Dave Ramsey’s Baby Steps to Get Debt Free

Dave Ramsey is a financial radio talk show host, who some people call a guru. He coaches his listeners on how to get debt free and take charge of their money. His website: www.daveramsey.com has lots of information and tools to help you, and you can listen to his 3 hour radio program daily, live on his website no matter where you live (good for Canadians!). You can also check out the archives of past shows. I myself like to listen once in a while to give myself some positive reinforcement to stay debt free. Check him out at: www.daveramsey.com.

Dave’s Baby Steps

Below I give a brief summary of his baby steps to get out of debt and plan your financial future. This is only one way to plan your finances that many people find is sensible and easy to follow. Consult your own financial advisor for more information.

Step 1: Scrape together a $1000 emergency fund into a separate savings account. Don’t touch it. It is for REAL emergencies only.

Step 2: Pay off your debts in a snowball approach: smallest to largest, rolling the payments for your eliminated debts onto the next one. Get intense about doing this quickly.

Step 3: Fully fund your emergency fund. Get 3-6 months of expenses into your emergency fund. Don’t touch it.

Step 4: Invest at least 15% of your gross income for retirement. Start with RRSPs (401K) and then move to other investment vehicles like Roth IRAs (US only) or simply into well chosen mutual funds.

Step 5: Save money for your short and long term savings goals. College for the kids, a new car, a vacation, etc.

Step 6: Pay off your home mortgage to become 100% debt free.

Step 7: Build wealth- save for a fabulous future, give money to good causes, and have fun.

Dave Ramsey is one of many financial “gurus” who has a plan you can follow. I added him to this site because I find his plan is simple and makes sense, he is a fun guy to listen too, and his website has some free information in addition to pay-products. He also does a lot of good things like giving away free copies of his book to callers, and encouraging people to give money to good causes. It’s not all about getting rich. But you need to make your own choices about what plan you want to take and who you listen to. Keep doing your research and make an educated choice.