Frugal Friends Podcast

Episode: Will Dave Ramsey's Baby Steps Work in 2026? (Our Actual Experiences)
Release Date: December 26, 2025
Hosts: Jen Smith & Jill Sirianni

Overview

This episode takes a deep, nuanced look at Dave Ramsey’s “Baby Steps” for personal finance. Jen and Jill bring humor and real talk as they break down each Baby Step—exploring its origins, why it worked in the early 2000s, and where it now falls short in the reality of 2025 and beyond. They also share alternative approaches and their own experiences, aiming to help listeners make practical, personalized decisions about debt, saving, and investing.

Main Discussion & Key Insights

1. Setting the Stage—Why Talk About Dave Ramsey?

[01:23 – 03:51]

• Dave Ramsey is a lightning rod in personal finance—people either idolize or vilify him.
• Jen and Jill take a “radical middle” approach, critiquing ideas, not the man.
• “We are not here to clickbait or clout chase. We have what we believe is very valid criticisms about the baby steps in particular.”—Jen [03:51]
• They acknowledge Ramsey’s influence—many have learned fundamental financial principles from him (including both hosts).

2. The Historical Context of the Baby Steps

[08:52 – 11:19]

• Dave Ramsey’s baby steps developed after his 1988 bankruptcy, gaining popularity through Financial Peace University and The Total Money Makeover (2003).
• The Baby Steps have remained mostly unchanged since then—over 23 years.
• Jen: “People are the same…but technology changes, situations change…operations have to shift with mainly technology, but a lot of other things.” [10:04]

3. Baby Step 1: Save $1,000 for a Starter Emergency Fund

[11:19 – 16:45]

• In 2000, $1,000 made sense: average rents were $500–650, and emergencies could be cheaper.
• In 2025, $1,000 doesn’t go far—basic car or home repairs almost always exceed that.
  • “Right now, $1,000 can barely cover a basic home or car repair. And that’s typically what you’re going to be using it for.” —Jen [12:12]
  • Cost of living/inflation: $1,000 in 2000 ≈ $1,900 today.
• Recommended update: Minimum $2,000 emergency fund (or up to your health insurance deductible).

4. Baby Step 2: Pay Off All Debt (Except Mortgage) Using the Debt Snowball

[16:45 – 19:51]

• Debt snowball = pay smallest balances first (for momentum), ignoring interest rates.
• Psychological finance was not mainstream in 2000; now, methods like the debt avalanche (paying highest interest first) are better understood.
• Today: Debts are larger; hybrid approaches make sense (start with small, high-interest debts for quick wins, then pivot based on rates).
  • “Mathematically it doesn’t make sense. Psychologically, it makes the most sense…and money is personal first.”—Jen [18:01]

5. Baby Step 3: Save 3–6 Months of Expenses

[19:51 – 22:29]

• Not that outdated—still a solid idea.
• Problem: It’s vague. “Six months is literally double three months.” —Jill [20:35]
• Modernization:
  • 3 months: Dual-income, no kids.
  • 6 months: Single income, kids, or both partners in the same field/company.
  • Adjust for health issues, deductibles, etc. Pick your “radical middle.” [20:57–21:25]

6. Baby Step 4: Invest 15% of Income for Retirement (with a Commissioned Advisor)

[24:10 – 37:36]

Why it made sense in 2000:

• DIY investing was intimidating; internet resources were scarce.
• Index funds weren’t mainstream; mutual funds had high expenses.
• Fiduciary standards didn’t exist; financial education was rare.
• “The way I learned about investing was through podcasts…these avenues were not available in 2000.”—Jen [27:31]

Why it’s outdated in 2025:

• Fees now dramatically lower; commissions unnecessary.
• Index funds available for 0.03% fees (vs. 1%+ in 2000).
• Fiduciary, flat-fee advisors now common.
• Commissioned advisors/smartvestors may cost you six figures over time for no added benefit.
  • “A commissioned advisor over the span of your time investing…could cost you six figures.”—Jill [30:17]
• Dave Ramsey’s network builds by sending “hot leads” to commissioned, not always fiduciary advisors.
  • “Ramsey Solutions is not a personal finance education company. They are a financial services marketing agency…” —Jen [34:47]

Updated Approach:

• Seek a fee-only certified financial planner (fiduciary).
• Use low-cost platforms like Fidelity, Vanguard.
• Learn the basics yourself through books/podcasts (e.g. The Simple Path to Wealth).
• “You can manage your own funds through a Fidelity, through a Vanguard, and that’s the alternative for 2026.”—Jill [37:36]

7. Baby Step 5: Save for Kids’ College

[37:36 – 40:44]

• Still relevant, especially as 529 plans have modernized:
  • Now cover trade, vocational, apprenticeships, and can be transferred or rolled into a Roth IRA for the beneficiary after 15 years (if not used for education).
• “529s have continued to keep up with the times, even if the baby steps have not, which is saying a lot…” —Jen [38:55]

8. Baby Step 6: Pay Off Your Home Early

[40:48 – 45:16]

• Made sense when homes were cheap, and mortgage rates fell (early 2000s).
• Much less feasible now: higher prices, higher rates, less disposable income.
• If you must pick a “big goal,” investing will beat early home payoff in today’s environment.
  • “If we’re going to give overarching, large, sweeping recommendations… gotta follow the math. And the math is going to say invest it.” —Jill [44:45]

9. Baby Step 7: Build Wealth and Give Generously

[45:16 – 50:14]

• The “finish line” of the steps; builds in a psychological payoff.
• Not as clear-cut as it sounds; living aggressively for decades does not translate to suddenly being generous and at ease.
  • “When you haven’t learned how to build a sustainable lifestyle… it must be this and it must be the way I tell you to do it. When we’ve never learned how to make financial decisions for ourselves, we are only following this to the table. What kind of financial person have we become now that we’re dropped off at step seven?”—Jill [49:28]
• The real journey is personalized, finding your own “radical middle.”

Notable Quotes & Memorable Moments

• “Both camps are a little out of touch.” —Jen [01:23]
• “It is gold.” —Jill, reacting to Dave Ramsey’s call-in segment [07:46]
• “Money is personal first. It’s personal over finance.” —Jen [18:01]
• “Pick up The Simple Path to Wealth, listen to some podcasts…You can manage your own funds…” —Jill [37:36]
• “You can’t just go up and then take your foot off the gas pedal and go right back down to zero.” —Jen [46:19]
• “We hope you can find a financial journey that makes sense for you…finding your own radical middle.” —Jill [51:21]

Lightning Round: Personal Finance Rules to Live By

[56:10 – 58:21]

• Jill: “Patience. If I were to think on my whole financial journey, what keeps me anchored…it has to do with patience.” [56:13]
• Jen: “The best way to save money is to spend time making it.” —about side hustling, filling up time so you’re less inclined to spend and more likely to pay down debt. [57:15]

Listener Bill of the Week

[52:08 – 53:57]

• Anonymous from New Zealand: Shares a clever “bill hack”—using cashback websites for work-related travel expenses paid personally and then reimbursed.
• Jill: “I see no problems. Maybe I’m morally gray…but…if they are having you float the bill and then reimburse you, then yes, you should be getting some version of perks for that.” [53:11]

The Big Takeaways

• Ramsey’s Baby Steps helped millions, but much is out of date—especially due to inflation, modern investing, and lifestyle shifts.
• Blind adherence to any “one true way” misses the personalization required for real, sustainable financial health.
• Today’s best practice: Learn from diverse sources, seek low-cost/high-quality options, and adjust financial goals for your real life—not someone else’s 2000-era blueprint.
• Find your own “radical middle” and design a financial system that supports your present and future—not just a checklist.

Want more?
Visit frugalfriendspodcast.com/debtfree to join their upcoming 90-day Debt-Free Fast Track Challenge starting January 1st.

Produced by Eric Sirianni.