Money, step by step
Where are you, and what is the next faithful step?
Try it
You are on Baby Step 2Put in your own numbers
Pay off $8,500 of debt, smallest balance first.
The seven steps, with your numbers
Open a step for why it comes where it does, what helps, a verse and a short video.
Baby Step 1: Set aside $1,000 for small emergencies$1,400 saved of $1,000: done
Why this step
So a flat tire or a doctor’s bill gets paid in cash, not on a card. Ramsey’s Baby Step 1 page says the $1,000 is not meant to cover every emergency: it breaks the habit of using debt as the backup plan. He aims to finish it in a month or less (Baby Step 1).
What helps
- Look at the last three months. Add up each kind of spending and divide by three. “Help me add it up” under question 3 does the sums.
- Sell what you do not use, pick up an extra shift, and stop eating out for a season.
- Until the $1,000 is there, pay for food, utilities, shelter, transportation and the minimum on each debt, and pause the rest. Ramsey calls the first four the Four Walls.
Know well the state of your flocks, and pay attention to your herds: for riches are not forever, nor does the crown endure to all generations.
Proverbs 27:23-24In context. Advice to a herdsman: know the condition of your flocks, because riches do not last forever.
Other planners
Here the views agree. Fidelity’s plan also starts with a cash buffer of $1,000 (Fidelity).
Baby Step 2: Pay off every debt but the house, smallest first$8,500 to pay off, smallest first
Why this step
Ramsey’s reason: with no payments, more of your income is free to save, invest and give. List every debt but the house from the smallest balance to the largest, pay the minimum on all but the smallest, and roll each freed-up payment into the next. His Baby Step 2 page says most people who go all in finish in 18 to 24 months (Baby Step 2).
What helps
- Stop borrowing while you pay off: no new cards, balance transfers or personal loans.
- Put savings above the $1,000 on the debts. Ramsey puts any tax debt first, whatever its size.
- If you cannot make a minimum, call the lender before it calls you, and ask about a hardship plan.
The rich rule over the poor. The borrower is servant to the lender.
Proverbs 22:7In context. A plain observation of how things work: the rich rule over the poor, and the borrower serves the lender.
Other planners
The avalanche, highest rate first, costs less interest; Ramsey picks the smallest balance first for the quick wins. The snowball below runs both on your debts. For the employer match, see step 4.
Baby Step 3: Save 3 to 6 months of what you spend3 × $3,000 = $9,000; 6 × $3,000 = $18,000
Why this step
A fund for big trouble, like losing a job, so it does not send you back into debt. Ramsey’s Baby Step 3 page says it covers essentials only: housing, utilities, groceries, insurance, transportation and vital bills. Add those up, then multiply by 3 if your job is steady, or by 6 if your pay varies (Baby Step 3). “Bare bones” under question 3 adds up just those.
What helps
- Roll the whole debt snowball payment into savings.
- Keep it where you can reach it fast, like a high-yield savings or money market account, not in investments.
- Before you use it, Ramsey asks three questions: is it unexpected, is it necessary, is it urgent?
The plans of the diligent surely lead to profit; and everyone who is hasty surely rushes to poverty.
Proverbs 21:5In context. The careful plans of a hard worker lead to plenty; hasty shortcuts lead to want.
Baby Step 4: Put 15% of income before tax into retirement15% × $5,000 = $750 a month
Why this step
With no debts but the house and a full fund, Ramsey invests 15% of household income for retirement. His Baby Step 4 page says to take the yearly income before tax, times 15%, then divide by 12 for the monthly amount. An employer’s match does not count toward the 15% (Baby Step 4).
What helps
- Have it taken from each paycheck automatically.
- Put in at least enough to get any employer match; Ramsey calls it free money.
- Do not cash out early or borrow from it. His page warns that early withdrawals bring taxes and a 10% penalty.
A faithful man is rich with blessings; but one who is eager to be rich will not go unpunished.
Proverbs 28:20In context. A faithful person is richly blessed; one in a hurry to get rich will not go unpunished.
Other planners
On the match, Ramsey waits until this step. Fidelity takes the full match before paying down card debt (Fidelity), and the Money Guy Show’s order puts the match second, ahead of high-interest debt (Money Guy). The video sets the two plans side by side.
Baby Step 5: Save for your children’s collegeNo set amount: an ESA or a 529 plan
Why this step
Ramsey puts retirement before college: your children may not go to college, but you will want to retire. He names two accounts that grow tax-free when spent on school: an Education Savings Account (ESA), up to $2,000 a year, and a 529 savings plan (Baby Step 5).
What helps
- Set a goal from real prices: community college, in-state and out-of-state, public and private.
- Fill out the FAFSA as soon as it opens, for grants and aid.
- Have your teen apply for scholarships like a part-time job, and look at AP and dual-enrollment classes for credit in high school.
A good man leaves an inheritance to his children’s children, but the wealth of the sinner is stored for the righteous.
Proverbs 13:22In context. A good person leaves an inheritance to their grandchildren.
Baby Step 6: Clear the mortgage ahead of timeRenting: no mortgage
Why this step
With retirement and college saving going, put any extra money on the mortgage. Ramsey’s Baby Step 6 page says not to pause or lower those two to do it, and that even one or two extra full payments a year shorten the loan and save thousands in interest (Baby Step 6).
What helps
- Mark each extra payment for principal only.
- Half the payment every two weeks makes 13 full payments a year instead of 12. Never pay a fee to set that up.
- Do not use retirement money for it: you would pay income tax and a 10% early withdrawal penalty.
Prepare your work outside, and get your fields ready. Afterwards, build your house.
Proverbs 24:27In context. Get the work that feeds you ready first (the fields), then build your house.
Other planners
Fidelity weighs the rate first. At 6% or more it pays debt down before investing more; below 6%, investing the extra money may come out ahead (Fidelity). Its plan names mortgages among the debts to check against that line (Fidelity).
Baby Step 7: Grow wealth and give generouslyMany start giving at 10% × $5,000 = $500 a month
Why this step
With the house paid off, Ramsey’s Baby Step 7 page says money is for three things: giving, investing and having fun. It sets no percentage for giving; many people start with a tenth and give more as they feel led (Baby Step 7).
What helps
- Set a percentage for giving and one for fun at the start of the year, and keep budgeting.
- Help family with gifts, not loans, and only gifts that do not undo your own progress.
- Keep investing simple, and pay cash for any real estate.
Charge those who are rich in this present world that they not be haughty, nor have their hope set on the uncertainty of riches, but on the living God, who richly provides us with everything to enjoy; that they do good, that they be rich in good works, that they be ready to distribute, willing to share; laying up in store for themselves a good foundation against the time to come, that they may lay hold of eternal life.
1 Timothy 6:17-19In context. Paul’s charge for the rich: do not be proud or put your hope in uncertain riches; hope in God, do good, and be generous and ready to share.
Other planners
Christians differ on whether a tenth is the rule for today. How much to give sets out both views.
The floors are Dave Ramsey’s 7 Baby Steps, put in our own words from his Baby Steps page and its step pages. This site is not affiliated with or endorsed by Ramsey Solutions. Other planners order some steps differently; Pay off debt or invest? sets the views side by side.
Snowball or avalanche
Two ways to pay off several debts with the same money each month. Pay the minimum on every debt, and put every extra dollar on one target. When that debt is gone, its payment rolls on to the next.
The snowball aims at the smallest balance first. It is Ramsey’s method. The avalanche aims at the highest rate first. Say these are your debts: change them to yours.
| Measure | Snowball | Avalanche |
|---|---|---|
| Debt-free in | ||
| Interest paid | ||
| First debt gone |
Then why would anyone choose the snowball?
Ramsey’s answer on his Baby Step 2 page is that “personal finance isn’t just math”: a debt gone early is a win you can feel, and wins keep you going (Ramsey, Baby Step 2).
There is some evidence for the idea. A 2012 study of people in a debt settlement program found that those who closed out whole accounts were more likely to clear all their debt, whatever the size of the balances they closed (Gal and McShane, Journal of Marketing Research). It followed real people rather than giving them a method at random, so it shows a pattern, not proof.
So the honest summary: the avalanche costs less, and the snowball gives you a finished debt sooner. Pick the order you will keep doing.
Money decision walks
Pick the choice in front of you and answer a few quick questions. Each walk ends with a next step, a tool to try, and a word from Scripture. Where Ramsey and other planners differ, you get both.
For which of you, desiring to build a tower, doesn’t first sit down and count the cost, to see if he has enough to complete it? Or perhaps, when he has laid a foundation, and is not able to finish, everyone who sees begins to mock him, saying, ‘This man began to build, and wasn’t able to finish.’
Luke 14:28-30In context. Jesus to the crowds about the cost of following him, pictured as a builder who counts the cost before starting a tower. This site applies the same picture to money.
The plans of the diligent surely lead to profit; and everyone who is hasty surely rushes to poverty.
Proverbs 21:5In context. The careful plans of a hard worker lead to plenty; hasty shortcuts lead to want.
Prepare your work outside, and get your fields ready. Afterwards, build your house.
Proverbs 24:27In context. Get the work that feeds you ready first (the fields), then build your house.
Know well the state of your flocks, and pay attention to your herds: for riches are not forever, nor does the crown endure to all generations.
Proverbs 27:23-24In context. Advice to a herdsman: know the condition of your flocks, because riches do not last forever.
Don’t you be one of those who strike hands, of those who are collateral for debts. If you don’t have means to pay, why should he take away your bed from under you?
Proverbs 22:26-27In context. A warning against guaranteeing someone else’s debt (co-signing, in today’s terms): if you cannot pay, even your bed may be taken from under you.
A man void of understanding strikes hands, and becomes collateral in the presence of his neighbor.
Proverbs 17:18In context. It shows poor judgment to strike hands and guarantee a neighbor’s debt.
The wicked borrow, and don’t pay back, but the righteous give generously.
Psalm 37:21In context. A psalm contrasting the wicked and the righteous: the wicked borrow and do not repay; the righteous give generously.
He who has pity on the poor lends to the LORD; he will reward him.
Proverbs 19:17In context. Kindness to the poor is a loan to the LORD, and he will repay it.
Give a portion to seven, yes, even to eight; for you don’t know what evil will be on the earth.
Ecclesiastes 11:2In context. The Teacher: give a portion to seven or eight, since you do not know what trouble is coming. Read both as generosity and as not putting everything in one place.
A faithful man is rich with blessings; but one who is eager to be rich will not go unpunished.
Proverbs 28:20In context. A faithful person is richly blessed; one in a hurry to get rich will not go unpunished.
Remember this: he who sows sparingly will also reap sparingly. He who sows bountifully will also reap bountifully. Let each man give according as he has determined in his heart; not grudgingly, or under compulsion; for God loves a cheerful giver.
2 Corinthians 9:6-7In context. Paul, about a collection for poor believers in Jerusalem: give what you have decided in your heart, not reluctantly or under pressure, for God loves a cheerful giver.
Bring the whole tithe into the storehouse, that there may be food in my house, and test me now in this,” says the LORD of Armies, “if I will not open you the windows of heaven, and pour you out a blessing, that there will not be room enough for.
Malachi 3:10In context. God, through the prophet, to Israel, which had been holding back the tithe owed under the covenant: bring the whole tithe into the temple storehouse. Christians differ on how tithing applies today; the New Testament stresses cheerful, generous giving (2 Corinthians 9:7).
This page teaches. It is not advice for your situation.
What just happened
A storehouse, filled in order
In Genesis 41 Joseph reads Pharaoh’s dream as seven years of plenty followed by seven of famine, and tells him to store a fifth of the good harvests for the hard years.
Let Pharaoh do this, and let him appoint overseers over the land, and take up the fifth part of the land of Egypt’s produce in the seven plenteous years. Let them gather all the food of these good years that come, and lay up grain under the hand of Pharaoh for food in the cities, and let them keep it. The food will be for a store to the land against the seven years of famine, which will be in the land of Egypt; that the land not perish through the famine.”
Genesis 41:34-36In context. Joseph advises Pharaoh to store a fifth of the harvest in seven good years against the seven years of famine God showed in Pharaoh’s dream.
The storehouse at the top of this page fills the same way, one floor at a time. Its floors are Dave Ramsey’s 7 Baby Steps, from the ground up. A floor turns blue as it fills (on floor 3 the dashed line is 3 months of spending, and full is 6), and the lamp hangs on the floor you are on.
Why that order
Ramsey starts small on purpose. His step 1 page says the $1,000 is not meant to cover every emergency; it is there to break the habit of reaching for debt when something goes wrong (Baby Step 1). Next, every debt but the house goes, smallest first. Only then comes the full fund of 3 to 6 months, and only after that, investing.
He also tells you to use any savings above the $1,000 on the debts, and to pause retirement saving until they are gone, even an employer’s match (Baby Step 2). Steps 4, 5 and 6 then run side by side: retirement first, then college, then the house (Baby Step 6).
Where planners disagree
The steps are one plan, not the only one. On the match, Ramsey waits and many planners do not: Fidelity puts the full match before paying down card debt (Fidelity). On the order of debts, the maths favours the avalanche and Ramsey favours the snowball. Each view has its reasons, so know which plan you are following, and why.
On giving, Ramsey budgets 10% of income before tax to give, starting in step 1 (Baby Step 1). Christians differ on whether a tenth is the rule for today; How much to give lays out both.
Faithful in little
None of this is about getting rich quickly. Proverbs 13:11 sets money grabbed in a hurry against money gathered little by little, and Jesus says that whoever is faithful with very little is faithful with much (Luke 16:10). The next step you can actually keep is the faithful one.
Where you’ll meet this
| When | What to ask | On this page |
|---|---|---|
| A raise | Before your spending rises to meet it, which step does the new money go to? | Find your step |
| A surprise bill | Is this what the emergency fund is for? Use it, then refill it before anything extra. | Find your step |
| A car loan offer | What is the total, interest included? Could a cheaper car be bought with cash? | Before you borrow |
| A store card at the checkout | A discount today, then the card’s rate on any balance you carry. Will you pay it in full every month? | Before you buy |
| A friend asks to borrow money | Could you lose the money and keep the friend? Could it be a gift? | Before you lend |
| Someone asks you to co-sign | If they never paid, could you pay the whole loan yourself? | Before you co-sign |
| A new job with a retirement match | Take the match now, or after the debts? The two views, side by side. | Pay off or invest |
| The offering plate, or a cause you care about | How much, decided on purpose and given gladly? | How much to give |
| A tax refund | Put it on the step you are on. If a big refund comes every year, Ramsey’s site suggests changing your tax withholding so the money reaches your budget sooner (Ramsey). | Find your step |
What Scripture says
There is precious treasure and oil in the dwelling of the wise; but a foolish man swallows it up.
Proverbs 21:20In context. The wise keep stores of treasure and oil; the foolish use up everything they have.
Work
In all hard work there is profit, but the talk of the lips leads only to poverty.
Proverbs 14:23In context. Hard work brings gain; talk without work brings only want.
And whatever you do, work heartily, as for the Lord, and not for men,
Colossians 3:23In context. Paul, in instructions that include servants: whatever you do, work at it with your whole heart, as for the Lord and not for people.
Saving
Go to the ant, you sluggard. Consider her ways, and be wise; which having no chief, overseer, or ruler, provides her bread in the summer, and gathers her food in the harvest.
Proverbs 6:6-8In context. A lesson for the lazy from the ant, which gathers its food in summer with no one telling it to.
Wealth gained dishonestly dwindles away, but he who gathers by hand makes it grow.
Proverbs 13:11In context. Wealth gained by fraud or in a rush dwindles; wealth gathered little by little grows.
Debt and co-signing
The rich rule over the poor. The borrower is servant to the lender.
Proverbs 22:7In context. A plain observation of how things work: the rich rule over the poor, and the borrower serves the lender.
Owe no one anything, except to love one another; for he who loves his neighbor has fulfilled the law.
Romans 13:8In context. Paul, right after telling believers to pay their taxes and dues: leave no debt outstanding except the debt to love one another. Many read it as “pay what you owe”; it is not a command never to borrow.
Contentment
Be free from the love of money, content with such things as you have, for he has said, “I will in no way leave you, neither will I in any way forsake you.”
Hebrews 13:5In context. To believers: keep your life free from the love of money and be content, because God has promised never to leave you.
He said to them, “Beware! Keep yourselves from covetousness, for a man’s life doesn’t consist of the abundance of the things which he possesses.”
Luke 12:15In context. Jesus, asked to settle a quarrel over an inheritance: guard against greed, because a life is not measured by possessions. The parable of the rich fool follows.
Giving
In all things I gave you an example, that so laboring you ought to help the weak, and to remember the words of the Lord Jesus, that he himself said, ‘It is more blessed to give than to receive.’”
Acts 20:35In context. Paul’s farewell to the elders of Ephesus: he worked to help the weak, remembering that Jesus said it is more blessed to give than to receive.
There is one who scatters, and increases yet more. There is one who withholds more than is appropriate, but gains poverty. The liberal soul shall be made fat. He who waters shall be watered also himself.
Proverbs 11:24-25In context. One gives freely and still gains more; another holds back and grows poorer. The generous are refreshed.
Honesty
Better is a little with righteousness, than great revenues with injustice.
Proverbs 16:8In context. Better a little gained rightly than a large income gained unjustly.
He who is faithful in a very little is faithful also in much. He who is dishonest in a very little is also dishonest in much. If therefore you have not been faithful in the unrighteous mammon, who will commit to your trust the true riches?
Luke 16:10-11In context. Jesus, after the parable of the shrewd manager: whoever is faithful with little is faithful with much, and faithfulness with money shows who can be trusted with true riches.
Watch
Use it on your choice
A money choice rarely has only two answers. Before you decide, add one more option: wait a month, buy it used, give instead of lend, or put the money on the step you are on.