Summary of "Does Dave Ramsey Need To Re-Write the Baby Steps?"

Podcast Information:

• Title: The Ramsey Show Highlights
• Host/Author: Ramsey Network
• Episode: Does Dave Ramsey Need To Re-Write the Baby Steps?
• Release Date: January 15, 2025

Introduction In the January 15, 2025 episode of The Ramsey Show Highlights, the hosts address a listener's intriguing question regarding the structure of Dave Ramsey's renowned Baby Steps. The discussion delves into whether the initial step of budgeting should be officially recognized as the first Baby Step, given its foundational role in financial planning.

Listener’s Question The episode opens with a question from a listener named Davey, who challenges the traditional ordering of Dave Ramsey's Baby Steps. Davey proposes that the first Baby Step should be creating a budget where every dollar is assigned a purpose, followed by saving a $1,000 emergency fund as the second step. He questions why budgeting, which is heavily emphasized, isn't designated as the primary Baby Step.

Davey [00:06]: "I'm wondering why baby step one isn't start your first budget and giving every dollar a name. Then baby step two would be save your thousand dollar emergency fund and so on. Since you always emphasize budgeting first, why isn't that number one?"

Host’s Explanation The hosts, referred to as Speaker A and Speaker B, respond with insightful explanations. Speaker B acknowledges the validity of Davey's observation, noting that budgeting is indeed a critical component of financial management.

Speaker B [00:06]: "I mean, yeah, budgeting is a budget. You're right. Budgeting is the everything we teach. Matter of fact, some folks in here that I work with, we call it like baby step zero or just kind of like there is that thought to it. It is the foundation."

However, they clarify that while budgeting is foundational, it doesn't qualify as a Baby Step because the Baby Steps are designed to represent specific financial milestones, rather than the tools or practices used to achieve those milestones.

Speaker A [00:45]: "No, it's, you know, the reason it's not like that is it's not a financial milestone. It's a tool and a practice. That's a good point. That hits a financial milestone. All the baby steps are financial milestones. So it's not a financial measure. It's the same reason insurance buy health insurance is not a baby step. It's not a financial milestone. It's something you need to do."

Distinction Between Tools and Milestones The hosts elaborate on the distinction between financial tools and financial milestones. They emphasize that Baby Steps represent measurable financial achievements, whereas budgeting, insurance, and other financial practices are necessary actions that support reaching those milestones.

Speaker A [01:13]: "A will is not a baby step. It's a tool, it's an item, it's a practice, it's a habit, it's a thing you need to do that causes you to hit the financial milestones."

They further categorize the Baby Steps, reaffirming that each step corresponds to a specific financial goal, such as paying off debt, building an emergency fund, investing for retirement, saving for college, and paying off the mortgage.

Speaker A [01:25]: "That's good. That's why it's not a baby step. And so all of those other things fall in the same category as the budget does. There are things you need to be doing. Living on less than you make is something you need to do, but it's not a baby step because it's not a financial milestone. Thousand dollars is a financial milestone. Getting all your debts paid off except your home. Baby step two is paying them off."

Affirmation of Baby Steps Integrity Addressing the concern about potentially altering the Baby Steps, the hosts firmly state that they have no plans to rewrite or re-release the Baby Steps. They reaffirm their commitment to maintaining the established financial roadmap.

Speaker B [02:38]: "So you're not going to rewrite the baby steps? You're not going to re release them? Not today on David, on Davey's plan."

Speaker A [02:46]: "Not, not, not. We're going to stay with Dave, not Davey."

Conclusion The episode concludes with encouragement to listeners to continue utilizing the existing Baby Steps framework while leveraging budgeting as a fundamental tool to achieve their financial goals. The hosts reinforce the importance of budgeting and other financial practices as essential actions that underpin the successful attainment of each Baby Step.

Speaker A [02:50]: "That's what we're going to do. Create your free every dollar budget today. The simplest way to budget for your life."

Key Takeaways:

• Budgeting as Foundation: Budgeting is considered a foundational tool ("baby step zero") essential for achieving financial milestones but not categorized as a Baby Step itself.
• Baby Steps as Milestones: The Baby Steps represent specific, measurable financial goals such as paying off debt, saving for emergencies, investing, and more.
• No Plans to Rewrite: The Ramsey Network maintains that there is no intent to alter the established Baby Steps, emphasizing their effectiveness and importance.
• Tools vs. Milestones: Understanding the distinction between financial tools (like budgeting and insurance) and financial milestones (the Baby Steps) is crucial for effective financial planning.

This episode provides clarity on the structure and purpose of Dave Ramsey's Baby Steps, reinforcing the idea that while budgeting is indispensable, the Baby Steps themselves serve as critical benchmarks on the journey to financial freedom.