Baby Steps to being Debt Free

Reader Question: My husband and I have been following your plan. We just paid cash for our new home after selling the old one, so we’re out of the Baby Steps. But we’ve still got about $50,000 in student loan debt hanging over our heads. We make over $100,000 a year combined, so how would you suggest handling this?

dave_ramsey Whoa, hang on a minute! I think you’re a little confused about the steps in my plan. You’re not out of the Baby Steps quite yet. You just got Baby Step 6, which is pay off your mortgage, done ahead of time.

Go back to Baby Step 2, which involves paying off all your debt except for your house, and take care of the student loans. You guys make good money, so it shouldn’t take long at all. After that, if you haven’t already, move to Baby Step 3 and set aside a fully loaded emergency fund of three to six months of expenses. Baby Step 4 is investing 15 percent of your income for retirement, and Baby Step 5 means putting aside money for the kids’ college education — if you have kids. The seventh Baby Step is building wealth and giving.

I hope that helps straighten things out. The good news is you won’t have to fight through a house payment while you’re paying off the student loan debt. So for now, just get into attack mode and make it disappear. Then, move on to the other steps. Other than getting the sequence a little mixed up, you guys are doing great!

Dave Ramsey

Dave is the author of The New York Times best-selling book Financial Peace. He is also the host of the nationally syndicated The Dave Ramsey Show, and is a regular guest on television. All of his financial counseling is based on biblical truths. You can hear Dave from 9 a.m. to 11 a.m., weekdays online at Send your questions He resides with his wife Sharon and their three children, Denise, Rachel, and Daniel, in Nashville, Tennessee.