares if you’re earning 7% on your 401k when the 8-18% credit card or loan or HELOC (Home Equity Line of Credit) interest is eating your lunch.
Like I said earlier, trust me. Surrender to the process and you’ll be able to build wealth MUCH more quickly once you’ve evicted your resident “thief”.
And please, don't take my word for it. Take the time to sit down and actually do the numbers. Add up how much you're paying in interest versus what you're getting in your company match. Every time we do this with clients, they're amazed.
Don't worry about the (hopefully) short amount of times you're sidelined from contributing to your retirement. The whole point is to get you out of debt asap, so that you can start sending shovel loads of cash into your retirement accounts.
We want you to arrive at retirement with zero debt and truckloads of cash!

Step 1 - Build A Budget 

 A solid budget is the absolute foundation of every successful money household.
Sounds simple enough, right? Well, sometimes yes, sometimes no.
It really just depends on your familiarization with budgeting as well as your stress level when you first sit down to do one.
If you're “killing it”, meaning you’re making piles of money and you are starting to budget because you’re wanting to reign in expenses and squeeze more value out of every dollar, that’s a much different stress level scenario than the couple who is tens or maybe even hundreds of thousands of dollars in debt.
They're also likely behind on bills and maybe have had another stressful event (like the loss of a job or another type of financial emergency) preceding their attempt to start a coherent budget.

Remember, Budgeting Is A Skill Not A Talent

The point is, regardless of where you’re starting, it’s important to understand that no one is a “born budgeter”.
It is not a “talent” or a “gift”, rather it is a skill or a muscle you have to build and develop.
So, it’s also important to understand that building that skill is going to take about 90 days of concerted and consistent effort.
When we coach, it almost always involves exhaustively reviewing a new budgeter's financial snapshot and writing down every dollar coming in and every dollar going out. 
Invariably, there are at least a couple of things they forget to list in that first meeting. It's totally normal and just one example of why it takes about 90 days to get good at budgeting. It's hard to go from a mess to a masterpiece in one sitting. Have patience.
That's another important element, learning to manage yourself and, if you’re married, working with your spouse and their feelings about this whole idea of budgeting. Learning to work together is pivotal and gets easier the more you do it. Just hang in there and don't quit.

If you’re new to budgeting, our Free Budgeting Forms are available to help you get started.

Step 2 - Starter Emergency Fund of $1000 

This first $1000 will serve to stand between you and those pesky credit cards...
"$1000", you ask? Well, $1000 is about what it takes for a budding debt eliminator to have held in reserve in order to restrain them from using credit cards or other forms of borrowing during an emergency.
I’ve heard it said, “when you find yourself in a hole, stop digging”. $1000 puts the shovel in the shed.
Keep in mind, this $1000 is to only be used for genuine emergencies, like a sudden car repair or an insurance deductible for a car accident or sudden disaster.
Buying a new Xbox or iPhone is not an emergency. You know what I’m saying…

This emergency fund will be greatly expanded once we’ve gotten you through the next debt elimination step. For now, we’re just keeping you away from using any kind of debt for an emergency.

Step 3 -Eliminate Debts Smallest To Largest (a.k.a The Debt Snowball)

And speaking of credit cards, let's go ahead an cut those bad boys up...


Also known as the "debt snowball", this is where the next big level of progress happens.

Now keep in mind, depending on the amount of debt you have, this could actually take many months or even years. That’s okay.

The point is that we get started and stay focused and consistent. We’ve seen thousands of individuals and families take anywhere from months to years to get through this step.

No matter how much time or effort it took, ALL of them say,  “it was totally worth it!”.

The nuts and bolts the attack are...

1. List ALL of your debts smallest to largest (regardless of interest rate).
2. Pay the minimums on all debts, except for the first one (smallest) on the list.
3. Begin making extra payments to the smallest debt first.
4. Once that debt is paid off, roll that "extra" amount into the payment of the next debt.
5. Wash, rinse and repeat until they're all gone!
One of the reasons we recommend to list all debts smallest to largest regardless of interest rate is that, in the grand scheme of things, the amount of possible “extra interest” paid is very typically negligible compared to the psychological, emotional and real momentum you get when you’re gaining traction and actually retiring each debt smallest to largest.
That progressive sense of accomplishment helps to keep you motivated in what can otherwise (without a plan) be a slog.
Another reason we recommend this method is that, focusing on one debt at a time helps you to maintain incredible intensity.
The watering down of your attention by trying to pay down more than one debt at a time can be demoralizing and downright frustrating.
You don't feel like you're getting anywhere because, well, you aren't.
The harnessing of this focused intensity is why we also list halting retirement contributions until you eliminate debt back in Step 0.
Remember what I said earlier, surrender to this plan and kick that debt in the teeth forever!

Step 4 - Full Emergency Fund of 3-6 Months

 I say 6 months minimum, then I'd go for a year. Cause, Murphy...
Once we've eliminated the debt, we’re going to add to that $1000 starter emergency fund until we have at least 3-6 months of funds to cover your basic living expenses in the case of an emergency.
Now, if you’re anything like my wife and me, we don’t feel like 3-6 months is quite enough, so we went for a year. So we now have an emergency fund for our emergency fund you might say.
Whatever you decide to save initially, can always be added to later. Just make sure it’s AT LEAST 3-6 months to begin with.
Remember, the last thing you want to do is EVER borrow money for any reason EVER again especially after you’ve fought so hard to eliminate debt.
Again, this is and EMERGENCY FUND, not a vacation fund, not a new car fund, not a home repair fund. This is to be used for emergencies only.
>Also, it's important to note that this step may require a continuation of a similar intensity you used during Step 3. That's okay, you can do it, even if at a slightly slower pace.
Once the emergency fund is funded, you can let off the gas a bit and maybe instead of working four jobs, just cut back to two. :) 

Now, The Really Fun Stuff!

Steps 5 (investing), 6 (college planning) and 7 (paying off the mortgage) are worked simultaneously, so strategies will be highly individualized. For this part of the journey, it can be very hand to get the outside help of a coach. :)

Step 5 - Invest A Minimum of 15% Income Into Retirement Accounts 

 Watching it grow is the fun part. There will be peaks and valleys, but time is on your side (typically).
Up to this point, we’ve recommended that you stop all retirement investing. Debt, gone. Emergency fund, full.  Let's start construction on that nest egg.
This part is all about your savings rate, which means everything you keep after you pay your expenses. If you want to put yourself in a position of having the ability to retire early, then increase your savings rate to 50% or more of your income .
Now, I’m not saying I recommend “retiring early" necessarily, but I do want you to put yourself in that position in case you want to or need to (and keep in mind "need to" could always possibly include an unforeseen disability).
"What?! 50% or more?!" I know it sounds insane, right? Keep in mind there's lots of data that shows a very positive correlation between an elevated savings rate and the accumulation of wealth (and therefore the early retirement option).
We go into more detail about this in the bonus section of this post but suffice it to say, the more you can do and earlier, the faster you can build that nest egg.
I recommend a minimum of 15% invested into retirement accounts.
Ideally, I’d like you to do more like 20-50%, but we have to factor in college funding and getting that mortgage paid off as well. If you don’t have children, this is the step where you can dump more into retirement investing.

Step 6 - College Funding 

Let's have some conversations around college and college funding... 


In terms of funding, this is where the 529 Plan (a qualified tuition savings plan) comes into play.

There are many different vehicles to accomplish college funding and we’ll go more into depth on that in other material. More than anything though, I want to make sure you’re funding your child’s college from a place of wisdom and discernment.
I’ve seen too many parents throw money at “college” when it was not truly appreciated by the child either philosophically (entitlement) or functionally (slacked off, didn’t take it seriously and failed out) when that money could have been used more productively to ultimately benefit everyone involved.
Slow down, take your time. Ask yourself and your young adults lots of questions and seek counsel when needed.
The underlying theme of all of our debt elimination material is that we are constantly pushing pause.
We do this to create space for comparison and contrast between the prevailing thoughts of culture with true wisdom.
We want to have a space to think carefully about all of our financial decisions.
Many people have to create their own financial vehicles to get through college (including me). You're not a bad person if you hand more of that financial responsibility to your young adult.
Expanding your child's responsibility in financing their own college journey can be a very important character building experience. It was for me and has been for countless others.
I'm just suggesting you consider it, especially if you're in a situation where you "can't afford it".

Step 7 - Pay Off The Mortgage

 Can you imagine when this is totally paid off? I hope you can because it's possible...
This is the home stretch here. This is the place where you can really start to see the light at the end of the tunnel. Here, you're rabidly moving toward being COMPLETELY debt free. And, you're on a trajectory to financial independence in perpetuity.
There are a thousand ways to "skin the cat" here. I say do it as soon as it’s humanly possible without causing a divorce or a heart attack, especially since you probably got pretty close to that state during the debt snowball. :)
Just increase the amount you’re paying on your monthly mortgage payment. Just make sure that extra payment is going to the principle.
This will be the last debt you'll ever have to pay. FREEEEEEDOOOOOOOM!!!!!


Step 8 - Build Wealth, Serve, Be Ridiculously Generous And Prepare For "FI" (Financial Independence)

 This is where it becomes super fun. Still tons of work, but hopefully work that you LOVE to do and that serves the stew out of people who really need you...
You made it, congratulations! You’re completely debt free! You’re now part of about 15-25% of the American population that has zero debt. Take a moment and bask in the wonders of not having ANY payments.

This is where you take the time, effort, momentum and fruit of all of these steps and put more of it toward giving and serving.
Ideally, we do this all throughout the process, but this is where we can really throw accelerant on it.
“Live like no one else, so later you can live and give like no one else.”
That's probably my favorite Dave Ramsey-ism. And it's an especially beautiful reality for people with no debt. And, most importantly, it helps to remind us that money is not our god.
Money is useful, money can be very helpful, but it is not the most important thing in life.

So go, build wealth, serve and be ridiculously generous!

Bonus Step: The Influence Of Savings Rate On Early Retirement

Have you ever heard of someone having a savings rate above 50% of their take home pay? Well, I definitely have, so let's talk about it...
Below is a graph that shows how you can shorten your "working years" until "retirement" by increasing your savings rate. Notice I put "working years" in quotations.
I do this because many people look to retire from full time work so that they can attack passion projects. These may be the beloved activities they've had to put off for years because of full time work.
I'm not advocating early retirement as an excuse to be inanimate or lazy. I loathe laziness.
Rather, I'm advocating early retirement as a means to give you options to do more work you love. I also want you to be proactive for a potential future state where you can no longer able to work.
The following is a blogpost on The Motley Fool's website about this very subject. 
Obviously, "retirement" and the amount of money you need are unique to each situation.
I just wanted to plant this seed. And, just as a teaser, last year, my wife and I had a 73% savings rate. It's doable, believe me. It's certainly not easy at first, but it's doable.

Early Retirement Extreme

This book will get your fired up about increasing your savings rate. In it, Jacob illustrates how elevating your savings rate is not only doable but advisable for so many reasons.
I  highly recommend the book as a reference guide.
If you really want to "prime the pump" for learning how to live more frugally, so you can save, invest and retire early, this is your book.
Along the lines of savings rate and early retirement, here is a great book called "Early Retirement Extreme" by Jacob Lund Fisker.
That said, I will warn that there are some extreme suggestions. It's pretty amazing to see the lengths he and his wife went through to retire early.
And some of those lengths may not be palatable to most people (including me). That's okay, it's still a fantastic "how to" guide.
Regardless of that, it's a fantastic resource in that it gets the wheels turning. You'll start considering all the things you tend to spend money on without even thinking about it.
His story will encourage you to continue to think differently about your situation. For that reason alone I think it's a logical supplement to your following these 8 steps.

The 8 Steps To Obliterate Your Debt


Yes, I know I'm being a bit of a broken record but I want to make sure you have this “8 Steps” framework that ALL of our content is centered around. 

Maybe your number is bigger, maybe it’s smaller. Either way the principles are the same and I want you to have them.

0. Stop All Retirement Investing (Until Step 4)
2. Starter Emergency Fund of $1000
3. Eliminate Debts Smallest To Largest (a.k.a The Debt Snowball)
4. Full Emergency Fund of 3-6+ Months’ Expenses
5. Invest A Minimum of 15% Income Into Retirement Accounts (and increase savings rate to 50%+ if possible)
6. College Funding (if applicable)
7. Pay Off The Home Mortgage
8. Build Wealth, Serve, Be Ridiculously Generous and Prepare For "FI" (Financial Independence)
I’ve created a simple, easy to follow guide that you can use as your foundation as you navigate the absolute annihilation of your debt forever.


My Most Popular Posts

What To Do When You Can't Pay Your Bills - Dave Ramsey's "4 Walls"

18 Expenses You Should Obliterate From Your Budget

How To Start Budgeting When You're Terrible At It

8 Steps To Erase Debt - And Get Your Life Back

9 Things We Do To Save Money Like "The Millionaire Next Door"

7 Budgeting Mistakes We All Make (And How To Correct Them)

What Is Financial Coaching?

$43k Paid Off!

The 4 Most Popular Reasons People Seek Financial Coaching

When Is It Okay To Say "I Can't Afford It"

How To Get Your $1000 Emergency Fund - Fast!

12 Things We Don't Spend Money On

How To Be Financially Prepared For The Coming Recession

11 Irregular Expenses You Probably Forgot To Budget

4 Not-So-Obvious To Rewrite Your Budget Every Month

12 Things You Should Buy At The Dollar Store And 5 You Shouldn't


When You Need More Help

And again, if you’re looking for some resources to get started, you can download our free budgeting forms. Also, if you’re in a place where you’re ready to kick your debt in the teeth, here's the link to our free “8 Steps To Erase Debt” guide for you to use as your foundation.
To your freedom,

This page may contain affiliate links, which means Zero Debt Coach will receive a small percentage of any product or service you purchase using the links. You will pay the same price for the products and services, and your purchase will help keep this website up and running. I only recommend products and services I know and love on this site. Thank you so much for your support!

zerodebtcoach.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com. Read my full disclosure policy.

50% Complete

Two Step

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.