How To Eliminate Debt Using Dave Ramsey Baby Steps

by Jul 24, 20210 comments

Have you heard about Dave Ramsey Baby Steps? If so, have you said to yourself “I will always be in debt.” before thinking about signing up for this program?

If you are like me, I have had these same thoughts as I have struggled with my personal finance for over 20 years.

In December 2017, I had over $200,000 in consumer debt and living paycheck to paycheck.

I was “sick and tired” of living this way so I decided to signing up for the Financial Peace University (FPU) created by Dave Ramsey in February 2018.

Once I completed FPU in April 2018, I was able to pay off $169,000 of debt within 20 months using Dave Ramsey’s Baby Steps.

Here are the baby steps and my recommendations on how you can eliminate your six-figure debt to achieve financial freedom.

What is Financial Peace University (FPU)?

Financial Peace University (FPU) is a nine-week financial coaching program that was created by Dave Ramsey. Dave Ramsey is a well-known financial expert and creator of the “Baby Steps” framework. This framework has taught over six million people how to get out of debt and build wealth for over 25 years.

The framework “Baby Steps”, includes seven steps that must be followed to get the desired outcome of becoming “debt-free”. Here’s each baby step and how you can use them within your financial journey.

Dave Ramsey Baby Step #1 – Save $1,000 For Your Emergency Fund

The first step when starting this plan is saving your first $1,000. You can find many ways to save this money through reducing your expenses or starting a new side hustle. Also, you can sign up for a savings challenge to find additional savings tips.

Shaquana’s Opinion

The quickest baby step to achieve is Baby Step#1. I already had some savings within my Emergency Fund before I started this plan. Once I started, I added any extra money and my bonus I received from my employer to achieve my $1,000 emergency fund.

Baby Step#2 – Pay Off Debt Using The Debt Snowball

Once you have saved your $1,000 emergency fund, you proceed to the second step in executing your Debt Snowball.

This method is one of the key milestones to achieve within the Baby Step framework. Dave Ramsey is known for saying “Debt is DUMB” and encourages his listeners to pay off debt.

The Debt Snowball method involves writing down all your outstanding debt from lowest to highest balance.

The overall goal is to keep you motivated to pay off the debt by allowing you some quick financial “wins” as you make progress.

Once you have completed this task, you would pay the minimum payments on all your debts. The next step is to add any extra money towards the smallest debt.

Once the smallest debt is paid, you would add this payment to the next highest debt balance. You would continue this method until all your debts are paid off in full.

Depending on your “debt elimination” timeframe, you can achieve completing this step in less than 12 months.

Shaquana’s Opinion

When I used the Debt Snowball method, it took about 3 months to see actual results. The first debt that I eliminated was a Capital One credit card that had a balance of $700. 

In order to make this method work, I made changes to some of my budget categories. This would include reducing my overall expenses. Also, I used any extra saving toward my debt elimination.

As I started to see progress, I made additional changes to my budget to aggressively attack my debt elimination plan.

This plan can be challenging to stay consistent; however, once you see your debt balance shrinking you don’t want to stop. 

Once you complete this step, you are officially “debt-free” excluding your home mortgage. The thought process here is to keep the focus on consumer debt that should take on average  3-5 years to complete.


Click here to get the FREE Six Figure Debt Elimination Playbook

Baby Step#3 – Save 3-6 Months Expenses In An Emergency Fund

So, you are now officially “debt-free” and have all this extra money in your bank account.

Are you excited yet? Once you reach this step, you should be able to stockpile cash fairly quickly within your bank account.

This step should take no longer than six months to achieve before you proceed to the next step.

Shaquana’s Opinion

I would suggest adding at least $100/month to your Emergency Fund as you progress through your Debt Snowball.

After starting my Debt Snowball, I put away $200 in my savings account for any unexpected emergencies.

Also, most of my emergencies seemed to cost more than $1,000 be prepared to avoid using credit cards.

Also, you should save a minimum of six months of expenses within our emergency fund. I would prefer at least 8 months for an unexpected job loss or medical emergency.

Depending on your saving habits, saving more money within your emergency fund helps you increase your confidence in managing money. 

Baby Step#4 – Invest 15% Of Your Income Into Retirement

Investing is another key milestone highlighted within Dave Ramsey’s Baby Steps framework.

Dave talks about investing strictly in mutual funds only as they provide greater diversification to the investor.

Also, he suggests working with individuals affiliated with his company called “SmartVestor Pro”.

SmartVester Pro are financial advisors that are able to discuss retirement planning and other investment-related questions. 

The goal at this step is to invest 15% of your income into your retirement accounts. The expectation is that you have already stopped investing in your retirement accounts to complete steps 1-3.

This includes your retirement account with your employer and any outside retirement accounts.

When completing this step, do not include any employer matching contributions to your 15% . Any employer contribution would be considered “extra money”.

As stated in the previous step, this should be easy to complete fairly quickly as you will have the extra money to invest within your retirement accounts.

Shaquana’s Opinion

I actually kept investing money within my retirement accounts while executing baby steps 1-3. I didn’t want to lose out on the opportunity to increase the value of my investment portfolio.

Making this personal choice did not hinder my progress towards completing my debt elimination goals along my financial journey.

Baby Step#5 – Save For Your Children’s College Fund

In Baby Step#5 where you start saving for your child’s college education.

Dave normally suggests using 529 plans or an Education Savings account for funding a child’s college education. If you don’t have any children, you can skip this step and proceed to step #6.

Shaquana’s Opinion

I actually think this step is great for parents or other individuals who are looking to help fund a child’s education.

We live in a society where having student loan debt is considered “normal”. Funding your children’s college education would drastically reduce the amount of student loan debt for future college graduates.

Also, I like that this baby step occurs after you achieved financial freedom as you can focus on adding as much money available to fully fund your child’s college education.

Baby Step#6- Pay Off Your Home

The longest baby step to complete is definitely baby step #6 as you are paying off your mortgage. According to Dave Ramsey, the average person that follows the baby steps framework can expect their home mortgage to be paid off in 8 years.

This is accomplished by paying extra towards the principal balance each month and converting your mortgage to a 15-year term.

Shaquana’s Opinion

I definitely agree with paying off the mortgage early to have 100% ownership and equity of your home.

Also, it eliminates the risks of the mortgage lender taking away your home if you have any unexpected financial challenges. Also, you have secured some wealth that can be passed on to future generations.

Baby Step#7- Build Wealth And Give

The final step is having the ability to build wealth and give generously. Most people that complete the baby steps strive to get to this baby step so that they can help charitable organizations. 

Shaquana’s Opinion

The more generous you are with your money, the more you can invest in resources and people. When you are able to give with no debt and an abundance of money,  you provide unlimited opportunities for other people that are less fortunate.

Pros And Cons of Dave Ramsey’s Baby Steps


  1. The baby step framework is simple to follow
  2. You will see results quickly if you follow each step
  3. The investment in FPU is relatively inexpensive
  4. FPU provides a lot of resources and financial coaches to give you support along your financial journey


  1. Results will vary from each participant that follows the baby step framework
  2. It is recommended to stop investing in your retirement accounts
  3. In order to get immediate results, you must be willing to drastically reduce some of your expenses (i.e. dining out, vacation)
  4. You are encouraged to cut up and cancel all your credit cards


Overall, Dave Ramsey’s Baby Step framework is effective in getting you out of debt and helping you to achieve financial independence and build wealth.

Along the way, you will learn that you have to make certain sacrifices in order to see results in eliminating debt or increasing your overall savings.

However, if you follow this plan and make the necessary changes, you will be in a better position than you were in before you enrolled in FPU and eliminated your six-figure debt.

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