The Truth About Dave Ramsey's 7 Baby Steps

WARNING these steps work! And will hold you back! Dave Ramsey's baby steps have been followed by tens of thousands of people. but are they the most efficient way to reach financial independence and retire early? As a financial minimalist and someone who left their day job at 24. I feel that if i had followed his advice i would have to have worked for a minimalism of 10 years longer then i did at my day job, so while alot of his advice is good if your goal to is to reach financial independence and early retirement then dont follow these steps.

Subscribe to support me coffee addiction ☕️

Some videos you might like
5 Things You NEED To Declutter TODAY (Minimalism Series)

10 Common Things NOT Worth The Money | Frugal Living & Minimalism

20 60-Second HABITS For A MINIMALIST HOME

Follow me on
Snapchat

#creatornow

[smonty]

Baby Step graduate here. We love Dave and his “baby steps” It worked VERY well for us. Now that all our debt is gone, we are acquiring wealth far far faster. Our wealth should double about every 7 years now. The freedom and security we feel being completely debt free was more important to us. To each his own.

[cattmahal]

Because of Dave’s rants I paid off 150k and bought my own house. Did it in 3 years.

[bestill]

What separates Dave from the rest of these financial “gurus” is that he focuses with changes in people’s behavior. Financial problems are not always mathematical problems, in fact most financial problems are not. I’ve followed Dave teaching it’s boring but it’s working.

[LillyAnnHouston]

Dave Ramsey was a good start for us. We tweaked it, especially step 1. We saved $3, 000. Then we added step 1a. Save one month worth of income before starting our debt snow ball so we were always one month ahead of our bills. If you know anything about Dave Ramsey he wouldn’t agree with this because it’s not his idea. Anyway debt free including home since 2013. Retired at 45.

[jesseellis]

Baby Step 1 is set at $1000 to make you uncomfortable. It encourages paying off debt faster. People are more likely to pay off debt when they see the small wins. Ramsey says "finances are 80% behavior and 20% head knowledge. Baby Step 3 is to build a 3-6 month emergency fund to remove the fire from under your butt. Baby Steps 4, 5, and 6 are supposed to be done AT THE SAME TIME. Baby Step 4 is simply to start investing (This can be maxed out on Baby Step 7). Dave also says it can, depending on how you want to raise your kids, be okay to skip baby step 5 (I think). For Baby Step 6, Dave teaches to only have a 15yr, fixed rate mortgage when you use your down payment of at least 20% created in Baby Step 3B. This is to avoid unnecessary interest. Gabe portrays Baby Step 7 as if its decades away (while it is for some depending on how much debt you have). For most people it doesn't take that long.

I think the main difference between Gabe and Dave is that Gabe is more focused on financial gain, while Dave is focused on financial peace. there's a big difference.

[awomanofvalueandworth]

It would be intriguing to see a video on why people go into debt. It is a behavioral issue more than mathematical problem.

[jwlove]

Dave focuses on behavioral change with the assumption most people aren't financially astute or highly disciplined. He's also very biased and gets immense kickbacks from his endorsed local providers program. That being said, I think his teachings are a good starting point for most people. I regard it as the "high school" of financial management. It works fantastic for the typical American lifestyle.

[Chrisp]

Dave has pulled himself back from bankruptcy to become a multi-millionaire and helped millions of people get out of debt and attain wealth. Many like to knock his system, yet they all lack the stats of starting with less than nothing and mass multitudes of people they've helped.

[d.zynedthrive]

No, money savvy people don't need Dave Ramsey. But for those who aren't, paying off all debt and avoiding credit cards is often necessary for them to reach financial success. And they need the dopamine rush of paying off smaller debts first, even though it costs more in the long run. For these people, being ready to retire at 65 is the best they can hope for, and trying to do things the most financially advantageous way would most likely end in ruin. We don't do everything the way he teaches either, but I think there are people who really have to in order to have any level of success. I agree 100% with your strategies, but will say that it would be tough for a family of 7 (in our 40s) to start investing 50-75%. We'd have to live in our camper with 5 kids for years, and that's not happening 😂. We wish we'd started younger like you did, but it is what it is🤷

[JoeLopez]

Another great video, thank you.

While true, let's consider his target audience. People who have made terrible financial choices and in all likelyhood have terrible spending/saving habits. His advice drives home the idea of not having debt and making better choices.

The debt snowball, even Dave says it doesn't make sense mathematically, but let's again consider the target audience. They will not invest the money and should concentrate on paying off their current debt.



Credit cards - same idea. Consider the true target audience.

Saving 15% in your retirement. Keep in mind, this is only to get started. Later steps has people investing more in their future ;)


Paying off your home - People with better discipline can carry the mortgage and invest their money more wisely.

[madiantin]

Re: college. Yes, it *can* work to not go to college. Many people have done it. However, the *vast majority* of those who don't go to college earn significantly less than those who do. I've watched over the years, and taken note of those people I know who have attended and those who haven't. In the long run 100% of those in my acquaintance who have attended college have had lives that are more stable, and more financially secure. Those who did not attend college had lives that were much more unstable, earned much less, and overall were more miserable. I used that word "miserable" deliberately - it has been my observation that they had much more stress in their lives and were less happy.
Yes, it *can* work not to go to college. But for the vast majority, it's so so so worth it if approached with wisdom and good planning.

Re: paying off house early. I can't describe to you the sheer relief of finally having no mortgage. It was one of the highlights of our lives, and brings us joy every month. The knowledge that this home is *ours* is worth every extra penny we used to pay it off early.

[jennie]

I agree with teaching your kids about finances and setting up some kind of funds to help your kids with their goals whatever they happen to be. I totally agree about not getting a post-secondary education just because it's expected. However, it would be good for them to be able to pay for it in case they want to follow a career path that requires some formal education. And that isn't just for becoming a doctor, accountant, teacher, etc. In Canada and the US, a lot of trades require formal education to enter and progress through the apprenticeship stages. It's much more difficult to get a well-paying, steady job, especially in a unionized environment, than it used to be, and education helps with that. It's not the only path to that kind of job but it's becoming increasingly necessary.

[granitemoss]

I think Dave Ramsey is a terrific motivator and starting point for people who don't know where to begin with their personal finance. But the things I strongly disagree with him about- credit cards/credit scores (never carry a balance but collect those rewards, maintain a good score for the benefits besides borrowing money), investing while paying down debt (NEVER turn down a company match, that's like rejecting part of your pay), 15 year mortgages only (not always feasible) and yes, the $1k emergency fund (totally outdated amount, even if it's not meant to be a full one).

But as the name implies, personal finance is, well, PERSONAL. So we all have to do what makes sense for us, even if it's not right for someone else!

[SevenFortyOne]

You make some great points but I think you are underestimating how much emotion factors in to the overall equation. Paying off all debt, including your house, has a profound effect on one's attitude toward work and money. When it comes to investing instead of paying extra on a mortgage, most people aren't disciplined enough to actually do that and end up spending that money on something else either by necessity or desire.

[betterideas]

My Dad never brought me things when I was growing up, not even a Birthday gift. I’m thankful I had food and clothes with a roof over my head along with learning independence.

[nanimaonovi]

I limited my daughter's exposure to media to 1 hr a day (don't raise a consumer) and gave her allowance from year 5-16, increasing from $5.00 a week at 5 to $16.00 at 16. I also paid for half of anything educational and 100% of sports. Interests and activities win over consumption then. It really works.

[PowerfulMoneyHabits]

2020 hurt my dental practice. I got on the Ramsey baby steps and in a year and a half, went from baby step 1 to baby step 7! His advice works! His net worth is $200 million. U can do it ur way or u can do it the proven way!

[cramsa]

You don’t need college to become a pilot… or to make a good income… but you want to become a medical doctor, scientist, engineer etc you need university education.

Also, paying off my house and becoming 100% debt free before I was 40 was the BEST THING I EVER DID… my savings rate went from 25% to 75% when I payed off my credit cards and mortgage and now the money that was budgeted to those former debts are now for investments. I HAVE MUCH MUCH LESS STRESS NOW when investing.

An investor with debt is more stressed than one without debt… same with leverage or borrowing money to invest… MUCH MORE STRESSFUL!

[DrProgNerd]

The debt snowball is more of psychological strategy than a mathmatical one. The people who seek out his program are generally people who have lost control of their finances. By paying off those cards, they are reinforcing the idea that they are in control of their finances. This confidence is the foundation that the other steps are built on. Great video. I love the 'teaching your kids about finances' part. I've been working with my 19-year-old for several years in this area. He's built his credit rating to 750+ and has a respectable chunk saved for a down-payment on a house.

[marywilliamson]

I always value your content and actively follow you. I do also think you made a great point about investing vs paying off one's mortgage. I do have to say that I paid off huge credit card debt quickly with that cute printable form on Ramsey's site for the snowball debt method. It's really about the visual, and watching your debt go down ON PAPER. It worked for me, and at the time I had a stupid low salary. Anyway, that's my take.