How To Get Out Of Debt & Get Rich with Dave Ramsey’s Baby Steps (Checklist & Snowball Sheet)

How To Get Out Of Debt & Get Rich with Dave Ramsey’s Baby Steps (Checklist & Snowball Sheet)


Dave Ramsey has 7 steps to help you
manage your finances and get out of debt. I am going to be sharing them today as
well as some advice on how you can complete each step along your journey to
financial freedom. I’m also including a free debt management printable in the description box below that includes a checklist and a tracker so that you can
monitor your progress to a debt-free, wealthy life. Let’s go. [music] Hi guys, it’s Laura from ‘How To Get Your Shit Together’ and I help you get organised, get motivated, and get out of debt. I’ve never attended a Dave Ramsey seminar but I have read two of his books – “Financial Peace” and “Total Money Makeover”. I’ve also watched some of his YouTube
videos – he is a straight-talking kind of guy – and loads of you have recommended
him too. So today I thought I would talk about his 7-step program to help you get out of debt and back in the black. But even if you are not in debt, these are practical ways that you can grow your wealth and invest your money wisely. The 7 steps are: 1. Have $1,000 cash in an emergency fund. 2. Use the debt snowball to pay off all your debt except your mortgage. 3. Have a fully-funded emergency fund of 3 to 6 months of expenses. 4. Invest 15% of your household income into retirement. 5. Start saving for college. 6. Pay off your home early. And 7. Build wealth and give generously. So let’s have a look at each one in turn, talk about what it is and how to do it. Dave recommends fully completing each step before you move onto the next. Again my printable in the description box has a checklist for you so that you can track your progress. Step 1 is about building an emergency fund. Dave recommends having $1,000 in emergency money because, you know, life happens. Boilers burst, cars break down, kids break bones… When you are trying to get out of debt, the last thing you’ll want is some unforeseen circumstance derailing your progress. So maybe do some overtime at work or sell some of your stuff until you have that extra $1,000. Then keep it in a separate account. Somewhere that you can access it quickly if needs be to cover those unexpected expenses. Step 2 is probably where most of the magic happens – it’s the debt snowball. I will try and explain it as clearly as I can. Basically, you list all of your current debts apart from your mortgage – we’ll get to that later – in order from the smallest balance to
the largest. If two amounts are similar than put the one with the highest interest rate first. So you focus first on the one with the smallest balance and you work as hard as you can to pay that off while continuing to make the minimum payments necessary on the others. When you have that first debt paid off, you take the money that you were paying on that each week and you add it to the next debt on your list. When you clear that one, you add that amount to debt number three, and so on. So each week, the amount you are paying will snowball. You will be clearing one debt after another and, as you do so, you will be able to make bigger and bigger repayments towards your largest debts. It is a really effective way to pay your debts fast. The printable in the description
box includes a debt snowball tracker where you can list all of your debts,
cross them off as you’re clearing them and watch that snowball grow and grow
until you are completely debt free. It makes it really easy to keep track of everything, and it is a great visual representation of the progress that you’re making, and it will really help to motivate you when you see that you are, you know, crossing off one debt after another and watching that snowball gain momentum. Step three is to have a fully funded emergency fund. So in step one we set aside $1,000 to cover those unexpected expenses. Now it’s time to increase that amount so that you are completely covered even in, like, the worst case scenario where maybe you or your partner loses their job or has an accident and is maybe out of work for a few months or the roof comes crashing in or whatever. Increase the amount in your emergency fund until there is enough in there to cover three to six months of expenses. Dave says that on average that
would be somewhere in the region of $10,000 – 15,000. It may differ for you. Add up all of your current monthly expenses and then multiply that by three to give you the minimum amount you will need in your fund. That way if something bad does happen, your bills and your living expenses will be covered and you will have a lot more, you know, breathing space and time to get yourself back on track. Step four is to start investing 15% of your income into a retirement fund. Now I will be the first to admit that I know nothing about retirement funds here in the United States. Dave Ramsey suggests starting with a 401(k). A lot of employers here apparently will match the amount that you put in so take advantage of that. It is basically free money for you. After that, Roth IRAs seem to be the way to go. Again, Dave’s the expert here, not me. He recommends spreading the money across four different types of mutual funds: growth, aggressive growth, growth and income, and international. Honestly, that means nothing to me, but maybe it will to you. But 15% of your gross income should go towards building your future so that, when the time comes, you will have a nice little nest egg. Step 5 is to start saving for college. This is a step that a lot of people can probably skip. Maybe you don’t have kids, or maybe they’re all grown up. Maybe they don’t plan on going to college, or maybe they have a scholarship for a subsidy or something like that. When I was growing up, you basically needed a degree even just to be able to sweep up but these days anyone can make a living – and a really good one – without any formal education. College degrees aren’t worth what they once were, and I think fewer and fewer people are going to be spending such astronomical amounts of money on them. But it is still going to be a long time before traditional colleges are obsolete so if this is something that is in yours or your kids’ future, then it makes sense to start saving now. There are funds and education accounts that have tax benefits. Dave recommends 529 College Savings Funds and Education Savings Accounts, or ESAs. Again, I know nothing about these so do your research first. Step 6 is to pay off your mortgage. This is probably the one that will take the
longest but will have huge, huge benefits. It’s something that I am currently working towards. Having been through all of the previous steps, you will probably find that you now have a reasonable amount of disposable income. All your other debts are gone so your expenses will have decreased, in some cases dramatically. It’s time to start putting that extra money towards your mortgage so that you can clear it once and for all. And the final step on your way to
financial freedom is to build wealth and give generously. You are debt free, you have an emergency fund, your kid’s college fees are covered, and your retirement is taken care of. Now’s the time to really have some fun. Your income can now be used to invest, to grow exponentially, and to help those less fortunate than you. Investing is a subject that I can’t speak competently to, so I will link below to Dave’s advice on the topic. But, certainly, donating a portion of your income is a very worthwhile and noble gesture. After all of the previous steps, you will find that your life is a lot more comfortable and, let’s face it, you can’t take it with you, so what better way to spend it than to
improve someone else’s quality of life. To give someone else a second chance or
hand up or a dig out. You know, to use your good fortune to help somebody who is currently back where you started… or worse. Those are Dave Ramsey’s 7 steps to help you get out of debt and find financial freedom. They are very instructive, very practical – just what I am all about – but they also speak to a deeper purpose – giving back. The end goal isn’t just to make yourself massively wealthy, it’s to use that wealth to help others. Pick up your debt management
printable in the description box below and, before you know it, you will be eliminating debt, building wealth, and making the world a better place. I will also link Dave Ramsey’s website and books below if you want more information, as well as his free budgeting app. All the good stuff is in the description box. If you found this video helpful or informative, or maybe you’re doing Dave Ramsey’s 7 steps, or maybe you have a tip of your own to share, or a particular topic that you would like me to cover next, then please do let me know in the comments below. And subscribe for more practical advice on living a simpler, happier life. Until next time, here’s to financial freedom. Go raibh míle maith agaibh, agus feicfidh mé sibhse go luath. Slán. [music]

24 Comments

  1. Grammy Vulture says:

    Ya! This was such a quick once-over the big list. Thank you. maybe some sno-balling will happen in my future?πŸ’–πŸ‘΅βœŒ.

  2. K H-C says:

    So I love, love, LOVE that necklace. SO cute!

  3. J Dyer says:

    I haven't ever read Dave Ramsey's books or gone to a seminar, but I have heard him on the radio a few times. I am currently working on the debt snowball, but I am taking debt from highest interest rate to lowest. I know that's not the recommended way, but I feel better doing that. I'm almost done with the credit card debt I foolishly built up and ready to move on to my student loan, then my car and that step is done.

    We have a rental house on the market and my husband wants to put the profit we make (after realtor fees and taxes) on our house mortgage, since it's a big amount. But, I think we should pay off our debts. We'll work it out.

    My husband and I keep separate finances, btw. We pool together money for shared expenses, but that's all. Yes, we're strange.

  4. Stephanie Alex says:

    Dave Ramsey plan works! I took financial peace university and went to a conference. People β€” try it!!!!

  5. K H-C says:

    We have followed Dave Ramsey for a while now and have no debt outside of our mortgage. We still stick to a tight budget and save, save, save, which means we pay cash for EVERYTHING. Working on paying the house off early and I can't wait to be done with the mortgage! Likely we have 4 -5 years left to go, but will still have it paid off a decade or so ahead of schedule. It was a LOT of work to get this this point, but well worth it. Thanks to introducing folks to Dave and his teachings! I am confident that anyone who applies his teachings will do well, if they just put in the time and effort to get there.

  6. pokk70 says:

    Great tips! I think the snoball debt paydown is a great system to use for anyone that is feeling overwhelmed by their debt. The structure and results are easy to follow for anyone wanting to figure out how to start paying off debts. Thankfully I don't have any debt. I paid of my student loans and car loan years ago and it was the best thing I ever did. I dont' own a home so I don't have to worry about a mortgage. TFS. 😊

  7. Peter8aus8Berlin says:

    Do not make any debt in the first place. If there is money you can borrow without interests nor other cost – maybe. But the moment you borrow 100 bucks and you have to pay 110 bucks back you lost 10 bucks for ever. Less kids less expenses.
    Donating: You draw out of an evil system (which CAUSES other people's misery in the first place) more many (thus creating more mischief) than you need. Then you go by and donate some percentage (never 100 or more) of the damage you done to charity. Why is this noble? Only if you make the least impact then you make the least impact. GDP and energy consumption are virtually the same thing. You lower your income (and thus your consumption – donating is consumption too) you lower energy consumption.

  8. Bri San says:

    I don't like that guy. It's all common sense. He's way overrated.

  9. Kiki Hammond says:

    Just started listening to Dave the past 4 months, so happy you are sharing this with others. For those who don't understand investing, I strongly recommend reading a book about investing (there are many, including the "For Dummies" series), and then find a good financial advisor and have them help you. Always remember though, it's your money, so you should understand and agree with what the advisor is telling you. Even advisors make mistakes. I had a panicky one once that wanted us to sell stock when it was going down, and I said no, and that stock today is worth double. I knew the company was solid, and I was right. So, remember, you can say no, you don't have to take their advice, but do listen to them and have them explain their rational to you. Over time, as you learn more and become more comfortable, you'll be more confident and feel better taking the reins and making decisions.

  10. Jade Star says:

    Thanks for the Snowball printable. Putting it on paper where you can look at results and something to actually follow sounds like a good idea. Thanks for the video.

  11. Katie M says:

    For one of my payments recently, they contacted me out of the blue in Jan 2018 and offered a 20% reduction in the amount owed if it could be repaid within 3-6 months. The offer was valid from one month from the date of the letter. I accepted and now it is gone and done! 😊 Just goes to show you never know what boost the universe might send you on your journey!

  12. Rachel McE says:

    If you don't understand investing, look for a Ramsey "Endorsed Local Provider" (ELP) financial adviser who can explain it to you and help you get your money in the right funds. This was a game-changer for us!

  13. martha salter says:

    I like Dave Ramsey for getting out of debt and having an emergency fund. One thing he doesn't talk about though is that you actually DO need a credit score in today's world, so I would bear that in mind when reading his plan. I'm not so enamored of his investing advice. I recommend "The Index Card: Why Personal Finance Doesn't Have to Be Complicated," " The Simple Path to Wealth: Your road map to financial independence and a rich, free life" (both likely available at your local library and certainly on Amazon). Also the Frontline documentary "The Retirement Gamble" available on YouTube (https://www.youtube.com/watch?v=cvd1dleZA5k). I have nothing to sell here, just recommending what I believe is common sense, and these are easy to understand.

  14. Kathleen Kline says:

    Dave Ramsey's snowball works very well, especially combined with a good budgeting system. I am constantly amazed at how many people (both women and men) pay absolutely no attention to bill paying in their household, preferring to let the other partner deal with it. Also, combining accounts with someone you don't have a legal contract with (yes, marriage IS a contract) is just plain stupid in my opinion. No matter how much you love someone, they can walk out the door and leave you in a financial mess unless you have a legal contract obligating them to pay at least some of the debt.
    One reason Dave's system works as well as it does is the psychological boost you get knowing (and seeing on paper) that each debt is paid in full. It gives you impetus to keep working on your debt-free goal. And, having money stashed for emergencies is a tremendous stress reducer should you not have income for awhile.

  15. J.M. Thomas says:

    I use the debt snowball and have one debt to go. Here in Australia we also have a finance guru called the Barefoot Investor. πŸ™‚

  16. Granny Squares & Wagon Wheels says:

    Thanks, you did a great job of summarizing Dave's principals.

  17. Sarah Reason says:

    But what do you do when your monthly bills are more than your income? Id love to be able to set aside $1000 in an emergency fund, but unfortunately these tips dont help people who live paycheck to paycheck.

  18. Carol Collett says:

    β€œFree” printable? It β€œcosts” me my email address, which has a small value to me. I used to give it away freely, but that caused a cluttered inbox which does not spark joy for me.

  19. Blush Muffin says:

    Talk about perfect timing. I'm struggling to keep even $200 in a savings account due to unexpected expenses. My car decided it wants to leak fluid, for example, and I have NOTHING put aside to fix it. We're in the process of revamping our finances. I'm looking to figure out which bills are still pending and which are not. But first, my car needs to be fixed.

  20. Catherine Kirby says:

    I definitely want to start taking these steps! Thank you for everything here!

  21. Rebecca Jane says:

    Thanks for keeping me company while I shave my head!

  22. Olga Ortiz says:

    GOD BLESS YOU

  23. Wanda Richardson says:

    Woohoo! I can skip steps 4, 5, 6 & 7πŸ™Œ

  24. Catie F says:

    So here's a thought for transiting from step 2 to step 3, that probably others have already thought of. Take that debt payment money and have it automatically transfer to the emergency fund account.

    For example, due to circumstance I have a direct deposit to a car payment account. Car has been paid for and now it has evolved into an emergency fund account with that money I'm already use to not having in my main account.

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