If you have recently started on your debt payoff journey you may have heard the name Dave Ramsey crop up a few times. Dave Ramsey is an American money guru who developed the ‘Baby Steps’ system in order to help millions of people to become debt free and change their attitude towards money. I honestly think that if I hadn’t stumbled upon his website I would probably still be in debt today. Although it is very American based it can easily be adapted for us to follow in the UK and there are many fantastic UK based Dave Ramsey Facebook groups around. These were invaluable in keeping me motivated when I felt I was drowning in debt. Dave’s ‘system’ is broken down into 7 distinct steps.



Save an ‘Emergency Fund’. This should be between £500 and £1000. You should do this as quickly as you can and you should only use this money for life’s little emergencies that you can’t predict or plan for. This step will potentially stop you getting further into debt and it’s important you don’t skip it.


Pay off all debt, except the mortgage, using the debt snowball method. The snowball method involves paying off your smallest debt first and then working your way through to the largest, regardless of interest rates. At first this made absolutely no sense to me. It made total financial sense to pay off the card with the highest interest rate as that’s the one that costs you the most. But I figured that what I’d been doing for years (paying the minimum on all of my cards) hadn’t been working so I ignored what I thought was best and did things ‘Dave’s way’. I kept all of my cards at minimum repayments and threw as much money as I could at the card with the smallest debt. Once the smallest debt was paid off I used the money I was spending on the smallest debt each month and put it towards the next card, on top of the minimum payment I was already paying towards that card. I carried on doing this until all of the debt was gone. Psychologically, it’s super motivating to ‘tick off’ each card as it’s paid off and it’s much easier to pay off the smallest debt first than it is the highest. My top tip for this stage is to have a mini celebration each time you pay off a card. I don’t mean go out for a slap-up meal, as that isn’t what this stage is about. Each time I paid off a card I made a celebration meal at home and made a big deal of cutting up the card and chucking it out.


Save 3-6 months of expenses in a fully funded emergency fund. Take all of the money you were throwing at your debt and put it towards your fully funded emergency fund. This fund will cover 3-6 months of your expenses. These are your essential expenses such as your mortgage or rent, your council tax, your food and heating, water rates etc. It does not include non-essential bills like Netflix, kids clubs, gym sessions etc as you would be expected to cancel all of these in the face of an emergency. This emergency fund will protect you against life’s bigger catastrophes, such as the loss of a job or the car breaking down. Again, this will help to prevent you slipping back into debt.


Invest 15% of your household income. Take 15% of your gross take-home pay and start investing it for your retirement.


Save for your children’s college/university fund. You will be debt free by this stage, aside from the mortgage, and you will have savings too. Now is the time to start saving for the time that your children start university.


Pay off your home early. This is the biggie! You’re debt free, with savings and you’re investing for your retirement. The only thing standing between you and financial freedom is your mortgage. Throw everything you can towards your mortgage, getting it paid off as quickly as you can. This will save you thousands of pounds in interest and will shave years off your mortgage term.


Build wealth and give. Dave says that this step is for ‘living like no one else and giving like no one else’. Keep building wealth and give generously.

There are many, many die-hard Dave fans that will follow the steps to the letter. I followed steps 1-2 and am currently on step 3. I followed these exactly as they are set out. But I think I will deviate a little from the plan after that. For example, I have been regularly donating throughout baby step 3 to various charities. Not set amounts each month but I will always buy food for the homeless when I’m passing them and I donate to various charities online (the wildlife charities during the Australian wildfires for example). I will always do this so I don’t see a real need to ramp it up during baby step 7. I am going to skip baby step 5 completely. I figure that if we focus on our own finances we will be in a great place financially when/if the kid’s go to university and we will be in a position to help them out when needed.

Check out Dave’s podcasts if you’re on the journey and struggling. I remember feeling down one night about everything. My daughter was in her karate club and I was sitting in the car blubbing and feeling very sorry for myself. So I put the podcast on and listened to other people talking about their journey. It definitely made me feel less alone.