An Analysis on the Seven Baby Steps for Obtaining Wealth by Dave Ramsey

If you are a regular reader of this blog, then you know that I am a supporter of the teachings of Dave Ramsey. There are many bloggers out there who think that Dave Ramsey has too much of an “emotional” approach to personal finance and neglects the math behind personal finance. There is some truth to that, but Ramsey doesn’t ignore the math. He embraces the premise that he believes that 80% of personal finance is behavior-based and 20% is about the numbers. A group of personal finance bloggers have analyzed the seven baby steps that Ramsey teaches for becoming wealthy. I thought that I would pass the links on to you to get their take on each step.

If you read my About Me page, you’ll read that it was Ramsey’s radio show that changed my way of thinking towards managing money when I was in college. I was an idiot when it came to money, and the appeal to Dave Ramsey is that he gives you straight talk and he’s not afraid to tell you when you made a big mistake. I started listening to all of the people calling in and yelling, “I’m DEBT FREE!!!”, and I wanted a piece of that sense of freedom that those people conveyed in their phone call. It was those long nights driving around town and delivering pizzas that made me want to change the way I handled money and throw out my credit cards. Since then, I’ve paid off $12k in credit card debt, and my wife and I have always carried an initial emergency fund between $2,000 to $3,000 while getting out of debt. My wife graduates from physician assistant school in June, and we will then start our major debt-free plan to pay off $55k in student loans. We’re planning on doing it in 18 months, using Ramsey’s plan. We’ll pay off the smaller student loans first, and then tackle the two big ones last. I will start giving monthly updates about our progress beginning in August.

The one controversial step that many people disagree with Ramsey about is paying off your mortgage early. I encourage you to research why he gives this advice. The whole idea is that the tax deduction savings does not justify the savings you’ll have from NOT having a mortgage payment. Plus, you’ll notice that this is step #6, so he doesn’t encourage people to pay off the mortgage before starting your retirement and college fund investing. What I’ve learned from reading many personal finance book is that Ramsey gets the emotional part about personal finance right. To say that there is no emotional and behavioral component to personal finance is very naive. Making a conscious effort to stop spending too much, stay away from debt, and save for the long-term requires a strong emotional and behavioral response to wanting something better with your money. Ramsey gets this, and that’s why his books and educational tools are sweeping the nation.

  • Glblguy From Gather Little by Little

    Thank you for the link and for including the M-Network’s articles on the Baby Steps!

  • Debt Free Revolution

    Thanks for the link love :) and your story sounds almost exactly like mine! I just finished baby step two about 2 weeks ago, but am still scooting around town taxiing pizzas to hungry people because I can’t wait to get to baby steps 4-5-6! I’m a “pay the mortgage OFF” blogger ;)

  • Milk Your Money

    I really enjoy getting another point of view on these sorts of things. I may refer to this article in the future if thats ok? I’ll ping you before I do… -Ben