dave ramseys baby steps m network style

March 7th, 2008

Dave Ramsey’s Baby Steps: M-Network Style

Over the past two weeks, the members of the M-Network have been reviewing Dave Ramsey’s Baby Steps to getting out of debt and putting yourself on the path to financial freedom. Come with me on a journey through Ramsey’s methods as evaluated and reviewed by the M-Network, and start or continue the path to financial peace.

First up was an overview of the entire project at Cash Money Life. Steps 0 – 7 were introduced and a short summary of each and where to find them was provided. To travel the road from drowning in debt to financial freedom, we need a road map, and this is where we find it.

Next up is Baby Step 0, which you won’t find on any list of steps but is truly imperative to accomplish the debt elimination goal: No More Debt. Ana at DebtFREE-Revolution and SGM at Single Guy Money both provided their viewpoints and thoughts on this important mindset shift – Ana as a devoted follower of Dave Ramsey and SGM as an “outsider” looking in. Both gave interesting commentaries and experiencesabout what the no debt mindset entails and the successes they’ve had with it.

We then travel to Gather Little By Little, where Gibble shares with us Baby Step 1: The $1000 emergency fund. This is a much-debated step – there are those who feel that everything should go to debt reduction and credit should be used in an emergency, there are those who follow the $1000 plan, and there are those who feel that $1000 is much too small, even as a temporary emergency fund while getting out of debt. Gibble gives his viewpoint, which is an emergency fund slightly greater than $1000 – but if you read Gather Little By Little, you know Gibble has 6 kids! That is a lot of people to be responsible for. We all have to adapt advice to our own circumstances and what makes sense for us.

Baby Step 2 was reviewed by me right here, and aptly it is about the Debt Snowball and using this method to eliminate all non-mortgage debt. I am not a Ramsey follower per se, in that I haven’t read much of what he’s written beyond the occasional website, but I am a fan of a snowball-like approach to debt reduction. I choose to aim my snowball from highest interest to lowest, because that is what works for me. Ramsey’s snowball is smallest balance to largest, for the psychological benefit of frequent victories. Again, know thyself. Know what works for you, and adjust accordingly. The snowflaking concept I discuss so much is truly a spinoff of the snowball, focusing on adding more and more small sources to the snowball as snowflakes to increase its effect.

We then go to Being Frugal to learn about Baby Step 3: The 3-6 month emergency fund. But wait, didn’t step 1 say $1000 for an emergency fund? That was when we were in debt. At the end of step 2, we’re debt free (except our mortgage if we have one). Now we need to save more and more and more until we have a fully funded emergency fund, which is 3-6 months of expenses. Not 3-6 months of salary, but 3-6 months of expenses, which is not (usually) quite the same. Lynnae goes through why you need it, where you should put it, and what isn’t an emergency.

Baby Step 4 is saving 15% of your salary for retirement, illustrated with great graphs by The Dough Roller. Now that we are out of debt and prepared for emergencies, we need to make sure we are prepared for our future as well. DR’s graphs really illustrate the power of compound interest and how time can really help you. It motivates me to save as much as I can as soon as I can. Too bad I’m still on baby step 2…

My Two Dollars tackles Baby Step 5: Saving for college for your kids. Ramsey makes the point that you need to save for retirement first (Baby Step 4) because your children have options for college, and you don’t have as many for retirement. But if you can save for college for your kids, the no-debt guru advocates helping your kids start off their adult lives with no debt as well. David shares his experience in his post with having parents who helped with his college education.

But what about that mortgage? Baby Step 6 is discussed at Moolanomy, which is Paying Off Your Home Early. Pinyo really lays out the hard facts for and against mortgage prepayment and comes to the conclusion that like many things, it is not a cut and dried decision, and really depends on the individual circumstances. For me, I fall into the “pay off early” camp, although I am a long way away from Baby Step 6 right now.

Which brings us to Baby Step 7: Build Wealth and Give! Plonkee Money does a great job of explaining how once you’ve got everything else under control, your job is happiness. Yours, those around you, and others in need. Build your wealth through investing, and give your wealth away to those less fortunate. As Plonkee so elegantly says: Step 7 is the rest of your life.

I hope the overview of Dave Ramsey’s Baby Steps was informative and enlightening, and contributed to the understanding of how to achieve financial peace. When money isn’t a concern or a worry but instead is a means to an opportunity, we will all have arrived. If you missed a step make sure to visit the above links to catch up on every detail!

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14 Responses to “Dave Ramsey’s Baby Steps: M-Network Style”

  1. Step 1, getting $1,000 dollars in an emergency starter fund is vital to accomplishing the other seven steps. So many people start throwing all their extra money at credit card debt without creating an emergency fund, next thing you know something comes up and they don’t have the cash to cover it. That means they use their credit card and now they’re right back where they started!

  2. It’s interesting that retirement savings isn’t covered until Step 4, since a lot of the financial advice I’ve read has stressed that you need to start contributing to it as soon as possible (certainly before all debts are paid off). Maybe not 15% worth, but at least enough to get the full company match in a 401(k), if you have one. I’m still in debt, but I couldn’t imagine holding off on retirement contributions for a few years until I’m debt-free. To me, the potential compounded interest will be worth it. Of at least, I hope so! :-)


  1. Dave Ramsey’s Baby Steps
  2. Interesting links | rocket finance
  3. Dave Ramsey’s Baby Step 6: Pay Off Home Early | Moolanomy
  4. Dave Ramsey’s 7 Baby Steps | beingfrugal.net
  5. Dave Ramsey Baby Step 1 $1000 Emergency Fund
  6. Dave Ramsey Baby Step 5 – College Funding For Children. | My Two Dollars
  7. Baby Step 2: Pay Off Debt Using the Debt Snowball | I’ve Paid For This Twice Already…
  8. Excellent Overview of Dave Ramsey’s Baby Steps
  9. Dave Ramsey’s Step #4: A Visual Guide to Saving 15% for Retirement in a Roth 401(k)
  10. How to Get a Payday Loan (if you must) | Smarter Money Management
  11. Debt, Savings, and the Balance Are Not One Size Fits All | I’ve Paid For This Twice Already…
  12. * Dave Ramsey’s Baby Steps Explained