Total Money Makeover by Dave Ramsey (7 baby steps)

Imagine having full control over your finances and having a simple plan to turn around your financial life no matter how bad it might seem at the moment.

Well, today we’re talking about the seven-step plan in Dave Ramsey’s book total money makeover.

How to win with money in 7 baby steps?

To turn around damaging finances and create a financially strong life. These steps will ensure that you understand how to take control of debt, have a strategy to save money, take advantage of tax codes many people don’t know about but anyone can use and begin building long-term wealth.

See according to over 189 million Americans hold credit cards and each household has an average of 8398 dollars in credit card debt. This puts the national credit card debt in the US at over 1 trillion dollars.

This means that Americans owe over 1 trillion dollars in credit cards alone. This does not include mortgages car loans student debt or any other forms of debt. Now you’re one of those people with a big amount of credit card debt don’t worry we’re going to be working on that, but before we get started on the practical steps we must first take care of the foundation of the problem.

Find Out–  Where we went wrong

We must understand what we did that got us here in the first place even if that means going over all of our bank statements to understand where we went wrong what mistakes we made and where we spent our money.

For some people, this mistake was living a life that they could not afford and buying things on credit. While for others it could be an unexpected emergency that created financial stress in their life regardless of the cause the foundation of turning your financial life around is to take 100responsibility for your money and the mistakes made. Not being prepared for unexpected emergencies is also a mistake.

As Ramsay says


 You can’t address a problem if you don’t first acknowledge It

See the real building block of wealth is your income. The key to wealth is to free up your income so you can invest and grow it.

Now that we acknowledge accept and take full responsibility for our finances, it’s time to move on to the practical steps.

Also Read – The 7 BEST Side Hustles That Pay $50-$200/Hour

Baby step number one

1. Create a small emergency fund

Imagine that you decided you’re going to be a responsible adult and you’re going to use your spare money after your monthly expenses to invest and pay off your credit card debt. Everything is going great for a few months when all of a sudden your car breaks down and now you have to spend an extra $700 to get your car fixed. So you can go to work this means that you will have to put this $700 expense back into your credit card sending you back on your plan to pay your debts. 

What’s worse is that now you have to pay interest on this new $700 debt.

Ramsay says that the very first step is to set up a $1 000 mini emergency fund. This will help you not abandon your plan when the next crisis happens. So before saving investing or reducing debt we must first create a mini emergency savings account.

Baby step number two

2. Start your debt snowball

What is a debt snowball you might ask?

Well, the debt snowball is a debt reduction strategy where you organize and pay off your debts from smallest to largest. Just like making a real snowball, you start with a small compact snowball and you roll it until it gets big.

This concept is used to reduce debt with a dead snowball. You organize your debts from smallest to largest except your mortgage regardless of interest rates and pay the minimum payment on all of them except for the smallest account.

Starting with the smallest debt first allows you to get rid of the monthly payment quicker. Freeing up more of your income to pay off the next debt which quickly frees up more money to move on to the next one and the next.

If we start with the biggest one first it might take a while before we free up some income to help pay other debts. 

A good idea in this step is to focus on reducing your expenses to the bare minimum and do everything we can to add extra money to your income.

  • Whether that is to sell off things that you already have in your house, 
  • starting a side hustle, 
  • picking up extra shifts, 
  • or getting a part-time job on the side.

 This will earn you more money that will help you pay down your debts faster. 

For example–  let’s say that you currently have these debts.

  • you have a medical bill for five hundred fifty dollars which you normally pay around fifty dollars per Month.
  • a credit card with two thousand five hundred dollars with a minimum payment of sixty three dollars.
  • a car loan of seven thousand dollars with a payment of 135 dollars a month.
  • student loans of $10 000 with a payment of 96 dollars per month.

Now that we organize your debts from smallest to biggest. You reduced your expenses to the bare minimum and took a side job you now have an extra 500 of income every month.

How does the debt snowball method work?

So according to the snowball method, you will put these 500 and your normal monthly payment on the lowest debt that you have.

So we put the 500 extra cash plus the minimum payment that you normally pay to pay this first debt in the first month.

On your next debt, you have a minimum payment of 63 dollars per Month.

Now you take the extra 550 that you freed up from paying your first debt and put it towards your next debt.

Now you’re paying six hundred and thirteen dollars per month to eliminate your credit card debt. And in about four months you will be credit card debt free.

Now you add the 613 dollars to your 135-dollar car payment which adds up to 748 dollars per month to your car payment. In 10 months you will own your car outright.

Now there’s only one more debt to tackle your student loan. In this stage, you add all of the money you freed up by paying off the smaller debts to allocate to the biggest debt.

So we allocate 748 dollars we freed up to your normal 96 Minimum Payment. Making your payment of 844 dollars per month means that you will pay your student debt in the next 12 months.

This means that with hard work and sacrifice you have paid off just over 20 thousand dollars in debt in 27 months b allocating only the original 500 a month. Of course, if you can allocate more of your income to pay debts the faster you will be able to pay off your debts using the snowball method.

So being able to manage your money correctly is a very important step.

Now you could use long spreadsheets to keep track of your expenses and organize your finances, but a great tool that i found that can help you keep track of your finances is the all-in-one financial platform True bill.

Baby step number three

3. Complete your emergency fund

Now that you are in debt free it is time to create financial stability. You have an extra 844 dollars per month that you freed up by paying off your debt. It is time to complete your emergency fund.

Dave Ramsey suggests–  putting away three to six months of living expenses to protect yourself from any emergency that comes up. If you lost your income now you have three to six months to find another source of income without taking a major financial setback.

Baby step number four

 4. Set aside for retirement

Now that you have a larger leftover income after you paid off all of your non-mortgage debt it is time to build your retirement account.

Dave Ramsey says–  to put away 15 of your income into a retirement account starting with an employer matching fund.  This simply means that your employer will match the amount of money you put into your retirement account up to a certain amount/. In other words, free money for retirement after that Ramsay recommends investing in a Roth IRA to continue investing outside of your 401k, and the remainder of the 15% can be invested into other investments that make the most sense to you like mutual funds or index funds.

Also read — 9 Top Ways To Achieve Financial Freedom.

Baby step number five

5. Save up for college

Once you have a system in place where you’re putting 155 of your income into your retirement account if you have children you can begin saving for college.

You can use an education savings account in a 529 plan to save for your kid’s higher education. This account is also an investment fund. The great part is that any earnings in the 529 plan are tax-free. So once your kid uses the money to pay for college he or she won’t be taxed.

Now if you don’t have kids then you could skip this step and put the money into the next step.

Baby step number six

6. Pay off your mortgage

 By this phase, you are already financially fit and have good money habits.

 now it is time to get ultra fit. The next step is to pay off one of your biggest debts your mortgage. After you will be completely debt free now a great way to do this is to pay off your normal mortgage where some of the money goes to your loan and some of it goes to pay interest.

But since we have money that has been freed up from paying our previous debts we can use this money to write a separate check that will only go to your home’s principal.

 in other words, this additional check will go to pay your loan and not the interest helping you pay your mortgage faster.

Once you’re in debt free you will be in a prime position for the next step.

Baby step number seven

7. Build wealth

At this point you are in control of your finances you are in debt free and you are prepared for any emergency and you are systematically saving and investing for your future. This is when you can focus on developing true wealth. You become truly financially free when the returns of your investments are higher than your monthly expenses.

Also Read – The Intelligent Investor

Your time is your own you can do as you please whether it is to continue working on building your business and achieving massive wealth or just take a break.

At this point, you have financial stability.

 By following these simple steps you would be far ahead of the average American and you’ll have more peace of mind.

In the comments below let me know what are your thoughts on this book what you agree with what you disagree with and what ideas stuck out to you from this Article I am always interested in what you have to say. 

Summary of what are the baby steps in total money makeover?

So these are the 7 financial baby steps.

1. Create a small emergency fund

2. Start your debt snowball

3. Complete your emergency fund

4. Set aside for retirement

5. Save up for college

6. Pay off your mortgage

7. Build wealth


How many baby steps are in Dave Ramsey’s financial plan?

There are 7 financial baby steps in Dave Ramsey’s financial plan.

How long does it take to complete Dave Ramsey Baby Steps?

Ramsey says Gradual step 1 shouldn’t require over 1 month with legitimate planning, scaling back spending, getting additional hours or side positions, and selling things you never again need nor use. Obviously, this can differ in view of your singular pay and circumstance

How much is Dave Ramsey worth?

Dave Ramsey worth over 200 Millions dollars.

Is Dave Ramsey against credit cards?

I previously found out about Dave Ramsey, an individual budget symbol, in the wake of moving on from school and getting keen on cash. Ramsey goes against the utilization of Visas or credit cards— he says they make it excessively simple to burn through cash and get into a devastating obligation.

How much money do I need to retire?

Instructions to Work out The amount You’ll Have To retire. A typical guideline is that if you have any desire to leave the labor force at 60, you will require multiple times the sum you have determined for your yearly after-charge retirement costs. So, if you gauge $60,000 each year, you will require $900,000.

How much money does Dave Ramsey make a year?

Dave Ramsey’s estimated revenue/income/salary is estimated around $15 Million per year.

What does Dave Ramsey say?

“We purchase things we don’t require with cash we don’t need to intrigue individuals we could do without.” “Assuming you will live like no other person, later you can live like no other person.”

How do I start a Dave Ramsey budget?

Stage 1: Record your absolute pay. This is your all out salary (after charge) for both you and, assuming you’re hitched, your life partner. …
Stage 2: Rundown your costs. Ponder your normal bills (contract, power, and so forth) …
Stage 3: Take away costs from pay to approach zero. …
Stage 4: Track your spending.

What is Dave Ramsey 25% rule?

Dave Ramsey has advised radio audience members to keep the 25% guideline while purchasing a house — recollect, that implies never purchasing a house with a regularly scheduled installment that is over 25% of your month to month salary on a 15-year fixed-rate customary home loan.

Dave Ramsey baby steps pdf

Dave Ramsey baby step 4

Dave Ramsey baby steps review

Dave Ramsey baby steps for singles

1 thought on “Total Money Makeover by Dave Ramsey (7 baby steps)”

Leave a Comment