Dave Says… Getting Started

Dear Dave,

Should I catch up on my past due bills before saving up $1,000 for Baby Step 1?


Dear Sharyn,

That’s exactly what you should do. Get current or make payment arrangements with everyone who’s willing to work with you first. In the process, make sure you’re keeping your own living necessities in mind—food, shelter, clothing, utilities, and transportation.

After you’ve done that, and saved a beginner emergency fund of $1,000, start your debt snowball and pay off all your debts from smallest to largest, except for your home. That’s Baby Step 2. In Baby Step 3, you’ll save up and increase your emergency fund from $1,000 to a full three to six months of expenses. Once you reach this point, you can really start looking toward the future.

In Baby Step 4, start investing 15 percent of your income into Roth IRAs and other pre-tax retirement plans. College funding for the kids, if there are any, is next in Baby Step 5.

Baby Step 6 is a big one, because this is where you pay off your home early. But Baby Step 7 is the real deal. This is when you’re completely debt-free, and you’re able to build wealth like crazy and give with outrageous generosity!


* Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 16 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

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