Rick’s Mod to Dave Ramsey’s Baby Steps

Building Wealth Is Great, But Don’t Forget to LIVE THE DREAM!

About 20 years ago, I made a decision that would significantly change the direction of my financial life.

I started following Dave Ramsey's 7 Baby Steps.

And I'll tell you something right up front: They worked!

Those principles helped me develop financial discipline, eliminate unnecessary debt, save money, and ultimately put myself in a pretty darn good position in life.

For that, I'll always give Dave Ramsey credit.

But here's the thing.

Twenty years later, with a little more life experience, a few more gray hairs, and a much different financial perspective, I've come to realize that while Dave's advice is excellent, I don't necessarily agree with every single part of it.

And that's okay!

Financial advice isn't necessarily one-size-fits-all. What works for someone struggling with debt might not be the best strategy for someone who's financially disciplined and building substantial wealth.

So, I've taken Dave's original seven steps, added a couple of my own, and modified a few others.

I'm calling it:

RICK'S MOD TO DAVE RAMSEY'S BABY STEPS!

Nine steps instead of seven.

And that ninth step? Well, that's probably my favorite!

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STEP 1: Save $1,000 for an Emergency Fund

No argument here, Dave!

Everybody needs to start somewhere.

Having $1,000 tucked away for an unexpected expense is a great first step toward financial stability.

Now, let's be realistic. In today's world, $1,000 doesn't go nearly as far as it did 20 years ago.

A car repair, an emergency trip, or an unexpected household expense can wipe that out pretty quickly.

But the principle is what matters.

Start saving. Build the habit. Establish some financial discipline.

You'll build on that foundation as you move forward.

STEP 2: Pay Off All Debt Except Your House

Again, I'm with Dave on this one.

Consumer debt can absolutely destroy your ability to build wealth.

High-interest credit cards, personal loans, unnecessary car payments, and financing things you really can't afford can keep you trapped financially for years.

There's something incredibly liberating about not owing everybody money.

But here's where Dave and I start to disagree a little.

And that brings me to my first modification.

STEP 3: Credit Cards Aren't Necessarily the Enemy!

Dave Ramsey absolutely hates credit cards.

And I understand why.

For people who lack financial discipline, credit cards can be dangerous.

If you're carrying balances, paying 20% or more in interest, and buying things you can't afford, then yes...

CUT THOSE CREDIT CARDS UP!

But what if you're financially disciplined?

What if you pay your credit cards off every single month, without exception?

Well, that's an entirely different conversation.

Personally, I think credit cards can be excellent financial tools when used responsibly.

Especially when they offer rewards.

I'm talking about airline miles, hotel points, travel benefits, airport lounge access, and other perks.

My wife and I love to travel. And over the years, I've learned that strategically using credit cards can provide some pretty significant benefits.

Why wouldn't I want to earn airline miles or hotel points on purchases I was going to make anyway?

The key is simple.

NEVER carry a balance. NEVER pay interest just to earn rewards. And NEVER spend money you wouldn't otherwise spend just to accumulate points.

If you can handle that responsibility, credit cards can actually work FOR you.

If you can't?

Cut them up and stick with Dave's original advice.

Know yourself!

STEP 4: Save 3–6 Months of Living Expenses

Absolutely!

Once you've eliminated unnecessary debt, it's time to build a real emergency fund.

Three to six months of living expenses is an excellent target.

Personally, I think your individual circumstances should determine how much you keep available.

Someone with a stable career, two household incomes, and minimal expenses might be comfortable with three months.

Someone self-employed or with unpredictable income might want six months or even more.

The important thing is having enough money available that an unexpected financial problem doesn't turn into a catastrophe.

Financial security brings peace of mind.

And peace of mind is worth a whole lot!

STEP 5: Invest 15% of Your Income for Retirement

Now we're getting into something I'm pretty passionate about.

Dave recommends investing 15% of your household income toward retirement.

That's excellent advice.

But my question is...

WHY STOP AT 15% IF YOU CAN AFFORD TO INVEST MORE?

Let's talk specifically about your 401(k).

One thing I've learned over the years is that a surprising number of people don't fully understand their employer's retirement benefits.

Does your employer match your 401(k) contributions?

If so, how much?

Three percent? Four percent? Six percent?

Whatever that number happens to be, you should make every effort to contribute enough to receive the FULL employer match.

Think about it.

Your employer is offering to contribute additional money toward your retirement, provided you contribute a certain amount yourself.

Why would you leave that money on the table?

That's part of your compensation!

And here's my next recommendation.

If you can afford to max out your 401(k) every year, DO IT!

Obviously, not everybody can.

We've all got bills, families, mortgages, and other responsibilities.

But as your income grows, consider increasing your retirement contributions rather than automatically increasing your lifestyle expenses.

And don't forget about traditional IRAs and Roth IRAs.

Depending on your income, eligibility, tax situation, and retirement strategy, those can provide additional opportunities to build wealth.

There are annual contribution limits and tax rules to consider, so make sure you understand which accounts are appropriate for your circumstances.

The point is simple.

Don't look at 15% as the maximum. Look at it as a starting goal.

Your future self may thank you!

STEP 6: Save for Your Children's College Education

I agree with Dave that helping your children prepare for their future is incredibly important.

But I have a question.

IS COLLEGE REALLY NECESSARY FOR EVERYBODY?

And before somebody gets upset, hear me out!

If your child wants to become a physician, attorney, engineer, or enter another profession requiring a college education, then absolutely.

College makes perfect sense.

But what about everybody else?

Somewhere along the way, society developed this idea that every kid needs to attend a four-year university to become successful.

I don't buy that.

There are plenty of successful people who never earned a traditional four-year college degree.

And there are some fantastic career opportunities that don't require one.

Let's Talk About Trade Schools!

Welding.

Plumbing.

Electrical work.

Automotive technology.

HVAC.

Diesel mechanics.

Skilled trades are essential to our economy, and experienced professionals in many of these fields can earn excellent incomes.

In some cases, they can start earning money years before their college-bound friends finish school.

And potentially without accumulating massive student loan debt!

There's absolutely nothing wrong with being a skilled tradesman.

In fact, I think we need to encourage more young people to consider these careers.

And Then There's My Personal Favorite: THE MILITARY!

Now, anybody who knows me probably saw this coming!

I spent 20 years serving in the United States Air Force, and I wouldn't trade that experience for anything.

The military gave me opportunities I might never have experienced otherwise.

Training.

Education.

Leadership.

Travel.

Responsibility.

And lifelong friendships.

I earned both my two-year and four-year college degrees while serving in the military.

Think about that for a moment.

I was able to serve my country, develop valuable technical skills, build a career, and earn my education along the way.

Military service certainly isn't for everybody.

But it deserves serious consideration.

And you don't necessarily have to make it a 20-year career.

Four or six years of military service can provide valuable training, educational benefits, work experience, and a foundation for future opportunities.

Not everybody who joins the military does so with the intention of making it a career.

Some simply want an opportunity to learn, grow, and figure out what direction they want their lives to take.

And there's absolutely nothing wrong with that.

My point?

Prepare your children for success.

But don't automatically assume that success requires a four-year university degree.

College, trade schools, apprenticeships, and military service can all be excellent paths.

Help your children find the path that's right for THEM!

STEP 7: Pay Off Your House

Now this is an interesting one.

Dave says to pay off your mortgage early.

And from a psychological standpoint, I completely understand.

There's something absolutely wonderful about owning your home free and clear.

No mortgage payment.

No bank holding a lien on your house.

Just the satisfaction of knowing it's YOURS.

But financially?

I think there's another side to this discussion.

Let's say you refinanced your mortgage several years ago and locked in an interest rate below 4%.

Maybe even 2.5% or 3%.

Would it necessarily make sense to aggressively pay off that mortgage?

I'm not so sure.

If you have a very low fixed mortgage rate, you might be better off investing additional money elsewhere, depending on your expected returns, taxes, risk tolerance, and financial goals.

Of course, investment returns aren't guaranteed, and paying off debt provides a guaranteed reduction in interest expense.

So there's a legitimate argument for both approaches.

If you're carrying a mortgage at 6%, 7%, or higher, paying it down becomes a much more attractive proposition.

But if you're sitting on a 2.75% fixed mortgage?

I'd certainly think twice before rushing to pay it off.

Sometimes the mathematically best decision and the emotionally best decision aren't the same thing.

And ultimately, you have to decide which matters most to you.

STEP 8: Build Wealth and GIVE!

This one is a no-brainer!

One of the most rewarding things about achieving financial success is reaching a point where you can help other people.

And I'm not necessarily talking about giving away enormous amounts of money.

Sometimes it's helping somebody who's going through a difficult time.

Sometimes it's supporting a family that needs a little assistance.

Sometimes it's contributing to organizations that do tremendous work for others.

Personally, I support several charitable organizations, including:

Tunnel to Towers Foundation.

The American Heart Association.

Wounded Warrior Project.

And several others.

These organizations support causes that mean something to me personally.

But here's something else I've learned.

You don't have to be wealthy to be generous.

You can give your time.

You can volunteer.

You can help a neighbor.

You can support a veteran.

You can make a difference in somebody's life without writing a huge check.

And when you do reach a point where you have the financial ability to give more?

It's a beautiful feeling.

Building wealth is great. Using some of that wealth to make the world a little better is even greater.

Which brings me to my final step.

And probably the one I'm most passionate about!

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STEP 9: GET OUT AND LIVE THE DREAM! (LTD)

Anybody who knows me has probably heard me say this a thousand times.

LIVE THE DREAM!

LTD!

I say it all the time.

Sometimes jokingly.

Sometimes seriously.

But I absolutely believe in it.

What's the point of working your entire life, saving every penny, investing religiously, and building wealth...

IF YOU NEVER TAKE THE TIME TO ENJOY IT?

Life is short, folks.

And tomorrow isn't guaranteed.

Take that vacation!

Get on that motorcycle!

Go see the country!

Spend a week at the beach!

Take your spouse somewhere special!

Go visit your children and grandchildren!

Spend time with your friends!

Make some memories!

Now, I'm certainly not suggesting that you should abandon financial responsibility and start spending money you don't have.

Quite the opposite.

I'm suggesting that the entire purpose of becoming financially responsible is to eventually have the freedom to enjoy your life.

And here's something else.

You don't have to wait until retirement to start living the dream!

Take a vacation every year if your finances allow it.

Even if it's just a long weekend somewhere.

You don't have to fly first class or stay at a five-star resort to enjoy life.

Sometimes a motorcycle ride through the countryside with good friends is all it takes.

Sometimes it's a cold beer, a beautiful sunset, and good conversation.

Sometimes it's simply having the freedom to do absolutely nothing for an afternoon.

The point is to enjoy the journey.

Because there will always be another bill.

Another project.

Another reason to put something off until next year.

And before you know it, the years have flown by.

Don't spend your entire life preparing to live your life.

LIVE IT!

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MY FINAL THOUGHTS

Looking back over the last 20 years, I'm incredibly grateful that I discovered Dave Ramsey's Baby Steps.

They helped me develop financial discipline and establish habits that have served me extremely well.

And I would absolutely recommend his basic principles to anybody who's struggling financially or just getting started.

But as I've gotten older, I've realized that financial strategies should evolve as your circumstances change.

Credit cards aren't necessarily evil.

Investing more than 15% can be a great idea.

College isn't the only path to success.

Paying off a low-interest mortgage isn't always the best mathematical decision.

And building wealth shouldn't become an obsession that prevents you from enjoying life.

That's why I've developed my own version of Dave's original seven steps.

RICK'S MOD TO DAVE RAMSEY'S BABY STEPS!

Nine steps built around financial discipline, smart decisions, personal responsibility, generosity, and enjoying the rewards of your hard work.

And if I could leave you with just one thought, it would be this:

Work hard. Save wisely. Invest consistently. Help others when you can.

But for heaven's sake, don't forget to enjoy the life you've worked so hard to build!

Because at the end of the day, money is simply a tool.

Freedom, family, friends, experiences, and memories?

Those are the things that make life worth living.

NOW GET OUT THERE AND LIVE THE DREAM!

LTD! 🇺🇸🏍️🏖️

— Rick