Finance Expert Dave Ramsey’s 7 Steps To Becoming Wealthy And Generous

Many people have fallen on hard times financially within the past few years, and it may feel like the situation is hopeless. But amongst the despair, one financial expert shared his recipe for financial success.

Dave Ramsey, a personal finance expert, recently shared a clip on his TikTok channel featuring seven steps for financial success and subsequent generosity.

Ramsey claimed that his seven "baby steps" have helped over 10 million people get their financial struggles straightened out.

@daveramsey 7 Steps. That’s it. A simple plan, and it works every time. But it’s not easy. To complete these, you’ve got to decide you’re going to do it. You have to be sick and tired of being sick and tired. Day in and day out, you’ve drawn a line in the sand, and you are NOT going back. No more excuses. You’re taking control of your actions and your life. You’re ready to make your money work for YOU, not the other way around. #moneytok #daveramsey #getoutofdebt #moneyadvice #moneytips ♬ original sound - Dave Ramsey

Finance Expert Dave Ramsey shared 7 steps to follow to become very wealthy and outrageously generous:

Of course, like most things in life, following Ramsey's guidance is easier said than done. Life rarely allows us to follow one perfect plan, but as long as you have the intention to get your finances in order, the journey gets easier.

Calculator and notepad on top of money Karolina Kaboompics | Pexels

1. Save $1000

Ramsey explained that when he first started financial advising, this step did not exist.

Ramsey explained how people would complain to him about his methods not working because they would have car trouble or a medical emergency and wouldn't have the money to cover these costs because they had put all their money towards paying off debt.

This made him realize that an emergency fund was integral to the process, giving people something to fall back on — a security net. So now when out of the blue, you have an emergency, you will be prepared.

@daveramsey Baby Step 1 is save $1,000 for your starter emergency fund. When I first started doing this, I did not have that as Baby Step 1. I had, “Shut up and get out of debt.” But then people would have an alternator blow on their car that was $350, and they didn't have any money because I told them to put everything on their debt. So they would sit there going, “I'm broke, and I got to get to work. Screw you, Dave, this doesn't work.” And they would quit. And so I went, okay, we got to have a little bit of pad between you and life’s emergencies, but we can't build up a big pile of money while we got this huge pile of debt over here. That didn't make sense either. So we're going to get just a little starter emergency fund. The humorous thing is that 30 years later, now people are saying, “Dave, you need to adjust this because of inflation.” It was never intended to be enough. $1,000 is not enough. And by the way, $2,000 is not enough. So it doesn't matter, because you're not going to live here for very long. This is $1,000 just to catch the little stuff so you don't lose your emotional momentum. Because we're running a behavior-modification program here, so emotional momentum matters. #moneyadvice #moneytips #daveramsey #babysteps #debtfreejourney #emergencyfund ♬ original sound - Dave Ramsey

Unsurprisingly, according to the Consumer Finance Protection Bureau, having a dedicated emergency is what they call "the first step" towards true savings. That's because, should something unexpected arise, like your car breaks down, it won't cause irreparable harm to your credit and it becomes much easier to bounce back.

2. Get out of debt using the debt snowball

The debt snowball is a debt-reduction method that entails paying off your expenses from least expensive to most expensive.

According to Citizens Bank, the debt snowball can best be broken down into a few steps of its own. (Steps inside steps?! Yes this may seem like a lot, but this is the most efficient way to get things done.)

Put debts in order from smallest interest to highest.
Pay the first debt beyond the minimum to bring it to a zero balance more quickly.
Submit minimum payment for remaining loans. Eventually, the debt gets wiped out.
Move on to the next loan and repeat the process.

Following these mini-steps will help you to clear yourself of debt as soon as you can.

3. Save 3 to 6 months of expenses for a fully funded emergency fund

Now that your debt is paid off, you can take the money that you were putting aside for paying it off and put it towards creating a fully funded emergency fund. If you haven't used the initial $1000 you can add to that!

woman happy with her finances BartekSzewczyk | Canva Pro

Now, instead of just having a little backup like in step one, you have a solid backup plan that will get you through any hardship.

It's best to create a timeline for how soon you want your emergency fund to be set up. This ensures you are staying on schedule and holds you accountable.

4. Invest 15% of your household income into retirement

Ramsey's next step is all about the future. With no debt and a fully funded emergency fund in place, you can now invest in retirement. Putting aside 15% of your household income into retirement ensures that you don't have to spend your entire life working.

Most companies will offer future financial security through a 401(k) or 403(b) by guaranteeing that they will match their employees' contributions to the company. However, if your company doesn't have retirement savings, it may be wise to look into a Roth IRA (Individual Retirement Account), which allows you to have much more control.

5. Start saving for kids' college

College isn't getting any cheaper, so it's wise to ensure your children have money for their higher education pursuits.

Some options for college savings include the 529 college saving plan or an ESA (Education Savings Accounts). When deciding between the two it may be helpful to look at the differences and see which one suits your needs better.

Obviously, if you don't have kids, you would skip this step.

6. Pay off your house

This is the toughest step of all, but it's also the most liberating. Not having to pay a mortgage would be the true end of all your debt. However this step is rather strenuous and will require clear planning.

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You will need to figure out how much your monthly payment will need to be and how long the whole process will ultimately take. You can meet with a financial advisor to flesh out the details of your long-term goals or even use Ramsey's own Mortgage Payoff Calculator to figure out the best payment plan for paying off your home quickly.

7. Nothing left to do now but become very wealthy and outrageously generous.

Now you're in the clear! You can choose to do whatever you want with your money, whether that's becoming even wealthier or sharing your wealth with others.

As mentioned earlier, this all sounds a lot simpler than it really is. The path toward financial security can be rough in itself, as life throws all sorts of obstacles at us, and some people's financial burdens may be worse than others.

But what matters is that you begin the journey towards giving yourself the life you deserve: One where you are debt-free and wealthy.

Sahlah Syeda is a writer for YourTango who covers entertainment, news, and human interest topics.

Finance Expert Dave Ramsey’s 7 ‘Baby Steps’ To Becoming ‘Very Wealthy And Outrageously Generous’

He claims that these steps have helped 10 million people get their finances in order.