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I have been writing this post now for a while and realized that I have not ever posted Dave Ramsey’s 7 Baby Steps. Why does he call them Baby Steps? According to his website you learn to “get out of debt the way you learn to walk – one step at a time.” Here they are as listed from the Dave Ramsey Site:

I know this is probably obvious, but…Please note that the commentary below each step (not bolded) are my personal comments and are not Dave Ramsey’s commentary. This is just my take on what I believe to be his wise counsel. Again, to read his words on each step on his website click here.

Baby Step 1

$1000 to start an Emergency Fund

Why start with this one? Because life happens. You’ve heard of Murphy’s Law, right? Murphy tends to show up at the most inconvenient times. Have a stash of cash to ward him off! (Maybe it should be and Emurphency Fund!?!)

Baby Step 2

Pay off all debt using the Debt Snowball

This is a fun one for me. You list your debts smallest amount to highest and pay off the smallest first. Once that is paid off, take the amount you paid monthly for that one and add it to the amount you pay for the next one. Continue until they are gone. It starts slow at first, but when you get the momentum going its awesome!! (Your mortgage payment is NOT included in the debt snowball.)

Baby Step 3

3 to 6 months of expenses in savings

Why do this one? What happens when people lose a job? They lose the paycheck. If you have a FULLY FUNDED EMERGENCY FUND the only worry you will have is to find another job. Having 3 to 6 months of expenses saved will cover your bills and relieve the stress of “Where am I going to get the money?”

Baby Step 4

Invest 15% of household income into Roth IRAs and pre-tax retirement

At this point the only payment you should have is your mortgage (if you own a home). This is exciting because you begin to build wealth. Be careful…now that you are out of debt and have money in the bank that doesn’t mean you go on a spending-spree!

Baby Step 5

College funding for children

My children are going to college soon…maybe I need to skip Baby Step 4. We love our children, but remember to invest in your retirement FIRST! Then later, your children won’t have to figure out how to take care of YOU.

Baby Step 6

Pay off home early

Can you imagine how much more wealth-building power you have if you didn’t have a house payment?!?

Baby Step 7

Build wealth and give!

You have made it to the best part. Begin blessing others! See how blessed you will be by doing this!

That’s it! Step-by-step. If you want to go into more detail for each step, find a Financial Peace University class near you. Believe me it is worth it!