Most people discover Dave Ramsey when they are already in debt and looking for a way out. I discovered him at 16 in a business math class, before I had ever taken a loan, before I had a credit card, before I had made a single real financial mistake.
It turns out that is a powerful way to learn something: before you need it.
Years later, I actually followed every step. Not hypothetically. Not partially. I worked through all of them during my 20s while married, driving a tractor trailer for UPS and building toward a net worth of $250,000. The steps worked. I ended up with two paid-off cars, an $816 monthly mortgage, no other debt, 401k contributions, Roth IRA contributions, 529 plans for both daughters, and an advisor at Prudential helping me manage the rest.
Then I got divorced. By the time it was finalized, the total I had paid out came to $130,000. The Ramsey foundation is the reason I had anything to split. I want to be honest about that too.
Here is what each step actually looked like for me.
Why I Took This in High School
The class was called business math. It was an elective, and one of the units was Financial Peace University – Dave Ramsey’s full course. We did the worksheets. We talked through the baby steps. We practiced budgeting on paper.
I was 16. I already had $5,000 in savings because my dad had been teaching me the same principles since I was old enough to receive an allowance. Every $20 I got as a kid was split: $8 to savings, $2 to giving, $10 to spend. My dad had also taken me to Edward Jones as a teenager to open a mutual fund account. So when I got to Ramsey’s framework in school, it felt like confirmation of what I had already been living.
The difference between me and most adults who discover Ramsey is that I had not yet formed any bad habits. I had no debt. I had no credit card. I had savings and a framework. The baby steps were not about fixing anything for me – they were about building from a clean foundation.
Financial Peace University is best absorbed before you make mistakes, not after. If you have kids, the most valuable thing you can do is get them the framework early – not to scare them about money, but to give them a map before they need one.
I want to be upfront: I did not follow the steps in strict order during high school. I followed the principles my dad taught me. It was when I was in my 20s, married, earning a real income, that I actually worked through every step deliberately.
Baby Step 1: $1,000 Starter Emergency Fund
Save $1,000 as fast as possible
This is your starter emergency fund. Not your full emergency fund – just enough to cover a minor crisis without going into debt.
By the time I was working full time at UPS and serious about implementing the baby steps, I already had more than $1,000 saved. Step 1 was basically already done. I had been saving since I was a kid.
But I understand why this step exists and who it is for. If you are starting from zero – which most people are when they find Ramsey – $1,000 feels like a lot. It is meant to feel achievable. The point is to create a small buffer so that when your car breaks down or your water heater goes out, you do not reach for a credit card.
If you do not have $1,000 saved right now, this is your only job. Sell something. Pick up extra shifts. Cut everything optional for 60 days. Just get there. Once you have it, it changes how you feel about money in a way that is hard to explain until you experience it. A small cushion is the difference between a crisis and an inconvenience.
Baby Step 2: Pay Off All Debt
Pay off all debt using the debt snowball
List every debt smallest to largest. Minimum payments on everything. Attack the smallest one first. When it is gone, roll that payment into the next one.
By my early 20s, my only debt was the auto loan on the 2008 BMW 325i I had bought from PSECU, my local credit union – $220 a month. When I got serious about the steps, I attacked that loan first and got it done.
The debt snowball is simple. Some people argue the debt avalanche – paying off highest interest rate first – is mathematically superior. Ramsey’s answer to that is: if math was the point, you would not have debt. The snowball works because of momentum. You kill the small one fast, feel the win, and use that energy to hit the next one harder.
I used the EveryDollar app to budget during this period. Every dollar had a job. Income came in, got assigned on the screen before it could disappear anywhere unplanned. The app is free for the basic version and does what you need it to do. I logged every purchase. Gas. Groceries. Everything.
The EveryDollar app makes the zero-based budget tangible. Every dollar in gets assigned a category before it can be spent on something random. It is not complicated – it is just intentional. That intentionality is where the power comes from.
Once the BMW was paid off, I had two paid-off cars and zero non-mortgage debt. That is when the savings rate started climbing fast.
Baby Step 3: Full Emergency Fund
Save 3-6 months of expenses
This is your real emergency fund – the one that covers job loss, injury, or a genuine crisis. Keep it in a savings account you can access quickly.
Ramsey says 3 to 6 months. I went to 6 months and I did not have to think hard about that decision.
At the time, I was the sole provider. My ex-wife did not work outside the home. If I lost my job or got hurt, our income would have gone to zero overnight. There was no backup income, no second salary to lean on. Six months of expenses in liquid savings was not paranoia – it was the only responsible answer given our situation.
If you have a dual-income household, 3 months might be enough cushion. If you are the only earner, go to 6. The math is simple: the fewer income sources you have, the bigger your buffer needs to be.
Baby Step 4: Invest 15 Percent
Invest 15% of your household income into retirement
Start with your 401k up to any employer match, then max a Roth IRA, then go back and contribute more to the 401k.
This is where I put most of my intentional energy during the building years. I was contributing to my UPS 401k, and I had a Roth IRA at Fidelity invested in index funds. I started with Fidelity’s robo-advisor – it was fine, it got the money working, it did not require me to know much. But I wanted more than a robo-advisor at some point.
I found a financial advisor at Prudential. I sat down with him, went through my situation, and he helped me build a more intentional allocation across my retirement accounts. Having a human advisor who knows your full picture is different from a robo-advisor picking funds automatically. That conversation shaped how we invested.
Index funds were my core vehicle in tax-advantaged accounts during those years. Low cost. Diversified. Simple. Ramsey recommends actively managed mutual funds – specifically growth stock mutual funds. I respect him on most things but I leaned toward index funds based on the data. Cost matters. Over decades, fees compound just like returns do.
Today my approach has evolved. Inside my 401k, I now hold Bitcoin ETFs – specifically IBIT and FBTC – rather than traditional index funds. I am only able to do that because my 401k offers a self-directed brokerage window. Not all plans do – check yours. Roth IRAs give you a lot more flexibility on investment options from the start.
I also think the traditional 60% stocks, 40% bonds portfolio is dead. I wrote a full breakdown of why I do not own bonds. Bonds are government promises. They do not keep up with dollar debasement. Every dollar printed erodes the purchasing power of the bonds you hold. I think replacing that 40% with Bitcoin is worth serious consideration for people who understand what Bitcoin actually is.
At 15% invested, my retirement was building on autopilot while I focused on the house fund. That is the point of the steps – each one builds a foundation so the next one has something solid to sit on. By the time I was deep into Step 4, the retirement accounts were growing without requiring daily attention.
Baby Steps 5, 6, and 7
Save for your children’s college
Ramsey recommends 529 plans or Education Savings Accounts (ESAs).
Pay off your home early
Any extra money goes toward extra mortgage payments.
Build wealth and give
Once the house is paid off, the wealth-building accelerates. This is the endgame.
Our first daughter was born in 2018. I opened a 529 plan for her right away. When our second daughter was born in 2020, I opened one for her too. Two 529s, both funded, both growing. Ramsey is right about the 529 – the tax-advantaged growth over 18 years is real and meaningful.
I do not contribute to the 529s right now. After the divorce, with child support, rebuilt savings goals, a new family, and a different financial picture, the 529s have taken a back seat. That is honest. That is where things are. I am not going to pretend the money is going somewhere it is not.
On Step 6 – paying off the home early – I was actively saving for a family home, not paying down the condo early. The plan was to save for the down payment, buy the bigger house, then attack that mortgage. The divorce interrupted that sequence.
Right now, buying a home is not my immediate priority. My focus is on building my Bitcoin position first. When the time comes, I want to buy a home without having to liquidate assets I believe in. That decision is still in front of me.
Step 7 – build wealth and give – is the destination. I believe in it. My path to it has just taken a different route than Ramsey’s map shows.
Where I Agree and Where I Have Gone Further
Let me be direct about where I stand on Dave Ramsey.
The baby steps foundation works. I am living proof. Without those steps – the budget discipline, the debt payoff, the emergency fund, the 15% invested – I would not have had $250,000 to split in the first place. The divorce hurt. The Ramsey foundation is the reason the pain had a number instead of being a catastrophe.
I also believe in his debt messaging completely. Debt is a risk. Consumer debt – credit cards, car loans for cars you cannot afford, personal loans for wants – is money working against you. Ramsey is right about all of that.
Where I have moved past Ramsey is on investing. He recommends actively managed mutual funds. I lean toward index funds because of cost. That is a small disagreement but it compounds over time.
The bigger split is on Bitcoin. Ramsey is vocally anti-Bitcoin. I understand where he is coming from – he has seen people blow up their finances chasing speculative assets, and he is right to warn people about speculation. But I believe he is wrong about what Bitcoin actually is.
Bitcoin is not a speculative gamble to me. It is a response to a structural problem with the dollar – the fact that purchasing power is eroded by design, slowly and continuously, by a system I have no say in. Ramsey’s advice is built for a world where the dollar is sound. I do not think that world exists anymore.
Ramsey’s framework will get you out of debt and build a solid financial foundation. It worked for me. But investing only in traditional assets inside a dollar-denominated system means all your wealth is tied to the dollar’s purchasing power. That is a risk Ramsey does not acknowledge. Bitcoin is how I manage that risk for my portion of long-term savings.
The Ramsey steps are a starting point. A very good starting point. Get your emergency fund in place. Kill your debt. Invest 15%. Those things matter and they work. Once you have done them, the next question is: where do you put the rest?
My answer to that question has evolved since the divorce. The steps got me to $250,000. Something different is getting me to what comes next.
Frequently Asked Questions
What are Dave Ramsey’s 7 Baby Steps?
Baby Step 1: Save a 1,000 dollar starter emergency fund. Step 2: Pay off all debt except mortgage using the debt snowball. Step 3: Build a full 3-6 month emergency fund. Step 4: Invest 15 percent of income into retirement. Step 5: Save for kids college. Step 6: Pay off the mortgage early. Step 7: Build wealth and give generously.
Does the debt snowball actually work?
Yes – I used it and it worked. Pay minimums on all debts and throw everything extra at the smallest balance first. Mathematically the debt avalanche saves more money. But the snowball works because quick wins keep you motivated. Personal finance is more behavioral than mathematical. The best method is the one you stick with.
Where do you disagree with Dave Ramsey?
Ramsey is anti-Bitcoin and I disagree strongly. He views it as speculation. I view it as the hardest money ever created and a direct response to government currency debasement. His framework for getting out of debt is excellent. His investment philosophy favoring actively managed mutual funds with high fees is where I part ways – low-cost index funds outperform most active managers over time.
Should I follow Dave Ramsey’s Baby Steps?
Steps 1 through 3 – emergency fund and debt payoff – are sound and changed a lot of lives including mine. I follow the general order of operations. Where I diverge is on Bitcoin and preferring index funds over Ramsey recommended actively managed mutual funds. Use the framework, think for yourself on the details.