Dave Ramsey Baby Steps


  1. $1,000 to start an emergency fund.

    You cannot get ahead if every emergency expense increases your credit card debt.
  2. Pay off all debt using the debt snowball.

    Pay off smallest debt first with extra principal payments while making minimum payments on all other debts until it is paid off to stay motivated and generate momentum.  Apply that payment to the next smallest debt as an added principal payment until it is paid off.  Keep adding the payments to to the principal of the next larger debt until all are paid off!
  3. Three to six months of expenses in savings.

    You should avoid investing until you have adequate access to emergency reserves.
  4. Invest 15% of household income into Roth IRA's and pre-tax retirement plans.

    Take all free money!  Invest up to your employers requirement to get the full matching contributions.  For additional investing consider the Roth IRA for an improved tax strategy.  After your Roth IRA is funded, apply additional savings to tax deductible retirement plans and/or non-retirement plans depending upon the short and long term goals in your plan.
  5. College funding for children.

    Consider the use of one or more of the private school and college funding strategies - 529, Education Savings Account (ESA), and custodial accounts (UGMA/UTMA).  Each have their advantages.
  6. Pay off home early.

    You want your home paid off ideally before retirement starts.  The earlier this is done, the more choices you will have to meet your other financial goals!
  7. Build wealth and give!  Continue to invest in mutual funds and real estate.

    When you are debt free you have more choices and flexibility to live and give!