Dave Ramsey is an American Financial guru who created a money management plan that is broken down into 7 ‘Baby Steps’.
It’s a fantastic plan but it is very much geared for a US audience (it uses/mentions financial products and terms that aren’t relevant here in the UK) so I’ve created this blog to share the Dave Ramsey Baby Steps UK Version.
They have been re-written so that they align a bit more with our British pounds and pennies.
Table of Contents
Firstly, who is Dave Ramsey and why should you follow his plan?
Dave Ramsey is an American personal money management expert, radio talk show host and TV personality who has helped thousands of people become debt free, build wealth and change their financial lives for the better. He gives no-nonsense advice to people who have gotten in over their heads with debt and helps them to find their way out in a responsible and methodical way. Regardless of whether you love or hate his approach (you have to check out some of the clips of the radio show if you haven’t already!) there is no denying that his plan works
Following the Dave Ramsey Baby Steps helped us clear over £22k worth of debt in less than 18 months!
Baby Step 0 (BS0) Commit to not borrowing for anything ever again (except for a house in BS3b)
- Talk with your spouse and get on them on the same page concerning finances
- Create a budget and learn to stick to it
- Get current on the basics; food utility, shelter and basic transportation
- Get rid of ‘toys’ and all non-essentials (anything that will slow down your debt snowball)
- Cut your lifestyle
- Get current on ALL bills.
BabyStep 1 (BS1) Save £1000 in Baby Emergency Fund (EF)
- Cut up credit cards – you won’t be needing them anymore!
- Get life and long term disability insurance if you have debt or if your family couldn’t survive financially if you died (especially important if you have children)
- Get rid of any cars that you can’t pay off within 24 months
- Draw up a will
Baby Step 2 (BS2) Work on your Debt Snowball
- Pay your debts off smallest to largest (regardless of interest rate), minimum payments on all debts and then throw any extra money at the smallest debt.
Baby Step 3 (BS3) Save 3-6 months of expenses in EF to make it your Fully Funded EF (FFEF)
- Start your replacement car fund
- Start furniture or other non-essential stuff replacement fund
Baby Step 3b (BS3b) Save for a house deposit
- Aim for a minimum of a 20% house deposit to make sure you get access to the best rates
Baby Step 4 (BS4) Start contributing 15% of your gross salary to retirement
- Make use of retirement vehicles and any company matching schemes to max tax relief
- Fund a LISA (Life Time ISA)
Baby Step 5 (BS5) Save for your child’s university or first house
- Consider a junior ISA or children’s bond – the money will be the child’s, but inaccessible until they turn 16/18.
