Why Dave Ramsey 7 baby steps do not work for everyone

The 7 baby steps created by popular finance advisor Dave Ramsey have been around for years.

People are following his advice and saving for an emergency fund, college fund, and eventually paying off their mortgage.

Although many people are happy with his advice, it is not for everyone.

Situations arise that make his advice obsolete.

In this article, we are making a case why following the baby steps is hard for many people and impossible for others. We’ll also talk about other alternatives to his methods.

What Are Dave Ramsey’s 7 Baby Steps?

Dave Ramsey is a financial expert who has developed a system to get out of debt and build wealth. His 7 Baby Steps are a simple and effective way to achieve financial freedom. Here is a quick outline of the 7-step method:

  1. The first step is to save up a $1000 emergency fund. This will help you cover unexpected expenses without going into debt.
  2. The second step is to pay off all your debt, except your mortgage. You should first attack the debt with the highest interest rate.
  3. The third step is to save 3-6 months of living expenses. This will give you a cushion in case you lose your job or have another financial emergency.
  4. The fourth step is to invest 15% of your income into retirement accounts. This will ensure you have enough money saved up for your golden years.
  5. The fifth step is to start saving for your children’s college education. This will help them get a head start on their financial future.
  6. The sixth step is to pay off your mortgage early. This will save you thousands of dollars in interest and give you peace of mind.
  7. The seventh and final step is to build wealth and give generously.

Reasons Dave Ramsey’s 7-step guide does not work for everybody.

Reason 1: $1000 emergency fund is too random.

person showing failure face

The amount Dave recommends is enough for most people. But not everybody.

Only you know your circumstances and how much you actually need for baby step 1, which is having enough on an emergency fund.

Instead of trusting good old Dave, here is how you can actually find your ideal emergency fund number:

  1. Make a list of all unforeseen emergencies you’ve had in the past ten years.
  2. Categorize each emergency. Example: vehicle, health, family.
  3. Find the average by adding all your emergency expenses divided by the number of events.
  4. Divide by half.
  5. That is your emergency fund goal.


Let’s say, over the past ten years, you had the following:

  • a car accident where you had to pay $1,200 out of pocket,
  • a medical bill for $700
  • you had to help a family member and gift them $900.

1,200+700+900= 2,800

2,800 divided by 3 = 933

Your emergency fund number is 933.

You may need more than $1,000 for an emergency fund if you have a family. That is why $1000 should only be considered the minimum, and why it doesn’t work for everyone.

Related: 5 Emergency Fund Mistakes, Avoid These Common Slips

Reason 2: You can’t pay any debt if you don’t have a job.

In baby step 2, Dave advises his people to pay all debt using the debt snowball method, which is paying the smallest of your loans as quickly as possible.

But the very reason that you had to resort to credit cards to pay for daily expenses is that you didn’t have enough income in the first place.

Think about it this way: If you had enough salary coming in, you wouldn’t have used credit cards as much.

So what is the root cause of the problem? Your credit card debt or lack of a good-paying job?

If you are reading this blog, you are already doing something smart for your financial life. The next best thing to do is find a job that pays what your real worth is.

If you are shy about your skills, then reassess your strengths and weaknesses. If you determine you have to go back to school or obtain a technical certification, then this could be your chance to do the right thing.

Cutting down on expenses is great. In fact, we are big advocates of living a frugal lifestyle.

But at some point, you have to start thinking of ways to increase your income.

Most of the time, making more money while avoiding lifestyle inflation will solve virtually all financial troubles.

Reason 3: Saving for your kid’s college is outdated advice.

In the past 40 years, college costs have gone up a whopping 169%. Colleges are getting more expensive because, like any business, they have to raise prices yearly to meet revenue quotas.

But the modern workplace no longer values a college degree as much anymore.

In other words, being a college graduate means nothing compared to someone who can do the job fast and correctly.

Even Google has developed its own program that has no college requirements.

You can take google courses online, get help with job interviews and land a job that pays $66,000 to start.

I know college graduates with bachelor’s degrees who make a lot less than that.

College is overrated unless your kid wants to be a lawyer or a doctor.

In my own experience, I became financially independent in my 30s by developing good financial habits and learning how to budget properly. Both of which you never learn in college.

Parents should still help with their kid’s education,

So how much should parents save for their kid’s education?

The average cost of public college for one year of education is $10,740. This is more than enough money to get an online certificate and land a high-paying job.

Alternatively, you can use this money to send your kid to a vocational school, learn a trade and make money.

Anyone going this route can turn that initial $10,000 and turn it into $100,000 in less than two years of work.

Related: No Nonsense Guide To Modern Money Management

Reason 4: Investing too much in retirement.

In baby step 4, Dave recommends people save 15% towards retirement. He’s mistaken.

Here’s the thing. Once you put money into a retirement account, you can’t touch it until you’re almost 60.

If you’re in your 20s or 30s, this is money you’ll never see for the next 20 or 30 years.

Instead of investing too much, it’s better to first pay off all debt and then pay your mortgage.

How I did it: How We Paid Our Mortgage In Less Than Five Years.

Your home is something you can touch and feel right now.

If you pay off your mortgage before investing, you’ll have even more money to put down once you are completely debt free.

I’ve seen plenty of people that never got to use their retirement money because they became too ill from overworking.

The money they saved was used by others that did not work for it.

Reason 5: You don’t have to part ways with your money.

In the last baby step, Dave Ramsey’s suggestion is to give away your money. It sounds good in theory.

The problem with this advice is that giving money away usually causes more problems than it solves.

Think about it. A parent that leaves a large inheritance for the family sounds like a noble thing to do.

The issue is human nature. The more comfortable we are, the less we achieve.

The stereotype of the trust fund baby is true.

When someone has too much money, they lose motivation and ambition.

Without these two qualities, they turn out to be average at best. Depressed and lonely at worst.

The majority of self-made millionaires in the United States came from nothing.

They built companies from scratch. They found innovative ways to solve problems.

Millionaires develop this mindset because of tough times. Someone that inherits a lot of money is spared these lessons.

By all means, donating your money for altruistic reasons is generous of you. But I’m suggesting giving away it in terms of a meritocracy, rather than randomly leaving huge sums to people that will squander it.

The seven steps of Dave may be followed by most, but not everyone.

I have followed some of Dave’s steps successfully. The personal finance man has been doing this for a long time.

He has a huge social media following that loves his style. His advice applies to most people.

But I would argue that some situations like the ones described in this article are exceptions.

And that building an emergency fund, paying off your home, and planning for retirement is important when you want financial independence.

It is a good framework to start. Keep making improvements and customizing some steps, so you can make it your own.

Subscribe Now And Get Smart With Your Money!

We don’t spam! Read more in our privacy policy

Related articles