Here’s What’s Wrong With Dave Ramsey’s 7 Baby Steps

And here’s how YOU can level up your financial health x 2

I have read many of Dave Ramsey’s books, and at the beginning of my journey to financial freedom, his advice seemed sound, but as I went along, I started to feel some resistance to following all 7 baby steps. This leads back to my philosophy that you should question everything and decide which methods will work best for you and your life.

Before we jump into my dissent, though, let’s take a quick dive into a breakdown of Dave Ramsey’s 7 baby steps.

What Are the Baby Steps?

“Dave Ramsey’s 7 Baby Steps will show you how to save for emergencies, pay off all your debt for good, and build wealth. It’s not a fairy tale. It works every single time!”

Baby Step 1*
Save $1,000 for your starter emergency fund.

Baby Step 2 *
Pay off all debt (except the house) using the debt snowball.

Baby Step 3 *
Save 3–6 months of expenses in a fully-funded emergency fund.

Baby Step 4 *
Invest 15% of your household income in retirement.

Baby Step 5 *
Save for your children’s college fund.

Baby Step 6 *
Pay off your home early.

Baby Step 7 *
Build wealth and give.

Where does Dave Ramsey go wrong?

Out of the seven baby steps, there are five that stand out to me the most that you should question thrice before following:

Baby Step 1: Save $1,000 for your starter emergency fund.

The $1,000 emergency fund problem is that it's a high-risk fund while you’re paying off all of your debt. You need more than $1,000 to cover yourself while you pay off your debt. One emergency (e.g., medical, car repair, kid expense, school expense, ticket, etc.) can wipe an entire fund like this out cold.

I talk about this more in Baby Steps 2 & 3.

Baby Step 2: Pay off all debt (except the house) using the debt snowball.

Instead of jumping the gun and paying off all of my debt when I got my first job out of college, I focused on building a one-year emergency fund and investing. It was the best decision I ever made because you can’t get one thing back, and that’s time — the most salient factor for an investor.

While I funded my one-year emergency fund, I invested and paid down my debts. Now, I know it sounds like major context switching is occurring here, but I’m an innate multi-tasker, and it worked exceptionally well for me.

The problem with focusing on paying down all your debts is once you’ve paid everything off, you don’t have anything in your investments or savings (and you also lost out on the magic of compound interest working for you). I wasn’t going to give up a golden nest egg for debt.

Find a way to do both [pay your debt and invest]. Remember, compound interest, in combination with time, is your best friend; don’t take it for granted. Yes, the interest rates on debt can work against you, but you can offset it by putting in place investments that work for you.

Baby Step 3: Save 3–6 months of expenses in a fully-funded emergency fund.

A person should have no less than a one-year emergency fund because sh*t happens. A 3–6 month emergency fund is an excellent start — especially considering most people don’t even have $500 in their account. Still, when you think of the bigger picture, a one-year emergency fund provides you more flexibility, peace of mind, and time.

Let’s say you lost your job. Instead of accepting the first job offer that comes your way, you can be pickier and choose the job that will offer you the best opportunity. You will also experience less stress in your job search because your expenses (and the expenses of your dependents — if you have any) will be covered for more than 6 months.

Imagine how low your anxiety levels will be with a one-year emergency fund versus a $1,000 or 3–6 month emergency fund.

An Idea — Use the Credit Card for GOOD
You don’t want to go into debt when you experience an emergency, but the credit card can be used as an emergency fund before your liquid cash. I leveraged my credit card as an emergency fund when I had to leave a toxic job. I wanted to keep my cash reserves. After I got my job, I immediately paid down the credit card balance to zero.

Taking It A Step Further
After you build out your one-year emergency fund, pay off your debts, and can save 25% percent of your income, it’s time to graduate to your second-degree blackbelt.

Level Up x 1: Build out a 2-year emergency fund.
Level Up x2: Save and invest 50%+ of your household income.

Baby Step 4: Invest 15% of your household income in retirement.

15% of your household income will most likely not be enough for you in retirement. Instead of going with the 15% that Dave Ramsey recommends, determine the financial number you would like to have in retirement, and then decide what percentage of your income that needs to be. But remember, as your income grows, the amount you save for retirement will also grow. I think 25% or more of your household income is a better place to start, but that also means you will need to sacrifice your expenditures in other areas potentially.

Baby Step 5: Save for your children’s college fund.

If you can’t afford to pay for your kid’s school or are behind on your financial goals, the last thing you need to do is fund your kids’ schooling.

If you have just started saving for retirement and you’re in your 40s or 50s, please forget about investing in your kids' college education for now.

Let your kids pay for their own school; it’s precisely what I did, and I’m grateful for it. I didn’t take my education for granted. I am now in the positive net worth bracket because I decided not to allow student loans to impede my financial goals negatively.

I get it; parents want the best for their kids. But looking back, I sure wish my parents took better care of themselves. I don’t need them to take care of me to the point they hurt themselves in the long run; they need to focus on their financial health so they can be taken care of for a change.

Parents, I encourage you to open your mind to a different perspective coming from someone whose parents opened up a retirement account at the age of 14 but weren’t investing with 100% effort in their own retirement. Sounds like a complete sham to me.

College students, be independent, and learn how to create income, and also save your income. When I graduated from school, I got a job that paid 70k. Granted, I did enter into the tech world, but I still also had other entrepreneurial ventures that helped my income to be higher than a typical graduate. I wasn’t running to mommy and daddy for money, though. We got to grow up at some point and ensure our parents are prioritizing their financial health instead of compromising it.

Baby Step 6: Pay off your home early.

If you want to throw all of your money into an intangible or elusive “asset” like a house, go ahead, but think twice before you do and ensure it's worth it. I see a home as something to throw away money on, which is why I’m choosing to invest in REITs over physical properties for now. However, if I were to get into physical real estate, I am most interested in house-hacking.

Many people invest all of their money into their homes, which requires loads of money, upkeep, and brings on many hidden costs. Home values inflate your net worth because you can’t physically tap into the equity.

So, for all people who have houses that shot up in worth with the recent pandemic, some cashed out and sold their homes, but many are still living in their homes, thinking they’re sitting pretty when they’re just sitting on inaccessible cash. Now, if you invested that equity into another property to bring in positive cash flow, that’s a different story. Now you’re making the system work for you.

Baby Step 7: Build wealth and give.

1 — Build Wealth: Though it is easier to focus on this step when you have no debts, the development of wealth starts from day one while you establish your emergency fund, the habit of investing, and pay off your debts. It’s a continuous baby step, not the final.

2 — Give: Why wait to give? Give and be generous now; it all comes back to you sooner or later. It can be more challenging to implement the habit of generosity as you accumulate wealth, which is why you should start practicing your generosity now while you have fewer resources.

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Destiny S. Harris is a writer, poet, entrepreneur, teacher, and techie who offers free books daily on amazon. Destiny obtained three degrees in political science, psychology, and women’s studies. Follow her on Instagram, Facebook, or @

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.