top of page

Saver Street's Steps to Financial Security

Dave Ramsey's Baby Steps are out of date.

There. I said it. Dave Ramsey's Baby Steps to financial peace haven't been updated for 20 years! They haven't kept up with inflation, high cost of living prices, or other changes in the world.

Dave Ramsey's Baby Steps need a facelift.

A $1000 emergency fund hardly covers a car emergency or an ER visit these days. A 3-6 month emergency fund needs to be a little heftier. Investing 15% into retirement sometimes isn't enough.

Let's give Dave Ramsey's Baby Steps the facelift they deserve and bring them up to date.


Step 1: Build a $2000 starter emergency fund.

A starter emergency fund will keep you from going farther into debt. Keep this money in a higher-yield money market account, savings account, or checking account. You want to be able to access this in case of an emergency.

Treat your emergency fund like insurance. This is not money you invest. It needs to be able to be accessed whenever you need it, so keep it out of CDs and other investment accounts.

Get through this step as quickly as you can. Get creative to barrel through it.

Step 2: Pay off all debt except your mortgage.

This step stays the same. I agree with Dave that you need to get out of debt as quickly as a bat out of hell.

Using the debt snowball method, list out your debts from smallest to largest. Pay them off as

quickly as you can.

Step 3: Build a 4-6 month emergency fund.

Now that you’re out of debt, building an emergency fund with 4-6 months of expenses should be easier. Include the $2000 starter emergency fund in this new fully-funded emergency fund.

If you notice, the 3-6 months emergency fund was changed to a 4-6 months emergency fund. That might not seem like a big deal, but during a pandemic or recession, when it's harder to find a job, that extra month is a lifesaver. Don't fool around with this step. Make sure you have the right amount of emergency fund in place.

Step 4: Invest 15% to 20% of your income in tax-favored retirement accounts.

Tax-favored retirement accounts include IRAs, 401ks, 403bs, TSPs, and others with either Roth or Traditional distinctions. Contact a financial advisor to help you invest properly.

The range from 15% to 20% is given because not all of us have the same retirement plans, retirement savings, and current age. You need to have a plan that fits you, not some target that may or may not work for your future.

Step 5: Save for your kid’s education.

Again, this step is unchanged. You save what you want to save for your children's future educational needs.

In an ESA or 529 or both, designate and save the amount you want to contribute each month. Your child will be happy you saved him or her from a mound of student loan debt.

Step 6: Pay off your mortgage.

Paying off your mortgage gets rid of your last bit of debt. Complete this step to be free and clear of all remaining debt!

Make sure you continue to save for retirement while you're on this step.

Step 7: Build a brighter future and give (more).

This one’s self-explanatory. At this point, you’re able to be extremely generous with those around you. Life feels much better when we can live our dreams and give outrageously.


Dave Ramsey's Baby Steps work well to guide folks to financial peace. I don't disagree with that. My husband and I followed them years ago and still do!

These updates in steps 1, 3, and 4 run deep, though. While the flow is still the same, the tweak in financial goals has a significant impact on those working the steps now.

If you are having trouble following the Steps above, please reach out to me. I'm a financial coach who would love to help! I'll send you down the right path to financial security and financial peace.


bottom of page