Setting financial goals is a crucial step toward achieving financial freedom and building a secure future. These goals serve as a roadmap, guiding our decisions about spending, saving, and investing.Whether short-term or long-term, financial goals help us stay focused and motivated on our journey to financial wellness.
Financial goals can range from building an emergency fund and paying off debt to saving for retirement or purchasing a home. By establishing clear, measurable objectives, we create accountability and increase our chances of success. The key is to make these goals specific, achievable, and aligned with our personal values and life circumstances.
After many years of struggling with various debts —consumer credit cards, student loans, and a hefty mortgage, I got sick and tired of being sick and tired of seeing these debts. I no longer wanted to see a balance owed, I wanted to see zero dollars owed or paid in full. I yearned to be free—truly free from lenders. I no longer wanted to be a servant or borrower, as Proverbs 22:7 declares that the borrower is a servant to the lender.
My journey to becoming debt-free took a decisive turn when I connected with a friend who shared my deep frustration with debt. She, too, was sick and tired of seeing debts and introduced me to Dave Ramsey’s financial teachings. This opened my eyes to a new way of handling money and debt. I began listening to his YouTube channel, and my friend and I read his book “The Total Money Makeover” together. What had once been my scattered attempts at financial freedom transformed into a clear, focused strategy for managing my finances and set me on the path to becoming debt-free.
Let me walk you through Dave Ramsey’s 7 Baby Steps and share how I approached each one:
Baby Step 1: Save $1,000 for an Emergency Fund.
- Dave Ramsey suggests saving $1,000 for your emergency fund, but I’d like to take it a step further: a $1000 can be your initial goal however, analyze what your emergency costs have been for the past year. By doing that you may realized quickly that you may need more than $1,000 for my emergency fund.
- Since I already had substantial savings—more than a thousand dollars—I modified this step by opening a dedicated emergency fund account and transferring an initial $1,000 into it. After analyzing my past emergencies, I realized $1,000 wasn’t enough, so I increased it to $2,000. Eventually, this account evolved into my fully funded emergency fund for Baby Step 3, containing six months of expenses. I maintain its value by adding a small amount yearly to keep pace with inflation.
***Action: Create a separate account for your emergency fund—distinct from your regular savings account—and set up recurring automatic deposits into that account.***
Baby Step 2: Pay off all debt (except the house) using the debt snowball method.
- This was my main focus at the start of my debt-free journey. I grew increasingly frustrated with monthly payments to lenders, which motivated me to make a radical change toward financial freedom. I listed all my consumer debts (Macys, Old Navy, Capital One etc.) and car loans in a spreadsheet, then used the debt snowball payoff method to tackle each debt one at a time.
*** Action: List your debts from smallest to largest and create a plan to pay them off. Research debt avalanche and debt snowball methods, then choose the approach that works best for you.***
Baby Step 3: Save 3-6 months of expenses in a fully funded emergency fund.
- While working on Baby Step 2, I treated my emergency fund like a regular monthly bill, making consistent contributions until I reached my target of six months’ worth of expenses.
***Action: Make recurring automatic deposits into your savings account.***
Baby Step 4: Invest 15% of your household income in retirement
- When I first started working, I contributed only enough to get my employer’s match (about 8%). To reach 15%, I set up an automatic 1% increase each year to align with my annual pay raises.
- After seven years of these automatic increases, I reached 15% and eventually capped my contribution at 18%. I chose this cap because contributions above a certain amount would be subject to be taxed.
*** Action: Research your employer’s match – this is the minimum you should contribute. If you are self employed, look into a Roth IRA and other self-funded retirement funds.***
Baby Step 5: Save for your children’s college fund
- Before having a baby this step was skipped, however, once our son was born, this step was initiated. A savings account was opened for our only child which he will have full access to at age 18, meaning that we can be removed from the account if he chooses to.
- However, I suggest that if you’re planning to have children, start saving for their college education early by opening a high yield savings account.
- Another recommended account for saving for children’s college education is the 529 plan—a tax-advantaged savings plan specifically for education expenses. The funds must be used for qualified educational expenses.
***Action: Start saving early for your children’s college after you’ve saved your six months of expenses.***
Baby Step 6: Pay off your home early.
- This was our biggest debt as a couple, and it’s most people’s biggest debt when they finance a house. As Dave Ramsey suggested, paying off your home early is crucial. My first step was creating a spreadsheet to detail different scenarios for early payoff. These scenarios included:
- How long would it take if we switched from monthly to biweekly payments?
- How long would it take if we added extra money to the monthly payment? This scenario explored different levels of additional payments.
- Once we identified the most effective strategy—making additional monthly payments—we set out to pay off our home early. The extra payment came from Baby Step 3: whenever we paid off a consumer debt, we redirected that freed-up monthly payment toward paying down the mortgage. We applied this strategy consistently with each debt we eliminated.
***Action: Develop an action plan to pay off your home early. Consider refinancing for a lower interest rate while maintaining your higher monthly payments—this will help you pay off your home sooner.***
Baby Step 7: Build wealth and give.
- Once all your debt is paid off and you’re in maintenance mode, it’s time to use that extra money you were paying to lenders to build wealth and give back.
- Build wealth by investing in high-yield savings accounts, the stock market, and rental real estate properties.
- Give to charitable organizations or establish your own non-profit organization to give back based on your true passion.
- I started a non-profit organization “More than a Cluster of Cells” with the mission to inspire, encourage, and provide support for mothers and fathers who have lost babies through miscarriage, stillbirth, or death after birth. We help them celebrate their children in a world that often fails to acknowledge their loss. One of our key goals is to financially assist couples on their journey to become parents.
***Action: Invest in yourself and learn ways to build wealth. Develop a giving plan—whether through monthly charitable donations, one-time contributions, or scholarships.***
Embarking on Dave Ramsey’s 7 Baby Steps journey has been transformative for my financial life. Through disciplined saving, systematic debt elimination, and strategic investing, I’ve moved from financial stress to financial freedom. This journey isn’t just about managing money—it’s about creating a legacy of financial wisdom and generosity. By following these steps, you too can break free from debt, build wealth, and position yourself to make a positive impact in others’ lives. Remember, financial freedom isn’t a destination; it’s a continuous journey of smart choices, consistent habits, and purposeful giving.
