I realize that many have written about Dave Ramsey’s Baby Steps. Of course Dave himself wrote “The Total Money Makeover", a New York Times best seller, which devotes an entire chapter to each step.
So what can I add to this topic? Good question. I have five goals:
- As a Dave Ramsey certified counselor, I use these steps to develop a plan for my clients. I have learned through experience what works and why. Click my “Case Studies" tab for real life scenarios.
- Despite all that has been written about The Baby Steps, there are still lots of people in cyberspace who don’t know about them. If this series helps one person get his personal finances on task, it is well worth it.
- I will explain the importance of doing the steps in order.
- I will discuss the issues that people disagree with.
- I will show that these Baby Steps are not as rigid as some may believe.
The Power of Focus
“Why are there such things as Baby Steps in the first place" you may be asking. Great question. We will get to that in just a moment, but first, where did the label “baby steps" itself come from? I am delighted to share with you that it comes from one of my all time favorite comedies: “What about Bob?" If you have seen this Bill Murray/Richard Dreyfus movie, you can never forget the “Baby Steps" book written by the egocentric psychiatrist played by Dreyfus. If you haven’t seen the movie, I recommend you do so.
Now, back to the concept of Baby Steps. Dave, a master of behavioral finance, realized years ago that most people, in trying to reach their financial goals, tried to do too many things at once. Getting out of debt, saving for an emergency fund, saving for kid’s college and investing for retirement, when done simultaneously, is a recipe for frustration. Why? Because each activity detracts from all the others, making it impossible to do them all at the same time without constant juggling. The net result, after a year, three years or ten years, is very little progress and lots of stress. “What", Dave thought, “if these could be done one at a time?" He discovered that if these activities could be prioritized, then all efforts could be focused on one step, not six or seven. This power of focus is the magic ingredient that has empowered millions to turn their finances and their lives around. It is really that simple and that simplicity is what makes the Baby Steps work.
With this background, we will continue this series next time with Baby Step One: The Baby Emergency Fund. See you then.