6 Steps to Financial Freedom
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Baby Steps By Dave Ramsey
Thinking of trying the baby steps by Dave Ramsey?
Today, I share something very personal. My husband’s and my financial crisis and journey to financial freedom.
I know we are not alone when it comes to our past life of “keeping up with the Joneses” and getting in way over our heads with debt.
If our story can help just one other person or couple find their way out of debt and into financial peace, then it’s worth the vulnerability!
If you’re reading this, you may have heard that the baby steps by Dave Ramsey are a great way to get out of debt and enter the world of financial peace.
But there is so much conflicting information about the baby steps online. Some people say they work and others say they don’t.
We want to share our experience with the 7 baby steps because we think it will help clear up some confusion for other people who are trying them right now or considering them in the future.
In this post, I’ll explain what happened when my husband and I tried Dave Ramsey’s 7 Baby Steps ourselves.
NOTE: I was in no way compensated by Dave Ramsey or any of his affiliates/team members to write this post. This is about me and my husband’s unfiltered experience with the baby steps by Dave Ramsey.
What are the 7 Baby Steps by Dave Ramsey
To start, there are 7 baby steps by Dave Ramsey:
- Save $1,000 (in a beginner emergency fund)
- Pay off all debt (except for the house)
- Save 3-6 months (of expenses for emergencies)
- Invest 15% (of your income for retirement)
- Save for College (for your children)
- Pay Off House
- Build Wealth & Give
Our Introduction to the Baby Steps by Dave Ramsey
Throw back to 2018. I was a couple of years into owning my own business and between my husband and I, we were pulling in a very healthy income.
We were also really good at spending all that income (and more!).
You name a loan or a line of credit, we had it. Car loan, credit card debt, student loan, second mortgage, 401k loan. Even the business held high line of credit balances at times.
Our total non-mortgage debt was over $100,000. The sad part is, we don’t even know how it got that high.
But hey, at least we had all the fancy new cars and a house in a highly coveted neighborhood to show for it, right? Spoiler alert: No, the answer is no…
Managing the debt was never an issue. Until we were hit with any kind of bill that was unplanned. Insert car repairs, medical bills, etc….
It got to a point that we had so many payments, we could no longer afford to save for unexpected bills. It seemed like everything was going on a credit card.
The high debt was causing friction and tension in our (generally happy and healthy) marriage. The stress was enhanced because we could not get on the same page with how to mitigate our situation.
Starting the Baby Steps by Dave Ramsey
I’ll admit, I was the one who was reluctant to try the baby steps by Dave Ramsey.
I figured it was just another scheme and way for someone to take our money (sorry, Dave! I see that is simply not true now). But my husband was a fan and insisted we give it a shot.
So, I did some research on the baby steps by Dave Ramsey.
While he does have very strict rules on how you spend your money in order to get out of debt quickly, I learned there are plenty of success stories where people were able to get their lives back together with his help.
As skeptical as I was at first, I decided to “play along” and we took the first step and signed up for Financial Peace University.
Our Financial Peace University Experience
We started FPU in September of 2018 and signed up to attend the classes in person.
We met with other individuals and couples, along with our class leader, once per week for several weeks.
Each week was dedicated to one of the steps. We learned more of the “why” behind each step and were given specific action steps to complete for the week.
The leader of the class was working the steps by Dave Ramsey. I remember him telling us he and his wife had paid off over $80,000 in less than 2 years simply by following the steps.
While that gave me hope, I was still not all the way bought in.
But every week, my husband and I showed up and engaged with the group.
The most important thing my husband and I did during this time (and still do today)? We DID THE WORK.
We followed the steps to a T. Yes, we made mistakes, got into tiffs over silly things and were not perfect (that is all to be expected), but we always got right back on track.
Our Results Three Years Later
It’s been almost three years to date since we’ve been working the baby steps by Dave Ramsey. We are currently on baby step number four and working toward achieving baby step 6. We don’t have children, so baby step 5 does not apply to us.
In three years, we:
- Paid off ALL non-mortgage debt (yes, all $100k+). This was done in the first two years.
- Own every vehicle/toy out right, including a pull camper, motorhome, two vehicles, a raft and a cargo trailer
- No longer carry credit card balances
- Built a fully funded six month emergency savings account
- Are ready for next year’s vacation – fully saved up and ready to party!
- Have a mortgage payment that is less than 12% of our monthly income
- Pay cash for our home renovations (good-bye equity loans!)
- Are on track to have a mortgage balance of $75k or less by end of next year (goal is zero, but that may or may not happen quite yet :))
Note: We live in Colorado, an increasingly expensive state to live in. I only say this because I don’t want anyone using the “oh, I bet the average home value is super low where they live” excuse that gets them thinking “this plan won’t work for me/us” because we live in an area where housing is downright unruly.
Just know that the steps by Dave Ramsey CAN work for you, no matter where you live and what your financial situation is. But they only work if you work them!
Want to know the ironic part of our journey? We achieved many of these goals on a lower income than what we had when we started the baby steps. Discipline is key to success.
Budgeting: The Single Most Important Part
The number one most important piece of FPU is creating a monthly budget.
Many think budgets are for people who are on lower incomes (ummmm, wrong!) or only for people who have a hard time managing their finances (wrong again!).
While a budget could certainly help in either of those scenarios, a budget is simply a way for you to make your money work FOR you rather than against you. It has nothing to do with level of income.
I know people who make minimum wage and those that make well over a half million dollars who swear by creating a budget alike.
With a budget, YOU tell your money where it’s going, not the other way around.
For the first couple of years, I used the printable budget sheets from the Dave Ramsey website. They worked well but were a bit time consuming.
So, I created my own electronic version that adheres to all of Dave’s steps. A budget that used to take me 30+ minutes to create now takes me about 5 minutes.
Point being: don’t let the process or “inconvenience” of something stand in your way of financial freedom. Create your own solutions and get to following the baby steps!
Tips for Making the Steps by Dave Ramsey Work for You
To see success from the steps by Dave Ramsey, it’s important to change your mindset and beliefs around money. There were several key attributes that helped us stay on track. You must….
- Be on the same page as your spouse
- Hate debt….and I mean HATE
- Make (temporary) sacrifices
- Release the desire to keep up with the Joneses
- Work the baby steps
- Connect with likeminded people
Be on the same page as your spouse
The first must do on the list is critical. If you are working the baby steps alongside a partner, life becomes much easier when you are on the same team.
Remember that I was the reluctant one. I was the “stubborn” one who didn’t believe these steps could work for us. I had every excuse in the book why this “wouldn’t” work for us.
But at the end of the day, we were facing a financial mess. I did not have a different/better plan so to keep doing the same thing over and over and expect different results would be the definition of insanity.
Oftentimes, money conflicts in marriage are due to two individuals that come to the marriage with their own money beliefs. You may or may not be fully aware of your money beliefs and how they mesh or contradict your spouse’s money belief system.
If the two of you simply cannot get on the same page, use other resources like couples counseling to help with communication and coming to a joint resolution.
Or heck, just sign up for FPU and promise each other you will both go in with an open mindset. It’s likely much cheaper than seeking counseling and you may just find common ground while attending the classes.
Hate debt….and I mean HATE
Dave says this often. You must learn to hate debt. All kinds. No matter what. Hate it so you can get rid of it. And never get into it again.
I used to have a mindset of “it’s fine to have a car payment because everyone has one” (wrong). Or, “a car payment means I will have a reliable car” (wrong).
Releasing these unhelpful and unhealthy money beliefs helped me see that even the most common types of loans, like a car loan, is unnecessary. I learned to HATE all debt.
Yes, you need to even hate those leased car payments. Dave talks about these in the program as well.
Make (temporary) sacrifices
You will need to make sacrifices. Know that many of these sacrifices are temporary. For us, the biggest sacrifice was eliminating unnecessary expenses like going to sit down restaurants.
On average, we spent $120 a pop at these places for the two of us. Multiply that by a handful of times per month and we have the equivalent of a decent sized car payment going to restaurants.
In the beginning, we eliminated all eating out. We came up with creative date night ideas that had minimal cost.
Today, we have brought back date nights that include eating out because we can easily budget them in.
Release the desire to keep up with the Joneses
Neighbor got a new RV, you love it, and now you think you should get one? Don’t. Well, at least not in the early stages and if you can’t pay cash for it.
A “keeping up with the Joneses” mindset is the exact mindset that will get you in loads of financial trouble.
Being stuck in this mindset can lead to unhealthy financial decisions. If it is something you can not shake, explore reasons why this mindset exists in your belief system.
Do you have a fear of feeling “less than” if you do not have all the things? Perhaps you tie a bit too much internal worth or value to material possessions. A desire for perfection may also play a role.
Once you identify the driver, you can start to reform how you think and feel about money and material objects.
Work the baby steps
The baby steps are rules. They need to become part items of your daily routine in order that they can be effective.
The baby step plan is designed so that over time, with baby steps, you will eliminate unnecessary debt and start saving for the future.
You will also change your perception about money, which I think is the most valuable insight you will gain.
Connect with likeminded people
If you are truly working the steps, expect to be labeled “weird”. Your friends and family may not understand why you are doing this (unless they are Dave people too!).
The best thing you can do to keep motivation high is connect with other people that are following the baby steps. Check out Facebook groups if you can’t find anything local.
This support system will help you and celebrate with you when your friends and family can’t, simply because they don’t get it.
What it Means to Have Financial Peace
Working the baby steps by Dave Ramsey has been life changing.
It has not only helped our financial situation overall, it has also helped our marriage become even stronger.
Knowing that my husband and I are on the same page with finances has allowed us to become a better team in everyday life.
It has also enabled us to help others and give more for our community than we ever thought possible in just three years. That is true wealth.
Please know that I do not share any of this to brag or boast. I share our experience in hopes to inspire others that may find themselves in a similar situation we were in, to take action. To know that there IS hope and you CAN do this.
If you find yourself in a stressful financial situation, know that I see you. I understand what you’re going through. There is a way out. You can turn your financial situation around.
Baby Steps By Dave Ramsey Conclusion
If you know how I got into owning my own business, you likely also know that I worked at a Fortune 500 financial institution for over 14 years.
Working at a bank meant selling all the loans, lines and lending opportunities available. Funny how my mindset has changed over the years.
In my current day situations, I wouldn’t even think to get an auto loan. We buy cars with cash now. And if we don’t have the cash required, we don’t get that car. Period.
Our new lifestyle feels like true freedom. We are usually the “weird” ones in our network of acquaintances, family and friends. And we’re OK with that.
If being weird means that we feel liberated, empowered and FREE in our financial situation, we’ll proudly wear that label.
In short, yes, Dave Ramsey’s baby steps make financial peace not only obtainable but achievable. You do the baby steps (ie: DO THE WORK) and you will gain financial peace.
Learn more about FPU here.
Until next time,
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