How We Used Dave Ramsey’s Seven Baby Steps to Get Out of Debt

How we used Dave Ramsey's baby steps to get out of debt - Life of Stones

You probably know you need to get out of debt. Maybe you’ve even tried once before (read: a dozen times before) and failed and are hesitant to try again.  We felt the same way until we found Dave Ramsey’s baby steps…these seven steps changed our lives in a big way and they can do the same for you!

In my opinion, when it comes to conquering your finances: the difference between success and failure is simply having a plan.

It honestly is that simple.

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Now, remember, simple and easy are two different things.  I always say that this process is simple but it is rarely easy and, in fact, is usually really hard work. But…BUT…if you’re up for the challenge then you will need a plan!

I want to share the plan we used.  I mentioned we follow Dave Ramsey’s baby steps. They are outlined in his books, which I highly recommend you read….but I would also like to share them in my own words and offer you some words of encouragement to you along the way!

How we used Dave Ramsey's baby steps to get out of debt - Life of Stones


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Baby Step 1 | Save a “starter” emergency fund of $1000

Step one is to quickly fund your starter emergency fund ASAP.   This is a very important step that should not be skipped!

I know you’re super pumped to start paying off your debt but chilllllll…we’ll get there.

This has to come first.

If you are single and have relatively low living expenses or are in high school/college you can probably get away with $500, otherwise, $1000 is the magic number.

Put this money either in an account where you are certain you will not touch it (because it is sacred)….or preferably in a box inside a fire-proof safe that is wrapped in barbed wire protected by a hangry drooling Doberman!



Baby Step 2 | Pay off all debt except for your mortgage

You will begin paying off your mortgage early in a later step so for now, we are just focusing on all other “non-mortgage” debts.

This will also include any rental properties you may own (that are not paid off) and any other outstanding debt except for car leases since they are a bit different.

Ideally, this step should take you less than two years. I know that sounds like forever, but it most definitely is not.  It’s only a season of life that will actually be quite small in the grand scheme of things but will serve to completely change the way you live and the way you handle money.

You will have to decide if two-ish years of sacrifice and hard work is worth a lifetime of financial freedom?   (hint: the answer is yes, it is, duh)



Baby Step 3 | Full emergency fund of 3-6 months of living expenses

[This is where it starts to get fun!  We are still currently in baby step 2 ourselves but expect to be starting step 3 *squeals with excitement* on January 1st!]

Congrats!  Once you begin this step you will be debt-free except for your mortgage (if you have one).  I know you are feeling extremely accomplished and life is good!

Now you will take all extra money in your budget PLUS all the money you were paying on debt and dump it in a separate account.

We plan on using our no-fee, high-interest Capital One 360 account to keep this fund separate from our other savings yet still access it easily.

We have had this account for many years and have them for our kids as well.  We like it because it earns way more than our savings account at our local bank and we can manage it online.

You want the equivalent of 3-6 months of living expenses in this fund in case of a major emergency, loss of income, etc. This will ensure that you can withstand the storm without taking out any debt and sliding backward!


“Pay off your debt first.  Freedom from debt is worth more than any amount you can ever earn.”

                    – Mark Cuban


Baby Step 4 | Save 15% of your income towards retirement

Seriously, how exciting is this?!?!  This is where you really start making your money work for you!

We will cover this later (like when I get there later) but basically, you will take a look at your income and take 15% off the top to invest in retirement savings.

This is enough to still capitalize on growth and the magic of compound interest to make a major impact on your retirement and since you are completely debt-free except for your mortgage at this point you still will have plenty left over each month for living expenses!

Check out Stephanie’s helpful post over at Healthy, Savvy & Wise where she breaks down the ins and outs of retirement plans!



Baby Step 5 | Begin college savings

If you haven’t yet begun to save for college for your kids, no worries.

We haven’t saved too much and I’m not that broken up about it.

The most important thing is to guide your child so they don’t take out an obnoxious amount of student loans and begin their adult life already in debt.

Let’s break the cycle.  You have the power to guide your children in a different direction!

You have changed your financial life and I feel it is our responsibility as parents to do our very best to be sure our children don’t make the same mistakes we did (do)!

There are different college saving plans out there. Dave Ramsey outlines this in great detail in this book…the important thing is to start saving what you can at this time.

And even more pressing – talk to your child about the importance of not taking out loans.  Start a dialogue about your personal experiences with student loan debt (if you have one) and together come up with a plan about how you will handle the cost of their secondary education then there is no surprise when the time comes!



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Baby Step 6 | Pay off your mortgage

This is pretty straightforward.  According to Dave Ramsey, by the time most people get to this step they have freed up enough money each month to allow them to pay off their mortgage in around seven years or less!

Take some time to imagine what your life would be like if you were completely debt-free INCLUDING your mortgage?  How would it feel to not owe one cent to anyone?  I can hardly wrap my head around it!



Baby Step 7 | Build wealth and give generously

This…you guys!  This is what it’s all about!  You have made it to the end of the list!  This is the fun part!  One of the greatest gifts is to be able to give to others.

Give often, give graciously and enjoy it!

There is nothing better than being able to freely help others. Especially when you don’t have to worry about not having enough left for yourself!

You’ve followed all the steps and you’ve set yourself up to live a fabulous life and sharing that with others will be incredibly fulfilling!

We have given more in the past six months than the past six years combined and I’m so grateful we have made it a priority in our life!


*Bonus step* 8 | Enjoy the beautiful, blessed, stress-free life you’ve built

Totally added this one on my own.  Because you’ve worked hard and you deserve it 🙂  I know these steps can seem daunting.

Please remember they are called “baby” steps for a reason.  Completing each step, in order, will adequately prepare you for the next.

This is not the time to work ahead.  One step at a time.  One foot in front of the other.  You can do this!  You owe it to yourself and to your family.

Be excited.  Be hopeful.  You are embarking on a life-changing journey!

Don’t forget to check out my new Begin to Budget Bundle to help you get started budgeting today!


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  1. I enjoyed reading your post. Im a single mom with rent a car pmt student loans and not the greatest income. Overwhelmed as to where to even start.

    1. Thanks, Connie! I hear you, it can be super overwhelming to start…honestly, my best advice is to just start! All the posts under my “money” tab can help you get started and you will just tweak each month. See what is working, see what is not and adjust! It might not be easy but just think…if you start today, where might you be in a few months??

  2. Hey Kristin, thanks for sharing this recap! My husband and I started financial peace a few years ago, and then life got crazy and we kind of forgot about it for awhile. We’re in Step 2 with a seemingly insurmountable amount of college debt, but I know there is hope! So exciting to hear you’re almost to Step 3.

  3. Great post!
    At this moment, I’m still trying to get that $1,000 emergency fund while paying off debt. No mortgage but I have a pretty hefty student loan still to pay off.

    I need to start taking some of these more seriously if I want to enjoy life a little more.

  4. Yes, being debt-free relieves so much pressure on your mind. I’m on stage 3. Having an emergency fund is really important. It’s what tides me over when fate turned my life upside down. The only silver lining I get (for the moment) from moving to back to Asia, my emergency fund lasts longer than it would have been in the U.S. Now, onward to the next step 🙂

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