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Phil Osagie
Updated Apr 14, 2026
Breaking out of the debt cycle isn’t easy.
According to research by Empower, 37% of Americans can’t cover a $400 emergency expense without borrowing money or dipping into their savings. And a startling 145 million Americans have less than $1,000 in savings.
So how do you beat debt and build wealth if you’re living paycheck to paycheck?
You may have already heard of Dave Ramsey’s 7 Baby Steps. The radio host and personal finance personality has popularized this step-by-step guide to take control of your money.
"It's not a fairy tale. Anyone can do it, and the plan works every single time,” according to Ramsey. “Many people have used the plan to ditch debt, increase wealth, and live and give like no one else.”
Whether it’s high-yield savings accounts or low-fee investment options, here are tools that can help you put Dave Ramsey’s 7 Baby Steps into action.
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Baby Step 1: Save $1,000 for your starter emergency fund
An emergency fund is money you set aside to handle life’s surprises — like a car repair, home fix, or unexpected bill — so you don’t have to rely on credit or take on debt when the unexpected happens. See it as your “uh-oh” fund.
“Without an emergency fund, you are one car repair or medical bill away from financial disaster,” Ramsey warned.
To reach that first $1,000 faster — and make your money work while it sits — move your savings into a high-yield account like a Wealthfront Cash Account. Instead of earning next to nothing in a traditional account, a higher-rate option lets your emergency fund quietly grow in the background while staying fully accessible.
A Wealthfront Cash Account currently offers a base APY of 3.30% through program banks, and new clients can get an extra 0.75% boost during their first three months on up to $150,000 for a total variable APY of 4.05%¹.
That's ten times the national deposit savings rate, according to the FDIC's March report².
Additionally, Wealthfront is offering new clients who enable direct deposit ($1,000/mo minimum) to their Cash Account and open and fund a new investment account an additional 0.25% APY increase³ with no expiration date or balance limit, meaning your APY could be as high as 4.30%.
With no minimum balance or account fees, 24/7 withdrawals, and free domestic wire transfers, your funds remain accessible at all times. Plus, you get access to up to $8M FDIC Insurance eligibility through program banks.
A high-yield cash account gives your emergency fund a safe place to grow—so when life happens, you’re ready.
Baby Step 2: Pay off all debt (except the house) using the debt snowball
Credit card balances have ballooned in recent years — in fact, total U.S. credit card debt hit a record $1.277 trillion in the fourth quarter of 2025, according to the Federal Reserve. That makes getting out of debt not just important, but urgent.
Dave Ramsey recommends using the debt snowball method to pay off your debts. Focus on paying off the smallest debt first while making minimum payments on the others. Once the smallest is paid off, move that payment to the next smallest debt and keep going.
Ramsey’s reasoning is simple: “Debt isn’t a math problem; it’s a behavior problem.” The early wins from clearing small balances help build momentum and keep you going when the process starts to feel long.
If you’re looking to speed things up or simplify your monthly payments, debt consolidation is another option worth considering. By combining multiple debts into a single personal loan, you replace multiple payments with a single, predictable monthly bill.
Consolidating all your debts into a personal loan through Credible can help get rid of your debt faster.
Through Credible's online marketplace, finding the right loan becomes much simpler. Credible lets you comparison-shop for the lowest interest rates with just a few clicks.
In less than three minutes, you can see which lenders are willing to help you consolidate credit card debt or other balances into a single loan — potentially making your payoff journey simpler and more structured.
Baby Step 3: Save 3 to 6 months of expenses in a fully funded emergency fund
Now that your debt is behind you, keep moving forward with Dave Ramsey’s Baby Steps by focusing on building your fully funded emergency fund. “Take the money you were using to pay down debt and set aside three to six months’ worth of expenses,” according to Ramsey.
This will safeguard you from life’s bigger unexpected bumps – like job loss or a medical emergency – and help you stay on track without slipping back into debt.
An easy way to keep adding to your emergency fund is by automatically saving your spare change with Acorns. When you make everyday purchases, Acorns rounds up the price to the nearest dollar and invests the difference for you in a smart investment portfolio.
For example, if you buy coffee for $4.30, Acorns will round up to $5.00 and automatically save that 70 cents. These small amounts can add up significantly – just $2.50 in daily round-ups could accumulate to $900 per year, helping you build your emergency fund without thinking about it.
Plus, if you sign up now you get a $20 bonus.
Baby Step 4: Invest 15% of your household income in retirement
The next Baby Step is to start investing 15% of your gross income towards retirement.
“By the time you’re 67, you should still be working because you want to, not because you have to,” said Ramsey.
At this stage, the goal shifts from debt elimination to steady, disciplined investing. Even relatively small contributions can grow significantly over decades thanks to compounding.
According to Vanguard research, people who work with financial advisors see a 3% increase in net returns. This difference can be substantial over time. For instance, if you start with a $50,000 portfolio, you could potentially retire with an extra $1.3 million after 30 years of professional guidance.
If you want that kind of disciplined, professionally guided approach without actively managing every decision yourself, Vanguard Digital Advisor is designed for exactly that. It puts the investing expertise of one of the world’s largest asset managers right at your fingertips.
It takes the guesswork out of investing by building a personalized portfolio for you using Vanguard’s well-known low-cost ETFs and mutual funds — then keeps things running smoothly with automatic rebalancing.
The platform also offers guidance on saving for retirement and lets you set additional goals as your life evolves. In other words, it’s designed to keep your investing aligned with your bigger financial picture, not just your account balance.
With a minimum investment of just $100, it’s an easy way to get started with professionally guided investing.
For every $10,000 in an all-index portfolio, you'll pay approximately $15 to $16 per year⁴.
You can even test-drive the Vanguard experience with no advisory fees for the first 90 days.
Baby Step 5: Save for your children’s college fund
By this stage in Dave Ramsey’s 7 Baby Steps, you’ve paid off most non-mortgage debt and started building your retirement savings. The next step is to begin saving for your children’s college expenses.
If you want to help your kids graduate without the weight of student loans, having a dedicated college savings plan is key. But it’s not just about putting money aside — it’s also about preparing your children to use money wisely when the time comes.
That’s where education and practical experience need to work together.
To help bridge that gap, Greenlight offers a more hands-on approach to financial education. It’s a debit card and financial literacy app designed for families, helping kids learn how to earn, save, spend, and even invest in a guided environment.
While traditional college savings plans (like 529s) focus on covering education costs, Greenlight takes a more hands-on approach, helping kids learn to manage money before they ever set foot on campus.
Here’s how it works: Both you and your kids download the Greenlight app — with tailored experiences. They check off chores, and you automate allowance. They spend wisely, and you set flexible controls. They build healthy financial habits, and you cheer them on.
Instead of just hearing about money management, kids get to practice it in real life. And as they build those habits, you’re free to focus on other priorities at home — and continue moving forward with the next Dave Ramsey Baby Step.
Baby Step 6: Pay off your home early
Now it’s time to bring it all home. Your mortgage is the last obstacle standing between you and complete financial freedom. As Ramsey says, “Baby Step 6 is the big dog!”
As you're paying down your mortgage, it's important to maintain liquidity. Having access to your home equity could help to cover unexpected expenses, pay substantial debt, fund a major purchase like a home renovation or supplement income from your retirement nest egg.
Rates on HELOCs are typically lower than APRs on credit cards and personal loans, making it an appealing option for homeowners with substantial equity. Total U.S. homeowner equity at the end of 2025 was about $34 trillion, according to the Federal Reserve.
Unlock great low rates in minutes with Figure. You can fill out an application that's 100% online – no need to wait for an in-person appraisal.
Once you reach the milestone of becoming mortgage-free, you can officially check off another Ramsey Baby Step.
Baby Step 7: Build wealth and give
Ramsey says the final Baby Step is the most rewarding: keep building wealth, become outrageously generous and leave a legacy.
Real estate has long been a proven path to building generational wealth. For the 12th year in a row, Americans have ranked real estate as the best long-term investment in 2024, according to a new Gallup survey.
And now there’s a way for everyday investors to tap into this market without having to play landlord or have a huge down payment.
The Fundrise Flagship Fund⁵ is a $1 billion private real estate fund that lets you invest in an expertly crafted strategy without needing hundreds of thousands of dollars. You don’t need to be an accredited investor, and you can get started with as little as $10.
Industrial
215 Interchange
Las Vegas, NV
Build-for-rent
Pine Ridge
Fountain Inn, SC
Build-for-rent
Omnia
Richmond Hill, GA
These are a few examples of properties powering the Fundrise Flagship Fund. For a full list of the Fundrise Flagship Fund's portfolio properties see the Flagship Fund website.
With 4,700+ single-family homes and 2,500+ residential units owned by the Fundrise Flagship Fund, you get exposure to institutional-style scale and diversification. After you place your first investment, the Fundrise Flagship Fund will work to find and add new assets to your portfolio over time and send you transparent updates along the way.
It only takes a few minutes to sign up now and become a real estate investor today.
Fundrise Flagship Fund
Buy real estate through Fundrise's $1 billion private fund
The next factor to consider is the preservation and protection of your wealth. Life insurance is one such tool for protecting your wealth, offering financial security for your family and ensuring your legacy is preserved.
When selecting an insurance type, Dave Ramsey recommends that families choose term life insurance over whole life insurance and invest the significant savings in a tax-advantaged retirement account.
Term life insurance offers coverage for a predetermined period, typically 10 to 30 years. If the insured person dies during this term, the policy pays a death benefit to the designated beneficiaries. Term insurance is usually a less expensive and more flexible option compared to whole life insurance.
Young families and busy professionals looking for fast and affordable insurance can easily connect with Ethos and get term life insurance in 5 minutes, with no medical exams or blood tests.
With Ethos, you can get a policy with up to $2 million in coverage, starting at just $2 per day. The application process ensures you get flexible coverage options quickly and transparently, allowing you to focus on what matters most.
The bottom line
“Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest,” Ramsey says.
The 7 Baby Steps turn that principle into a clear path — guiding you from getting control of your money to building wealth, staying protected and ultimately creating a legacy that lasts.
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The Base Annual Percentage Yield (APY) is 3.30%, as of 01/30/26, and is subject to change. If you are eligible for the overall boosted rate of 4.05% offered in connection with this promo, your boosted rate is also subject to change if the base rate decreases during the three-month promotional period. The Cash Account is offered by Wealthfront Brokerage LLC, Member FINRA/SIPC. Wealthfront is not a bank. The Base APY is representative, subject to change, and requires no minimum. Wealthfront Brokerage sweeps cash balances to Program Banks, where it earns the variable base APY and is eligible for FDIC insurance. Instant withdrawals may be limited by your receiving firm and other factors. Investment advisory services provided by Wealthfront Advisers LLC, an SEC-registered investment adviser. Securities investments: not bank deposits, bank-guaranteed or FDIC-insured, and may lose value.
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Based on the national average savings accounts interest rate of 0.39% as posted on FDIC.gov, as of March 16, 2026. Wealthfront doesn't charge wire fees for transfers to title and escrow companies or your accounts at other institutions, but the receiving entity or institution may charge a fee. For more wire info, visit wealthfront.com/transfer-agreement.
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The Direct Deposit Plus Investing Program ("DDI Program") from Wealthfront Advisers LLC and Wealthfront Brokerage LLC (collectively, "Wealthfront") provides eligible clients a 0.25% annual percentage yield ("APY") increase above the current base APY (paid by Program Banks) on total eligible Cash Account balances. Wealthfront may change or end the program at any time and determines eligibility at its discretion. See Terms and Conditions at wealthfront.com/promo-terms.
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Vanguard Digital Advisor is an all-digital service. Digital Advisor charges brokerage accounts an annual gross advisory fee in the amount of 0.20% for an index portfolio option or 0.25% for an active portfolio option. That gross advisory fee is reduced by a credit of the actual revenue The Vanguard Group, Inc. ("VGI"), or its affiliates retain from investments in each enrolled account, resulting in a net advisory fee. The net advisory fee is the actual fee collected from your account(s) and will vary based on your unique asset allocation, portfolio option, account type, and specific holdings in each enrolled account. Note that this fee doesn't include investment expense ratios charged by a fund, such as fees paid to the funds' third-party managers which are not credited. While we generally recommend using low-cost Vanguard funds to build your portfolio, actively managed funds will have higher expense ratios than index funds. For more information on the services, find VAI's Form CRS and each program's advisory brochure here for an overview.
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Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund’s prospectus. Read them carefully before investing. This marketing was vetted by the Moneywise team and sponsored by the Fundrise Flagship Fund.
Phil Osagie
Conversion Copywriter
Phil is a writer at Moneywise, bringing a strong background in public relations, financial communications, and copywriting. Educated in Cambridge, U.K., he has created content for several blue-chip companies, and his work has been featured on MSN, Yahoo, Google, and Apple News.
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