Dave Ramsey's Seven Baby Steps

Submitted by Southwest Investment Advisors on March 15th, 2018


Dave Ramsey’s Seven Baby Steps

Step #1 Emergency Fund

Save $1,000 in an emergency fund ($500 if your annual income is under $20,000). Bad things happen to good people, so be ready.


Step #2 Debt Snowball

Debt is your enemy. Pay off all debt except your home’s first mortgage.


List your debts in order, from smallest balance to largest. Do not be concerned with interest rates unless two debts have a similar payoff balance, and then list the highest rate first.


Pay the minimum payments on all of your debts. For the smallest one, pay every extra dollar you can afford until it’s gone, then attack the next one down. Every time you pay off a debt, you add its old minimum payment to your next debt payments.


As you eliminate debts, you will build momentum with each success, paving your way to freedom from debt!


Step #3 Be Prepared

Build your savings account to three to six months of living expenses: three months if both of you are on salary and have job security, six if one or both are on commission or jobs are less secure.


Step #4 Invest

Invest at least 15% of your pre-tax household income for retirement. This number does not include company contributions.


Invest up to the maximum matching limit in your company retirement plan.


Invest up to the maximum in a Roth IRA, or Traditional IRA if your income is too high to invest in a Roth.


Any extra should be invested in a company plan or a taxable account.


Step #5 Save for College

Open an Educational Savings Account (ESA) or 529 Plan (optional; assuming retirement savings are maximized).


Step #6 Pay off Your Home Early

Live the golden years as golden, not beholden. Pay off your home no later than your retirement.


Step #7 Build Wealth & Give!

It is a joy to share in the blessings that you have been given, so spread the joy!


Be encouraged – this takes time.  Proverbs 28:20 “A faithful man will abound in blessings but he who hastens to be rich will not go unpunished.”


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual

Dave Ramsey, Southwest Investment Advisors and LPL Financial are separate entities