Dave Ramsey Baby Steps UK and Equivalents

Popular in the US the Dave Ramsey 7 Baby Steps have helped millions of people reduce their debt and many of those to become debt-free.

If you are interested in becoming debt-free and improving your finances but don’t know where to start then Dave Ramsey could be the answer.

Dave Ramsey Baby Steps UK

The main issue for UK residents is that the plan is very much geared towards US residents.

As the Dave Ramsey plan is broken down into simple Baby Steps, I’ve taken each step and highlighted where it might be different for us in the UK.

Who is Dave Ramsey? 

Dave Ramsey is an American financial guru.   He is most well known for his Baby Steps process and utilizing the Debt Snowball Method to become debt-free.

He has a no-nonsense approach and encourages followers to stick to his rules backed up by his reasoning.

You can find the Dave Ramsey Radio Show on Youtube. He has a new show daily on weekdays and the Youtube channel features plenty of archives.   Pretty much any questions about his plan have already been asked so you can just search them on Youtube and listen to his in-depth answers.

Dave Ramsey won’t be to everyone’s tastes.  He’s straightforward, blunt and to the point.  He also incorporates and references some of his strong Christain faith in his answers but if you are looking for a plan to become debt-free, he is one of the best resources for getting started and he is highly motivating.

Dave Ramsey methods and motivation have helped thousands of people pay off their debt and many to pay off their mortgages and become totally debt-free.

However, the process is geared towards the US population and not the UK, so, therefore, there are quite a few differences along the way.

Dave Ramsey Baby Steps UK Alternative Version

The Dave Ramsey 7 Baby Steps is a step by step plan to get people out of debt through to financial independence.

Typically it’s a 1-7 step process, but depending on what further reading you do into the process, you may come across an extra step in Baby Step 0 and see some other steps broken down a little further.  I’ve covered these below.

Baby Step 0 or The Four Walls

This step is actually not often referred to and barely gets a passing mention in his best selling book The Total Money Makeover.  I came across it watching Dave Ramsey Youtube Videos.

If you are behind on your current bills then you are in Baby Step 0.   You can’t begin Baby Step 1, which is to start saving an emergency fund if you aren’t up to date on your bills

You first have to get current on what is referred to as the Four Walls:

  • Food
  • Shelter and Utility Bills
  • Transportation
  • Clothing –

Here’s a quick video that quickly explains The Four Walls

Baby Step 1 – Save a £1000 Emergency Fund

The first official baby step is to save an Emergency Fund of $1000.  This equates to approximately £750 in British pounds but most UK followers aim for the full £1000.

The idea is that you save £1000 so you don’t need to go further into debt at any point in the future.  You are saving to cover any forthcoming emergencies.

Otherwise, you will be paying off your debt but having to dip into it when the law of Murphy (or as we tend to say in the UK, “Sods Law”) strikes and the car breaks down or the boiler goes wrong or whatever and you need to borrow to fix it.

Dave wants you to break your need for ever having to borrow again right from the start.

Dave is great at, is motivating you to work your butt off to save this £1000 as fast as you can.

You are now starting your mission to be debt-free and you need to work hard and focus on your goal.

  • You need to cut costs and save.
  • Look at what you own that you can sell.
  • Think of ways to earn extra money.

Do whatever you can to save this Emergency Fund as fast as you can.

If you are looking for side hustle ideas I have covered the best ways to make money from home that helped me make £500-£1000+ a month.  Some options are more suitable than others while you are in debt.  However, there are options for earning starting with no money.

Baby Step 2 – Pay Off All Debt  

This is where Dave comes into his own.  He highly motivates his followers to pay off their debt with full-on intensity.  he calls it “Gazelle Intense“.

You can’t just decide to pay off debt and do it half-heartedly at the same pace you drifted into it.

You need to attack your debt.  Smash it.  Do everything you can to pay it off as soon as possible.

Student Debt In the USA they seem to rack up tens of thousands of pounds of student debt that needs repaying.

We are fortunate in the UK that we can ignore Student debt.

Although we rack up similar amounts of student debt in the UK, we have a totally different way of repaying.  The vast majority of people never fully repay their student debt and some get it for free.

Here in the UK, student debt is treated much more like a form of tax, and for some low earners, they don’t even have to repay any if they stay under the threshold.

Regardless of what’s outstanding, any remaining debt is wiped out after 30 years.

This is because repayments are based solely on what you earn, so if you don’t earn enough you won’t pay any back.

Mortgage Debt This step also does not include your mortgage debt.

Depending on how much debt you have, it might take 12-18 months to complete Baby Step 2.  Hopefully less.

Debt Snowball Method

Dave Ramsey advocates the Debt Snowball Method.   This debt pay-off method ignores the rate of interest on any debts and instead targets debts from smallest through to largest.

For the UK, that’s all debts excluding any student debt and your mortgage.

Mathematically in terms of the cost of interest it might not make much sense, however, Dave believes and research suggests that people stay motivated by hitting small wins.

When you completely pay off a small debt you’ve scored a win.  You then use those repayments to target the next smallest debt, aiming to clear that too as soon as you possibly can.

Baby Step 3 – Save Full Emergency Fund – 3-6 months of Savings

Once you are debt-free, you then need to set about building yourself a secure financial footing for life.

Saving the equivalent to 3-6 months basic expenses to cover yourself should you lose a job or be off sick for some time.

So this full emergency fund will be to cover:

  • Mortgage/Rent
  • Household Bills
  • Food

It does not need to cover holidays or spends sprees you might have when things are running fine.

See this post for how much emergency funds you need.

The Emergency Fund gives you a wide buffer between ever needing to go into debt again and a great base for building a financially independent future.

Again, Dave encourages followers to save this emergency fund as fast as possible.   In some instances, this can be quite a sum of money, especially for families with children and high outgoings.

In addition to my comprehensive list of ways to make money, you may at this stage consider one of these 67+ side hustles.

3 or 6 Months Expenses

How much you need to save will depend on your personal circumstances.

A singleton or couple with lower expenses and more flexibility in life may only need to save 3 months’ expenses.

However, a family with children might feel more secure with a fully-funded 6-month emergency fund.

Baby Step 3b – Saving For A Home

Dave believes people should become debt-free (Baby Step 2) and have saved a full emergency fund (Baby Step 3) before embarking on homeownership.

Only when these 2 steps have been completed should you consider saying to either buy a house 100% outright (who can do that these days?) or save for the down payment.  He suggests aiming for a 15 year fixed mortgage.

Dave believes an emergency fund is even more important once you embark on homeownership, and he’s right.

There’s certainly a lot more expenses that come with owning a house.

Baby Step 4 – Invest 15% Of Household Income

The fundamental point here is to invest 15 % of your household’s income for your future.  This is a great habit to get into once you’re debt-free.   Pay your future self first.  The earlier you can start this the longer your investments will have time to grow.

However, when reading any of Dave’s references to this step, most UK residents won’t have a clue what Roth IRA’s, 401 K’s and pre-retirement funds are.

The closest equivalent to a ROTH IRA is an ISA.   With an ISA in the UK, you can save in either cash or stocks and shares ISA’s.   Any income from interest or dividends within the ISA is tax-free.   You can access your funds at any time.

Our equivalent to 401k’s is pensions.  There are various types, pensions.  With these you let your funds grow and you can’t access the funds until you reach a certain age.

To highlight:

  • Think of a Roth IRA as similar to our ISA’s
  • Think of 401k’s as similar to our pensions.

Baby Step 5 – Uk Student Loans

Students loans are totally different here in the UK and fortunately, we have a much better and fairer system than in the US where millions of students owe over a trillion dollars in student debt that must be repaid.

Here in the UK, we have a much better system.   Student loans are treated as a form of tax rather than a debt.  In fact, our very own Martin Lewis is calling for student loans to be renamed “graduate contribution system“.

We don’t even need to save up for our children to go to University and we don’t need to worry about how they will pay the debt back because repayments are based on earnings.

Student Loans in the UK are repaid as follows:

  • You only start repaying once you have left University
  • You start repaying only when earning over £25,000 a year (£2083 a month)
  • Repayments are fixed at 9% of what you earn over £25,000 a year

This makes repayments extremely affordable, even for the lowest of earners, because they pay nothing.

Here are a few examples of what you repay

  • Earn less than £25,000 – you repay £0 (Nothing!)
  • Earn £30,000 a year you repay £450, just £37.50 a month. (£5000 x 9%)
  • Earn £40,000 a year you repay £1,350 a year, just £112.50 a month) (£15,000 x 9%)

For a full explanation read Martin Lewis’s Student Loans Mythbusting page.

Baby Step 6 – Pay Off Your Home Early

Again, this step can be life-changing.  Paying off the mortgage really takes the pressure off paying the monthly bills.

It leaves you in a position of more disposable income every month.  You can, therefore, enjoy life more or choose to invest more and build your wealth even faster.

Check out my post on whether it’s best to overpay the mortgage or invest in a pension and what to consider.

Baby Step 7 – Build Wealth and Give

Your investments are growing.   With no mortgage, our outgoings are less.  You have more disposable income available.  Life is good on the financial front.

Every Dollar UK Alternatives

Every Dollar is a US app based around Dave Ramseys Baby Steps.   It’s based around assigning an action to every dollar, or pound in our case.  Be that spending or saving.

Some people in the UK use Every Dollar by saying they live in Canada when they sign up.   Just ignore the $ signs and treat as £’s.  however, you’ll only be able to use the free version as you won’t be able to connect to U.S banks in the paid version.

One of the most similar apps available to UK residents is the You Need a Budget or YNAB app.  After the initial free trial, there is a small monthly fee for this app.  However, it is highly rated when it comes to budgeting apps and those following the Dave Ramsey plan in the UK.

Dave Ramsey Books

Dave Ramsey has written several books.

The Total Money Makeover – Best Seller

Dave’s main book is The Total Money Makeover (On Amazon) – A Proven Plan for Financial Fitness.

You don’t need to buy the book to follow Dave’s principles.  They are freely available on the internet and you can see and hear him talk about them on his Youtube videos.

It is, however, a good motivating read and having the book in a prominent place acts as a strong reminder of the journey you embarking on if indeed you decide to do so.  You get a full understanding of why the plan is set up the way it is.  He also covers many myths and pitfalls not to fall into.

There’s quite a lot of “success stories”, (you could say a few too many).  However, they each highlight a key point of the plan and help you realize the end goal is achievable, even under some really tough circumstances.

Other Dave Ramsey books of note:

  • Total Money Makeover Workbook, (the “Workbook” is not the version you need)
  • Financial Peace
  • Smart Kids Smart Money (co-written with his daughter Rachel Cruze)

Rachel Cruze (Dave Ramsey’s Daughter)

Like father like daughter.  Rachel Cruze follows in her father’s footsteps and talks about the debt-free life and saving for your own home etc.

Together they co-wrote the No.1 New York Times Best Seller “Smart Money, Smart Kids”.  A book I’ve purchased myself and at the time of writing my daughter is reading (slowly over time).

Smart Money Smart kids

Dave Ramsey Uk Support Groups

There are also some great Dave Ramsey Facebook Groups geared towards UK followers.  Although the Group names may change, 2 worth joining are:

Dave Ramsey seems to be building more of a following in the UK, especially within the debt-free community.

You’ll find many references to his methods and people sharing their journeys on Instagram.

While on there, please follow my  MoneySavvyDaddy Instagram profile 🙂


I think the Dave Ramsey baby steps are an ideal foundation for anyone who’s not sure where to start on their debt-free journey.

In my opinion, he is ideal for motivating you to get out of debt.

Once you are out of debt and committed to being debt-free you’ve already achieved something potentially life-changing.

How you tackle and vary the steps during and after baby Step 3 will probably come down to personal choice.

Have you attempted the Dave Ramsey Baby Steps plan?

If so, which step are you currently on? Did it help you achieve debt freedom?

I’d love to hear your stories, please share in the comments.

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