The Baby Steps Explained


What are the baby steps, why I do things a little differently, and how to take advantage of this effective plan. 

In this blog post, we:

  • Define what baby steps are
  • How to start putting the baby steps into action
  • Tips and Tricks to the baby steps 

What are the Baby Steps?

The baby step method of paying off debt was made famous by finance guru, Dave Ramsey. In the debt free community, the baby steps are the preferred and most common method of paying off debt. It’s also how Josh and I paid off $133,000 in less than four years. 

Below, I’ve listed the baby steps according to the Dave Ramsey philosophy:

Baby Step 1 - Starter emergency fund of $1,000

Baby Step 2 - Pay off debt using the debt snowball method

Baby Step 3 - Fully funded Emergency Fund of 3-6 months living expenses

Baby Step 4 - Invest 15% of your household income in retirement

Baby Step 5 - Save for your children’s college

Baby Step 6 - Pay off your mortgage

Baby Step 7 - Build wealth and give 

Since I’ve been on this journey and had the pleasure of watching thousands of others pay off debt, I have formed my own opinions of how effective the baby steps are.

Mostly, I approve of what is listed above; however, I do have updates that have worked for my family and others in the debt free community.

Here’s how to start this Baby Step Method

1. Decide what starter emergency fund amount works for your family 

It’s probably one of the more contested opinions about the baby steps. The starter emergency fund of $1,000 is in place so that it is a feasible amount to save up in a short amount of time.

By selling items, taking on extra jobs, and squirreling away money, the starter emergency fund should be done within a month or less.

I have seen instances where $1,000 is enough. Some on this journey never have a crazy emergency where one grand fails them.

Too often, though, I have seen where $1,000 doesn't cut it, which is why I recommend an initial emergency fund of $1,000 - $3,000.

If you don’t have a sufficient starter emergency fund, you risk going back into debt to cover something that you didn’t expect. The amount in the fund is up to you.

How much risk are you willing to take on? What would be the worst-case scenario in your life? Do you have kids or a mortgage? 

Consider these things when mapping out this step. For some, $1,000 is enough. For others, $1,000 is laughable. YOU have to decide what is right for YOU!

Josh and I had an emergency fund of $2,000 during most of baby step two. It was a compromise between us and reasonable based on our risk level. 

Debt Free in Sunny CA Amanda Williams


I'm Amanda. My husband and I paid off $133,763 of debt in less than four years! During our journey, I realized what my true passion was in life: helping others become debt free and reach financial independence. You can learn more about us here.

Debt Free in Sunny CA Honeycomb Debt and Savings Tracker

2. Try to move as quickly as possible when working Baby Steps 1 and 2 

Having a sense of urgency and attacking debt is what propels people to pay off large sums of it. Get M A D at your debt. 

3. Focus on one debt at a time, and throw ALL of your income power at it 

Whether you use the snowball method or the avalanche method of paying off debt, focus all of your energy and passion on eliminating one debt at a time.

By doing this, you’re not diluting your income power across different debts. Trust me; you’ll pay off debt much quicker by being hyper-focused on one debt at a time.

The debt snowball method is my favorite because it gives you quick wins and motivation to continue on this journey. The debt avalanche (paying your debts from highest to lowest interest) can save you some money, but if you start to lose steam, switch to the debt snowball. Staying motivated is more important than the interest you'll save.

4. Remember, paying off debt and changing your financial habits is a marathon, not a sprint

Becoming financially free takes time and discipline. If it were easy, everyone would do it. There will be setbacks, things will pop up in your life, and some months will seem like years.

Consistency is key here. I promise you; it’s worth it. Four years of this was nothing compared to the rest of my life where I’ll be able to live and give what I want, on my terms.

Extra Tips and Tricks

  • Make the baby steps work for you, but don’t veer off track too much. Keep it simple!
  • Save up an emergency fund that hits the sweet spot. 
  • Dave Ramsey’s plan is excellent for getting out of debt, but don’t be afraid to explore other methods and find what works for you.
  • Travel hacking - while it won't make you super rich, it’s nice to go on vacations for cheap. Once you’ve gotten out of debt, built an emergency fund, and learned how to control your impulses, I think it’s ok to start exploring credit card use for travel hacking AS LONG AS THEY ARE PAID OFF MONTHLY AND YOU DON’T PAY INTEREST. If you notice your spending getting out of control, cut them up. No perks are worth the unnecessary spending.

What alterations have you made to the baby step method? What has worked for you and/or your family? Let me know in the comments below!

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  • EasyBudget - Check out the debt free community's leading debt snowball calculator. 
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      About Amanda Williams

      Amanda Williams is owner and founder of Debt Free In Sunny CA: A company inspiring financial literacy and debt free living. Josh and Amanda paid off $133,763 of debt in 3.7 years. She has built a dedicated, engaged, and loyal audience of thousands from the ground up. The #debtfreecommunity hashtag was created under Amanda's direction and has generated an online movement, bringing thousands together on a daily basis.