Dave Ramsey has made it to become one of the most accepted and well respected personal finance experts in America and beyond. His job as a radio talk show host, public and motivational speaker, entrepreneur, TV personality and bestselling author has put him in a position where he teaches people on how best to manage their finances. His teachings are common among the public and one of his most known is the 7 baby steps where people learn how to save, get out of debt and become financially comfortable.
While the 7 baby steps may have been one of the huge reasons why some people have become debt-free, others feel they are not as helpful as everyone thinks. And while many must have tried Ramsey’s baby steps, others are still new to the notion or have not tried it just yet. Therefore, here’s what you should know about Dave Ramsey and his 7 Baby Steps.
Who is Dave Ramsey?
Dave was born into a family that believes in making earnings through work and was encouraged at different times to go make his own money.
He is a graduate of the College of Business Admiration at the University of Tennessee. He has tasted both the sweet and sour sides of becoming wealthy and broke. Ramsey has been able to manage from being a debtor to a debt-free man who now teaches the world how to become financially safe. Through the radio, TV, books, online and different other mediums, Ramsey has taught millions of people across the globe.
Ramsey has won several awards for his works and has been inducted into the National Radio Hall of Fame. In his line of work, he has definitely faced both acceptance and rejection as some believe in his financial theories while others find it futile.
In terms of personal life, Ramsey is a Christian and mostly gives his teachings in the Christian perspective. He is married to Sharon Cruz and has 3 children. Together with his daughter Rachel Cruz he wrote Smart Money Smart Kids.
Ramsey’s 7 Baby Steps
1. Save $1000 For Starter Emergency Fund
When the unexpected happens, there should be money saved to deal with it. As usual as this may seem, quite a number of people forget to save for rainy days. Hence Ramsey admonishes that if one must plan to come out of debt and be financially covered, then, saving up for emergency is very crucial.
2. Pay Off All Debt Using the Debt Snowball
While this approach has been criticized by a number of people, the Kellog School of Management has made a finding through research that the method is very effective. Dave stresses that debts should be paid starting from the lowest.
3. Save 3-6 Months of Expenses in a Fully Funded Emergency Fund
Save up money for bigger emergencies that may hit you likes illness, loss of a job or car and more. This method will automatically keep you away from becoming a debtor.
4. Invest 15% of Your Household Income in Retirement
While you enjoy the fruits of your labor, it is important to save up for retirement not minding your current age. Dave Ramsey encourages that one should invest into Roth IRA.
5. Save For Your Children’s College
If you’re in debt and have successfully come out of it, remember to start saving for your children’s college whether or not they are due for college. Ramsey recommends 529 college savings plan or Education Savings Account ESAs.
6. Pay Off Home Early
Financial freedom is incomplete without saving up for a house. Dave Ramsey feels that saving up for a house will not only keep you away from becoming a debtor but could save you quite an amount in interest.
7. Build Wealth and Give Back
Dave Ramsey firmly believes that people who owe nothing easily get whatever they want with their money, giving is no exception! Therefore, he stresses the importance of saving part of the wealth you have gathered and the need to give as well as leave an inheritance for your children.
While the entire aforementioned baby steps plan for getting out of debt may seem easy, it is important to note that it is hard work and except one is determined to change and deliberately make effort to become debt-free, there is no amount of teaching that would take you out of it.