Should I Follow Dave Ramsey’s 7 Baby Steps?


A Money Coach’s Perspective on Dave Ramsey’s Black and White Approach

Questions we hear most often as Money Coaches:

“Do you just teach Dave Ramsey’s 7 Baby Steps?”


“Is what you do the same as FPU (Financial Peace University)?”

The short answer is no.

Dave focuses more on the education and entertainment side. We walk our clients through the whole process by helping our clients discover their why, set up systems to simplify and automate their money, and take action.  

An area that sets us apart from Dave is that we don’t see money as black and white; there’s a lot of gray. There isn’t just one right way to handle money. There is more than one way to pay off debt, fill an emergency fund, manage finances, and more. There’s room for nuance. Each person is different, and we’ve seen that our clients thrive when we tailor our coaching to them. 

If you know much about Dave, he’s all about the 7 baby steps; it’s his formula to gain financial peace. Since he works with the masses, his steps are generalized. His baby steps are the foundation of all he does. If you’ve ever wondered our thoughts on Dave Ramsey’s 7 baby steps, I’ve broken down each one, and how we are similar and different.

Picture of Dave Ramsey book with the title To Dave, or Not to Dave?

Baby Step 1 

Save a $1,000 Starter Emergency Fund

Having a starter emergency fund is key. This helps break the debt cycle, but $1k isn’t much these days. Dave’s been saying save $1,000 for 20 years. Inflation has increased significantly and times are different now. $1,000 twenty years ago is equivalent to $1,640.66 in 2023. That’s a 64% increase, but that isn’t accounted for in his advice. 

Another thing to consider when figuring out how much you need in an emergency fund is your family size. A starter emergency fund of $1,000 looks very different for a single college student versus a family of six. There are a lot of factors at play here. This is an example of how this isn’t a black or white scenario, there is a lot of gray.

When we work with our clients, we take into consideration their family size, their cost of living, their job, and their financial situation as a whole. This gives a clearer picture of how much is needed in an emergency fund. But as a basic rule of thumb, we’d recommend saving at least $500-$1,000 per family member to start out.

Baby Step 2

Use the Debt Snowball Method to Pay Off All Your Debt, Except your House

High-interest debt eats away at your lifestyle now and in the future. Dave Ramsey pushes gazelle intensity to outrun your debt to motivate you. Fear, guilt, and shame aren’t the best motivators. When we work with our clients, we focus on what they are running towards. What are their goals? Focusing on what’s on the other side of the debt and the life they’ll experience is a much healthier way to fuel someone.

One of Dave’s biggest pieces of advice about debt is to cut up credit cards and never use them. When a credit card offer comes into your mailbox, he says to yell cheetah! He encourages you to run away from credit cards like you would run away from a cheetah chasing after you. If you listen to Ramsey, you may feel like credit cards are evil and you shouldn’t use them. We don’t believe this is a black or white area either. 

Dave Ramsey's 7 Baby Steps

We have many clients who use credit cards and pay them off each month. They enjoy the perks, rewards, increasing their credit score, and the protection. We have many clients who have credit card debt that is constantly revolving at high-interest rates and fees. Revolving credit is a problem that needs to be addressed. Each person handles credit cards differently, and there isn’t a one-size-fits-all answer. The way you use credit cards is more important than if you use credit cards. 

This isn’t an area where you have to be all or nothing. We have many clients that solely use debit cards, some that use a combination of credit cards and debit, and some that exclusively use credit cards. It really is dependent on the situation, how disciplined they are, their spending triggers and habits, and their financial goals. 

Now, let’s talk about the debt payoff method Dave recommends: the debt snowball. Essentially the debt snowball method is where you pay off the smallest debt first, then you pay off the next smallest debt, until all debts are paid off. With this method, you’d pay the minimum payments on all your debts and put any extra you have towards the smallest debt. Each time you pay off a debt, you add the amount you were paying on the previous debt onto the next debt, gaining momentum, creating the snowball effect. This method gives quick wins and can be very effective. 

There are a lot of ways to pay off debt. The debt snowball is one strategy and it does work. But there are other methods that are worth putting on the table. We show our clients what their debt payoff would look like using 4 different strategies. 

Our goal is to help our clients discover which strategies excite them most. That way, they have a greater likelihood of success. Some of our clients choose to use the snowball method, but many choose a different strategy. The key is to choose a method that you’ll stick with for the long run. If you’re using one strategy, and it just doesn’t excite you anymore, you can always switch to a different method. 

Baby Step 3

Fully Fund Your Emergency Fund with 3 to 6 Months of Expenses

We’re all about having a good emergency fund. If you followed Dave to a T, you could be on baby step 2: the debt snowball for a very long time. That would mean you would have a starter emergency fund of $1,000 for years. Honestly, that $1,000 probably won’t cut it. 

Here’s a question to consider: what if it was possible to pay down debt, while building up your emergency fund? Now, imagine you have a real emergency. You lost your job and will be living off your emergency fund temporarily. How much would you need? Would your spending change? How long would you guess it would take to get a different job? 

I bet your spending would look different. In this scenario, should you save your current spending rate or a cut back version? Let’s look at an example of this.  

A family of four spends $6,000 monthly. If they filled their emergency fund (according to Dave Ramsey), they would need to save $18,000-$36,000. But if they were in a true emergency and dialed back their spending, they would spend $3,500 a month. That emergency fund number would be $10,500-$21,000. 

There isn’t a cut and dry answer to how much you should save in your emergency fund. There are so many factors to consider. This is why we actively walk through this with our clients. The bottom line is that each person has a number that makes them feel comfortable for their emergency fund, and that’s the number to stick to.

Baby Step 4

Invest 15% of Your Household Income for Retirement

Investing is key. It’s a way to use compounding interest in your favor. Saving 15% is a great rule of thumb, but waiting until you have a starter emergency fund, all debt (besides the house) paid off, and a fully-funded emergency fund could take a lot of years and even over a decade. 

Time is the biggest factor when it comes to investing. The longer the money has time to grow, the better, this is where compounding interest is on your side. Waiting until baby step 1-3 is complete before investing in retirement can be a missed opportunity. You can build an emergency fund, pay off debt, AND invest for retirement ALL at the same time. 

Investing consistently is a habit. If you don’t start investing in your future when you have less to work with, it’ll be harder to invest when you do have more money. When you have your emergency fund and debt paid off, you’ll be freed up to invest more. But starting the habit of investing a little today will help you consistently invest throughout your lifetime.

If you’re getting an employee match for retirement, this is the best place to start. Since it’s taken directly out of your paycheck, you won’t have to think about it or really feel it.  Plus, you’ll get the benefit of doubling your money with your company’s match.  Investing up to the max match is a great way to take advantage of free money that so many people leave on the table. 

Baby Step 5

Save for your kids’ college fund

Out of all of Dave Ramsey’s 7 baby steps, this is the only one that we view as optional. You don’t have to pay for any of your child’s education. Your child doesn’t have to go to college either. Times are changing, and a college education doesn’t mean they’ll have a better paying job or more opportunities. 

We believe it’s important to discuss how and if you want to contribute to your kid’s college fund. There are a lot of creative ways to approach this. You could pay a portion of their education. You could require that they apply for a certain amount of scholarships each semester. You could purchase a rental property for your child to live in for free while in college and have them manage renting out the extra rooms. 

They could take as many college classes as possible in high school. Many high schoolers now graduate with an associate’s degree. Look into community colleges, state schools, trade schools, internships. There are many creative ways to pay for college.

The traditional way to save for your child’s education is through a 529 plan. We have a fund for each of our children, but we aren’t trying to max it out. We know that when someone pays for something themselves, they pay attention. We see this with our coaching services. Putting money towards coaching makes you show up differently. They have skin in the game. Personally, we don’t want our kids to get a free ride from us. 

Baby Step 6

Pay Off the House Early

Should I follow Dave Ramsey?

We paid off our house when I was 31. It didn’t make mathematical sense to do it. Our interest rate was 3.625%, and we were getting a much higher rate of return in our investments. But money isn’t just about math. There are emotions tied to it.

By paying off our home early we freed up money to live the lifestyle we wanted. There’s a different level of freedom when we own everything outright. James was able to quit his 9 to 5 job to pursue our money coaching business together. We’ve been able to take risks that we wouldn’t have been able to make if we didn’t have a paid-off house.

I say this all to say that paying off your house early isn’t for everyone. For many people, this isn’t a goal for them, and that is fine. We work with people who have a wide range of financial goals and very few of them have the goal of paying off their house early. 

We do recommend having a paid-off home before retirement. Having no mortgage can free up the money needed to be able to retire early. Plus, it will help stretch whatever has been saved for retirement and social security. 

Baby Step 7

Build Wealth and Give

Once all of these baby steps are complete, it is much easier to build wealth and give. Building wealth is pretty ambiguous. Not everyone has a goal to build wealth, and that’s totally ok. And not everyone wants to give it away. 

At this stage, you’re able to generously fund your values. You get to control where the majority of your money is going. It’s important to think about what is important to you and why. 

Dave encourages giving at this stage. We believe that generosity is key in all stages. If we wait to give until our financial lives are practically perfection, then we’ve missed the point. Giving changes our perspective and heart posture. If we don’t practice giving with little, it will be much harder to give when we have a lot. Generosity is like a muscle, we have to continually use it, otherwise it atrophies. 

Dave Ramsey has helped millions of people get out of debt, but he’s not for everyone.

If you’re wanting someone to tell you exactly what to do and what order, he’s your guy. He doesn’t sugar coat it. Our approach is very different. 

We coach our clients on their values, not ours. We help our clients see all the options and walk them through the decision process. We want our clients to feel heard and not judged for past decisions. We want to strip guilt and shame (and definitely not add to it) from our client’s money narrative.

Overall, there are holes in any formula meant for the masses.

You don’t have to focus on one financial step at a time. There is nuance to money management and there’s more than one way. 

Now, I could write pages on how we help our clients in all the minor financial details that are missed inside of Dave Ramsey’s 7 baby steps. For example, when we help our clients with their emergency fund, we help them find the best place for them to house it, what they want to name it, and best practices. We walk them through exercises to help them create guidelines on when and what they should use their emergency fund on.

We help them prepare for the emergencies that keep them up at night. When emergencies come, it’s easy to make rash decisions. But if we help our clients be prepared and know what to do, they’re equipped to make better financial decisions for themselves and feel more confident and prepared. This is just a taste of the kind of exercises, education, activities, and coaching we walk our clients through.

If you’ve tried Dave Ramsey’s approach, and it just didn’t settle right for you, don’t give up. It’s time to try something different. If you feel guilt and shame about your money situation, there is hope. You’re not an idiot, delusional, or out of your mind. We all make mistakes, what matters is what we do about them.

If you’re ready to take action, get accountable, and change your financial life, money coaching is for you. We’ve seen this happen over and over again in the hundreds of people we’ve coached. Our clients experience transformation in their financial lives which ripples out into every area of their lives. Schedule a free Q&A Session with us to find out if money coaching with us is a good fit for you. We’d love to help you reach your financial goals and get closer to financial freedom.  

Written By Amberlee Rich

Amberlee is a Money Coach, content creator, podcaster, and avid reader who is passionate about intentional living. She's a recovering couponing addict and aims to help others break free from survival mode. With her husband, James, they're certified financial coaches and have been helping people experience joy with their money for over 15 years.

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