What Dave Ramsey’s 7 Baby Steps Are Missing

4 July 2017

dave ramsey baby steps missing

We firmly believe in the fact that getting out of debt and building wealth takes time and determination. Our good friend Dave Ramsey put together a plan that will help you achieve financial freedom if you’ll simply allow the process to work. He calls his plan the 7 Baby Steps.

But, like everything else in life, some of the best-laid-out plans can eventually become outdated or flawed. Dave Ramsey’s Baby Steps are no exception to this fact and we’re going to show you what we think could be improved.

But first…

For those of you who have never even heard of the 7 baby steps. Here they are:

  1. $1,000 to start an emergency fund.
  2. Pay off all debt but the house.
  3. 3 to 6 months of expenses in savings.
  4. Invest 15% of household income into retirement.
  5. College funding for children.
  6. Pay off home early.
  7. Build wealth and give.

What The Baby Steps Got Right

I really love some of the things that are mentioned in the baby steps but I’m not going to go through all of them today. However, I will say that I absolutely agree with the idea of putting $1,000 into an emergency fund as a first step towards financial freedom. Statistically, 6 out of 10 people cannot afford an unexpected expense that is $500 or more.

Sound familiar?

It’s surprising how many people identify with this statistic. It’s even more surprising how easy it actually is to save $1,000 fairly quickly. The first thing you’ll need to do is sit down and create a budget that you promise you’ll follow each month.

What The Baby Steps Are Missing

Babies…Specifically

Dave always says that he doesn’t believe in putting babies in the baby steps, but I have to disagree here. Bringing a child into the world is stressful enough. Bringing a child into the world when you have no money or more debt than money is infinitely more stressful.

People always say things like, “You can never be ready to have kids”, but that simply isn’t true. There is absolutely nothing wrong with getting out of debt and building up X amount of dollars before you decide to have a kid.

Yearly costs to raise a child in the U.S. are somewhere between $12,500 – $14,000 per year, which is about $234,000 calculated out to age 17. If it is already difficult to make ends meet, having a baby won’t make things any easier.

I think that there should be an addendum to baby step 2 that says “Pause your debt snowball if you are planning to have a child within the next year”. Instead of waiting until the baby is already on the way or almost here, start early and bulk up your emergency fund so that you’re prepared when the baby arrives.

Renting vs Owning

Here is another point of contention in Dave’s plan. He constantly tells people that they shouldn’t even consider buying a house while they are working the baby steps. This might be true for a lot of people, but I think that it is really an over generalization.

Where you are in the baby steps and where you are living should be considered. If you are almost done with baby step 2 and purchasing a house is in your plan, you should be able to do it. OR if you live in an area where it is more expensive to rent than it is to own, then you should be able to go and buy a house.

Due to our careers, we can’t just up and leave the area that we live in. If we could we definitely would because this area is super expensive. The cost to rent here is MORE than the cost of owning a home now. We’re still in baby step 2, but we ran the numbers and it actually makes more sense for us to buy now instead of continuing to wait.

YOU CAN’T OUTSMART MATH!

While this works for us, your situation may be entirely different. You’ll have to really dig deep into your own finances and figure out what is going to be the best option for you. We just wanted to make the point that the “rent vs own” conversation is not the same for everyone!

What Are DJ & Dannie Doing?

Currently, we are in baby step 2. We’ve paid off ALL of our consumer debt and ALL of Dannie’s student loans so far! (YAY 🙌🏽) All that is left is my student loans, but we actually paused our debt snowball fort he time being so that we can significantly increase our emergency fund. We are preparing for some pretty big changes coming up in our future and we want to be as prepared as we can be. This might be a no-no in Dave’s book, but we’re choosing to do what will really work for us.

This is just the start…

All in all, we constantly keep in mind the fact that personal finance is just that — PERSONAL. We love listening to the advice that Dave gives people on a daily basis but we’ve learned that you have to keep things in perspective.

What works for one person may not work for you.Click To Tweet

Use the baby steps as a starting point for your debt free journey. Let them serve as a guide to set you on a path in the right direction and then tailor them to fit your needs as you continue working towards financial freedom!

***

Are you following Dave Ramsey’s baby steps during your financial journey? If so, how closely do you follow the principles?

Let us know in the comments below!

$tay wealthy friends!!! 🤑

— DJ

http://penniestowealth.com/dave-ramsey-baby-steps-missing/

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Eat Pray Budget
6 years ago

I couldn’t agree more with everything in this post! 👏🏼 The kiddo thing is dead on and planning just the way you’ve laid it out is a great approach! We’re with ya on the renting v. owning thing too. No reason to spend more if you can have an asset for less! Work smarter not harder! 🤑

Dannie @ PenniesToWealth
Reply to  Eat Pray Budget
6 years ago

I’m glad you enjoyed the post. I just wanted to share my opinion about those things but it’s great to see that there are some like-minded people out there! I know it won’t work for everyone, but it’s what makes sense to me! Thanks for commenting! – Dj

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