What is Dave Ramsey’s Advice?

Who Is Dave Ramsey?

Dave Ramsey is an American finance personality, radio show host, author, and businessman.Dave Ramsey

One of his most famous books, and The New York Times bestseller, is The Total Money Makeover. This book teaches people how to restart their finances by focusing on any debt held by the reader. Giving the reader a money makeover and teaching the reader ways to get out of debt, staying out of debt, and correcting myths about money.

Dave Ramsey is an advocate for the debt snowball method where the debtors pay off their lowest balances first.

What is Dave Ramsey’s Advice?

As we know, Dave Ramsey is a strong advocate for a debt free life, by using the debt snowball method by paying off the smallest balance of debt. By paying off the smallest amounts of debt first you start to simplify your debts on your debt free journey.

50/30/20 Rule


As well as this advice Dave Ramsey enjoys preaching about the 50/30/20 rule.

In his 2005 book called All Your Worth it talks about a simple budgeting method which divides your spending and saving categories: Needs (50%), Wants (30%) and savings (20%).

50% Needs

We all have needs in our lives, though the definitions of needs vary from person to person. This is where a budget comes into play. Having a budget will allow you to visualise your spending habits and whittle down your list between needs and wants. Needs are the things which would majorly affect your life if you didn’t pay from them such as: shelter, food, utilities, transportation, insurances and minimum payments on debts.

Expenditures which are needed for a functioning life fall into the needs category.

30% Wants

Sometimes the line between wants and needs can be blurry. You sometimes believe that an action you carry out month to money is a need, as its became part of your every day life. When in fact its a want action that you do frequently.

Habits which fall into the want section can include an unlimited data plan (mobile), eating out, new clothes or that daily coffee on the way to work.

Wants can really be described as the actions which give your life a little jazz, a little fun and interesting.

Its normal to have wants and in fact important to have hobbies and habits where spending the money with worth the pay off.

20% Savings

Having a consistent savings is important as there are many aspects of life which need saving for.

The 20% savings category cover savings goals such as retirement investments, emergency fund saving, general savings goals such as a house or a car but the aspect Dave Ramsey focuses the most upon are the extra debt payments.

Having a 20% savings rate is impressive in this day of age but aiming for 20%+ savings rate is important to get you feeling safe and secure with your money today, tomorrow and down the line.


Needs, Wants and Savings

What are Dave Ramsey’s baby steps?

Baby Step 1

Dave Ramsey’s Baby Step 1 is about creating your emergency fund. The advice is to build up an emergency fund first to £1,000 or $1,000. This is key as having an emergency fund is a solid base to any financial plan.

Baby Step 2

Once you have your starter emergency fund in place, next is to attack any non-mortgage debt. Reducing your spending on debts means you will free up those monthly payments to debt and then you are able to put that free cash flow towards other goals.

Dave Ramsey suggests using the Debt Snowball Method.

Baby Step 3

Once you have completed the Debt Snowball Method of paying off all your non-mortgage debt you can start focusing back on building up a secure emergency fund.

As we seen with step one, you would have build an emergency fund of £1,000. The next step to your emergency fund is to build it up to cover 3 to 6 months of expenses in a fully fledged emergency fund.

Having 3 to 6 months of expenses saved will create a solid financial base where, in the case of losing your job, you have a 3 to 6 month period of being able to pay your bills, even if you have a hard time finding a job.

Baby Step 4

Now you have a fully fledged emergency fund you can look at investing 15% of your take home pay (out of your 20% savings of the 50/30/20) towards retirement. Building a future life that most people cant fathom during a working life.

The UK government have been pushing for workers in the UK to take their retirement more seriously by now making new employees enrol into an opt-out retirement scheme. In 2021 almost half of Brits (47%) made sure that they are saving for retirement. – Finder

Baby Step 5

Now you have your retirement sorted with 15% going towards retirement, if you have children you can look at securing their future. Dave Ramsey talks about step 5 of saving for your children’s college funds.

This step is more of an American approach, where in the UK college is free. The alternative to this is saving money for your child to help pay towards University fees, if your child chooses to pursue going to University.

Figures from the Department of Education show for the years 2017-18, 50.2% of people go onto higher education, so saving for your children to go to University may not be a bad idea.

Baby Step 6

Step 6 of Dave Ramsey’s Baby Steps is paying off your home early, in the long run over paying on the mortgage can save you thousands if not tens of thousands of pounds over the term.

In the UK the majority of households (64%) are owner-occupier, meaning that the occupants either own outright or own the home with a mortgage and equates to 24.7 million households. – Uswitch

Paying off your mortgage is a long term goal, so results wont be seen over night but following Dave Ramsey’s other steps, your mortgage will be the last remaining debt left in your liability category.

Baby Step 7

If you find yourself on Baby Step 7 then congratulations! By this point you should have no debt to your name and great monetary wealth. In this stage you can now focus on free cash flow from becoming debt free to building your wealth and giving.

Step 7 is when things become really exciting and you are free to build what you wish as you have made your step 1 dream become a reality.


Dave Ramsey takes a hard stance on debt, that anyone and everyone should be debt free or strive for a debt free life. Following his 50/30/20 rule along side the Baby Steps is a great way to become debt free and have a more fulfilling life.

For the normal person Dave Ramsey’s steps is a great way to balance your financial life and go from consumer (consumer of debt) to a debt free life where you can give more, to your dreams/desires or back to the community around you.

The steps Dave Ramsey lays out may not be the route for you, as personal finance is exactly what it says on the tin, it is personal.

Though he advocates for The Debt Snowball method of paying off debt, another way to pay it off is via The Debt Avalanche method.

While The Debt Snowball method focuses on paying off the smallest debt first, The Debt Avalanche method focuses on paying off the highest interest rate first. Paying off the highest interest payments means you are slowly decreasing the interest payments. Though if you don’t have a large consumer debt the amount saves may be insignificant and may come down to how many different debt accounts you hold.

A great book which can help your relationship with money is The Psychology of Money by Morgan Housel. A book which gives you 18 lessons about your thinking and relationship with money. Check out our break down on The 18 lessons of the Psychology of Money.

If you are looking for ways to help you save your cash towards your goals and to build up savings then check out our article on the 5 Best Ways to Save Cash.

5 Best Ways to Save Cash


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