Personal finance can easily overwhelm anyone. If you ask five different people a question on the topic, be prepared to get five different answers. The problem with personal finance isn’t a lack of information, it’s the availability of too much information.
Unfortunately, a lot of the information is inaccurate, poorly thought out, and just plain bad advice!
So when I set out to get professional training as a financial coach, it was super important to me to pick the right teacher.
Out of all the personal finance “gurus” and systems out there, Dave Ramsey’s Seven Baby Steps provides the most comprehensive, common-sense way to budget, get out of debt, protect your assets, and build wealth wisely.
However, I will also say that the Dave Ramsey plan isn’t for everyone.
(Can she say that?)
Well, I did!
Here are 8 ways to know if the Dave Ramsey plan is – or isn’t- right for you.
The Dave Ramsey Plan might NOT be right for you if:
The Ramsey philosophy is all about becoming and STAYING debt-free. Dave’s personal story includes becoming a millionaire by age 26, losing it all, going bankrupt, and deciding that he would never be in debt to anyone ever again. That’s pretty much the basis of the Baby Steps.
Baby step two is to pay off all non-mortgage debt. It is intended to be done as fast as humanly possible, based on the teaching in Proverbs 6. This means pare down your expenses as low as you can get them, earn as much extra money as possible and put it ALL toward the debt until it’s gone. Dave even advises you pause retirement contributions. Yes, even if your company offers a match. This is serious stuff. Don’t say you’re on the Dave Ramsey plan if you’re not willing to commit. There’s not a Dave Ramsey “lite” option.
Everything hangs on your ability to budget. Everything. If you don’t use a budget in which every single dollar of income has an assignment, you will never get out of debt, you will always have an emergency that requires more debt, and you will never build wealth the way you could if you had used a budget. Simply stated, the budget puts you in control of your money. Good intentions aren’t enough. Sticking to a budget is what gets you from one baby step to the next. If you aren’t willing to do the work of budgeting, you won’t advance through the plan.
Any attempt to apply some of the seven baby steps, do them out of order, or otherwise cherry pick what you like from the plan is almost a guaranteed way to fail with money. It’s kind of like trying to go vegan and paleo at the same time and eat bread on the weekends. The seven baby steps are very specific and are ordered the way they are for a reason.
Dave’s motto is “live like no one else so later you can live and give like no one else.” It’s a countercultural way to live in a YOLO world. I have yet to meet anyone who got to baby step 4 (save 15% of your income for retirement), and said, “Geez, I wish I had taken a lot longer to pay off that debt. I regret the temporary sacrifice I made for my long-term financial wellbeing.”
And yet, YOLO persists.
If you’re content to spend more now and have less later, then you won’t be very motivated to follow the Baby Steps.
However, the Dave Ramsey Plan IS right for you if:
You’re sick of the debt. It’s suffocating. It’s holding you back from doing what you really want to be doing with your money and your life. Or maybe you’re not at a breaking point yet but you realize that debt has nothing good to offer and you want to get on the right track.
The Seven Baby Steps will be your best friend. The first step, saving $1,000 for a starter emergency fund, is just enough cushion (not a cozy one) to give you a little margin when a big unexpected expense hits.
A lot of people think $1,000 isn’t enough, but what they don’t realize is that with a budget and tons of extra money going toward the debt snowball, you can pause the debt snowball, take care of the emergency, and then continue. There’s a lot of power in your income to reallocate funds when you’re actually on a budget. But I digress…
The $1,000 will protect the progress you’re making on paying off the debt so you don’t take two steps forward and one step back.
And the debt snowball has been scientifically verified to be the most effective way to reach the goal of being debt-free. Once you get started you quickly see how psychological and emotional momentum overpower sheer numbers.
Bottom line: if you’re looking to destroy debt, the Dave Ramsey plan will get you there.
Again, the budget is everything. The good news is you don’t have to be an expert at budgeting, you just have to be willing to learn and to develop consistency. It’s incredibly empowering and freeing to live on a budget, even though you will have to say “no” to yourself at times.
And by “budget,” I don’t mean simply having a positive balance in your checking account or having the ability to pay off the credit card every month. If you’re new to budgeting, check out this short video on how to make a budget that works.
You’re someone who doesn’t let their circumstances dictate the future. When it comes to money, you have a no excuses mindset. You’re ready to take charge of your finances and tell your money where it’s going to go. Even if you’re not a naturally organized person, you are willing to develop some organizational skills and discipline in this area of your life.
The Seven Baby Steps are anything but a get-rich-quick scheme. My favorite analogy of Dave’s is that building wealth requires a slow cooker, not a microwave. This plan is for the long haul. (Not to be mistaken with the length of time you want to be in Baby Step 2). You will have to save money, talk with your spouse, learn about investing, write a budget every single month, build an emergency fund and then not touch it ever except in a real emergency. To you, that’s okay because it’s worth it.
The thing about sacrifice is you know the price of what you are giving up is small compared to the prize that you win.
After reading through these eight ways to know if the Dave Ramsey plan is right for you, which camp do you fall into? Are you clearly on one side or the other? Are you on the fence? Do you have more questions about the Baby Steps? Let me know in the comments!
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