Do Dave Ramsey’s Baby Steps Still Work? An Honest Assessment

July 30, 2024 · Dottie Ray

Heads up: I'm not a financial advisor. This article shares personal experience for educational purposes only — consult a qualified professional before acting on anything here.

I followed Dave Ramsey’s Baby Steps for 22 months. I paid off $38,247.11 across six debts — three credit cards, a personal loan, a medical bill, and a lingering car note. I used his debt snowball method. I built the $1,000 starter emergency fund. I invested 15% of my income in Roth IRAs.

Did it work? Yes. Am I going to tell you it’s the only way? No.

Dave Ramsey’s Baby Steps are a solid framework for getting out of debt and building basic wealth. But they’re not perfect. Some steps are too rigid. Some advice doesn’t account for modern realities like student loans, medical debt, or low-income situations. And some of Ramsey’s rules — like “never use a credit card again” — are impractical for most people.

Here’s what I learned after following the Baby Steps for two years: the framework works if you adapt it to your situation. The core principles — spend less than you earn, prioritize debt, build emergency savings, invest consistently — are sound. But the specific rules need flexibility. This article walks through each Baby Step, what actually works, what doesn’t, and how to modify the plan for your real life.

The 7 Baby Steps (and what I actually did)

Dave Ramsey’s plan has seven steps. Here’s what each one is, how long it took me, and whether it worked:

Step	What It Is	My Timeline	Does It Work?
Step 1: $1,000 Emergency Fund	Save $1,000 for starter emergencies	3 weeks	Yes — essential
Step 2: Debt Snowball	Pay off debts smallest to largest	18 months	Yes — with modifications
Step 3: 3-6 Month Emergency Fund	Save 3-6 months of expenses	6 months (after debt payoff)	Yes — but start with 1 month
Step 4: Invest 15% of Income	Invest in retirement accounts	Ongoing	Yes — but max out employer match first
Step 5: Save for Kids’ College	529 plan contributions	Skipped for now	Depends on your situation
Step 6: Pay Off Mortgage Early	Extra payments on home loan	Not yet	Debatable — see below
Step 7: Build Wealth and Give	Invest and donate generously	Working on it	Yes — wealth building works

Step 1: The $1,000 Emergency Fund

Ramsey says save $1,000 fast before doing anything else. This is where I disagree slightly. According to the Federal Reserve’s Report on the Economic Well-Being of U.S. Households, 37% of adults couldn’t cover a $400 emergency expense without borrowing or selling something. A $1,000 buffer is a good start, but it’s not enough for most people.

What I did: I saved $1,000 in three weeks by cutting dining out, pausing subscriptions, and selling stuff I didn’t need. This prevented me from adding to my debt while I tackled Step 2.

What I’d change: If you have dependents, unstable income, or high-deductible health insurance, aim for $2,000-$3,000 instead. The $1,000 figure is arbitrary — what matters is having enough to handle your most likely emergencies.

Step 2: The Debt Snowball Method

This is where Ramsey shines. The debt snowball — paying off debts from smallest to largest balance regardless of interest rate — works because of behavioral psychology, not math.

Research published in the Harvard Business Review found that people who focus on paying off small debts first are more motivated and likely to complete their debt payoff journey. The psychological wins matter more than the interest savings, according to research from the National Bureau of Economic Research.

What I did: I listed my debts from smallest to largest: medical bill ($847), credit card ($2,341), personal loan ($5,678), credit card ($8,923), car note ($12,458), credit card ($17,000). I paid minimums on everything except the medical bill, which I destroyed in two months. Then I rolled that payment into the first credit card. The momentum was addictive.

What I’d change: If you have a debt with over 25% interest (looking at you, credit cards), consider tackling that first even if it’s not the smallest. The math works better, and high-interest debt can spiral quickly. I kept a 0% APR credit card at the end of my list because it wasn’t accruing interest.

Step 3: The 3-6 Month Emergency Fund

After you’re debt-free (except the mortgage), Ramsey says save 3-6 months of expenses. This is solid advice, but the timeline is flexible.

The Bureau of Labor Statistics reports that the average job search takes 3-6 months. That’s why this fund matters — it covers you while you find new work. But you don’t need to save it all at once.

What I did: I started with one month of expenses ($2,800) and built it to three months over six months. I kept the money in a high-yield savings account earning 4.5% APY.

What I’d change: If you have a stable job, dual income, or marketable skills, 3 months is probably enough. If you’re self-employed, work on commission, or have a single income with kids, aim for 6 months. The exact number depends on your risk tolerance and job security.

Step 4: Invest 15% of Household Income

Ramsey says invest 15% of your gross income in Roth IRAs and mutual funds. This is where I strongly agree — but with one modification.

According to the Employee Benefit Research Institute, only 55% of workers participate in an employer-sponsored retirement plan. If your employer offers a 401(k) match, that’s free money. Max out the match first, then use Roth IRAs for the rest.

What I did: I invested 15% of my income — 5% to get my employer’s 401(k) match, then 10% in a Roth IRA invested in low-cost index funds.

What I’d change: If your employer doesn’t offer a match, go straight to Roth IRAs. If you earn too much for Roth IRA contributions (over $153,000 modified adjusted gross income for singles in 2024), use a backdoor Roth or traditional IRA. The 15% figure is a good target, but if you’re starting late, consider 20% to catch up.

Step 5: Save for Kids’ College

Ramsey says save for your kids’ college education using 529 plans or Education Savings Accounts. Here’s where I push back hard.

The College Board reports that the average annual cost of a public four-year college is $27,940 (in-state) or $57,570 (out-of-state). But here’s the reality: your kids can borrow for college. You can’t borrow for retirement.

What I did: I skipped this step. Instead, I’m maxing out my retirement accounts. My kids will use scholarships, work part-time, and start at community college if needed.

What I’d change: If you’re behind on retirement savings, skip this step. If you’re on track and have extra money, contribute to a 529 plan. But don’t sacrifice your retirement to fund your kids’ education — they have their whole working lives to pay back student loans, but you only have a few decades to build retirement wealth.

Step 6: Pay Off Your Mortgage Early

This is the most controversial Baby Step. Ramsey says pay extra on your mortgage until it’s gone. The math says otherwise.

The Federal Reserve reports that the average 30-year fixed mortgage rate is around 7% in 2024. If your mortgage rate is below 5%, you’re probably better off investing the extra money. The stock market historically returns 7-10% annually over the long term.

What I did: I’m not doing this step yet. My mortgage rate is 3.75%. I’m investing the difference instead.

What I’d change: If your mortgage rate is above 6%, consider paying it off early — the guaranteed “return” of eliminating that debt beats most investments. If your rate is below 5%, invest the extra money instead. The psychological benefit of being debt-free is real, but the math favors investing.

Step 7: Build Wealth and Give Generously

Once you’re debt-free and investing, Ramsey says build wealth and give 10% of your income to charity. This is where the Baby Steps shine.

Research from the Indiana University Lilly Family School of Philanthropy found that households that give regularly report higher levels of happiness and life satisfaction. Generosity isn’t just good for others — it’s good for you.

What I did: I increased my investments and started giving 10% of my income to causes I care about.

What I’d change: Nothing. This step works.

The Verdict: Do the Baby Steps Work?

Yes — but with modifications. Dave Ramsey’s Baby Steps provide a solid framework for getting out of debt and building basic wealth. The behavioral psychology behind the debt snowball is sound. The emphasis on emergency savings and consistent investing is wise.

But the specific rules need flexibility. The $1,000 emergency fund might not be enough. The debt snowball might need to prioritize high-interest debt. The mortgage payoff might not make mathematical sense. And college savings might come at the expense of your retirement.

The core principles work: spend less than you earn, prioritize debt, build emergency savings, invest consistently. But adapt the specific rules to your situation. That’s how you make the Baby Steps work for you.

Frequently Asked Questions

How long does it take to complete all 7 Baby Steps?

Most people take 5-10 years to complete all seven steps. Steps 1-4 typically take 2-5 years depending on your income and debt load. Steps 5-7 are ongoing. The timeline varies based on your starting point, income, and how aggressively you tackle debt.

What if I have student loans? Should I still follow the Baby Steps?

Yes, but be realistic about the timeline. Student loans are included in the debt snowball (Step 2). If you have $50,000+ in student loans, it may take 3-5 years just for Step 2. Consider income-driven repayment plans if your payments are unaffordable, but continue with the Baby Steps framework.

Can I skip steps or do them out of order?

You can modify the order slightly, but don’t skip steps entirely. For example, if your employer offers a 401(k) match, contribute enough to get the match before paying off debt (that’s free money). But don’t skip the emergency fund or jump to investing before you’re debt-free (except the mortgage).

What if I have a low income? Can I still follow the Baby Steps?

Yes, but the timeline will be longer. Focus on Step 1 first, then Step 2. If you’re struggling to make minimum payments, contact your creditors to negotiate lower rates or payment plans. Increase your income through side hustles, selling items, or asking for a raise. The principles work at any income level.

Should I pay off my mortgage early if interest rates are low?

If your mortgage rate is below 5%, you’re probably better off investing the extra money. The stock market historically returns 7-10% annually, which beats your mortgage interest savings. However, if being debt-free gives you peace of mind and you’ve already maxed out your retirement accounts, paying off the mortgage early is a valid choice.