Dave Ramsey is an American Financial guru who created a money management plan that is broken down into 7 ‘Baby Steps’.
It’s a fantastic plan but it is very much geared for a US audience (it uses/mentions financial products and terms that aren’t relevant here in the UK) so I’ve created this blog to share the Dave Ramsey Baby Steps UK Version.
They have been re-written so that they align a bit more with our British pounds and pennies.
Firstly, who is Dave Ramsey and why should you follow his plan?
Dave Ramsey is an American personal money management expert, radio talk show host and TV personality who has helped thousands of people become debt free, build wealth and change their financial lives for the better. He gives no-nonsense advice to people who have gotten in over their heads with debt and helps them to find their way out in a responsible and methodical way. Regardless of whether you love or hate his approach (you have to check out some of the clips of the radio show if you haven’t already!) there is no denying that his plan works
Following the Dave Ramsey Baby Steps helped us clear over £22k worth of debt in less than 18 months!
Baby Step 0 (BS0) Commit to not borrowing for anything ever again (except for a house in BS3b)
- Talk with your spouse and get on them on the same page concerning finances
- Create a budget and learn to stick to it
- Get current on the basics; food utility, shelter and basic transportation
- Get rid of ‘toys’ and all non-essentials (anything that will slow down your debt snowball)
- Cut your lifestyle
- Get current on ALL bills.
BabyStep 1 (BS1) Save £1000 in Baby Emergency Fund (EF)
- Cut up credit cards – you won’t be needing them anymore!
- Get life and long term disability insurance if you have debt or if your family couldn’t survive financially if you died (especially important if you have children)
- Get rid of any cars that you can’t pay off within 24 months
- Draw up a will
Baby Step 2 (BS2) Work on your Debt Snowball
- Pay your debts off smallest to largest (regardless of interest rate), minimum payments on all debts and then throw any extra money at the smallest debt.
Baby Step 3 (BS3) Save 3-6 months of expenses in EF to make it your Fully Funded EF (FFEF)
- Start your replacement car fund
- Start furniture or other non-essential stuff replacement fund
Baby Step 3b (BS3b) Save for a house deposit
- Aim for a minimum of a 20% house deposit to make sure you get access to the best rates
Baby Step 4 (BS4) Start contributing 15% of your gross salary to retirement
- Make use of retirement vehicles and any company matching schemes to max tax relief
- Fund a LISA (Life Time ISA)
Baby Step 5 (BS5) Save for your child’s university or first house
- Consider a junior ISA or children’s bond – the money will be the child’s, but inaccessible until they turn 16/18.
This is great, thanks for putting them in a UK version for us to grasp!
No problem!
I found you using the Money Money linky – great post! I haven’t read the book but it was clear from a lot I had seen online that some of the terms aren’t relevant for the UK (and at least we don’t need medical insurance!). This has made it really clear and simple.
Thank you, glad you liked it!
Good structure to work through debt payments. If you want to save for children without having to give them the money at 18, you could just put money into your own Isa and choose when to hand it over. Or tie it up fir a really long time by opening a pension for them! Thanks so much for taking part in #MondayMoney.
Great post, I’m really interested in investing in the uk bs 4, Is it as beneficial as the us? Is there any uk version of smart Vesta pros? Mutual funds… what on Earth there’s so many what ones do we pick and how? I need help lol
Hi Kayleigh!
I’m hoping I’m going to be able to answer all those questions in the coming weeks and months, I’m already doing research and talking to people who know a lot more about investments than I do (I’m still on BS2 at the moment) This is one of the reasons I’ve decided to ‘translate’ the Baby steps as there are so many differences in finance between us and the US.
Please feel free to email me any specific questions you have about BS4 or any of the BS’s and hopefully I can answer them in an upcoming post for you!
Brilliant I look forward to learning more from you! Thank you xx
When we work out our net worth do we include what our pension is worth at present – is that equivalent to USA 401k?
Yes 🙂 depending on who your pension is with you can sometimes go online and see it’s current worth. I’m planning on working out our net worth this month and doing a post on it and how to calculate it so keeps your eyes peeled!
This is amazing. Some great insights. Thanks for putting it together..
With the 15% towards retirement, if you have a pension with your employer where they make contributions too, are their contributions included in the 15%?
So if I contribute 9% through salary sacrifice and my employer contributes 11%, I have covered off the 15%?
It’s completely personal choice but for me I’d count the 9% you contribute as part of the 15% and then invest the other 6% elsewhere 🙂
This is great to have thr programme translated into English so to speak….I listen to his radio sjow via you tube daily, to keep me on track on BS 2
Thank you for this Charlotte. I was looking for something that made the whole Dave Ramsey baby steps relevant to the UK and you delivered.
Thanks Yinka! I’m still working hard on bringing more posts with more UK relevant info and we’ve just created a new FB group for UK Davers too! Will post details soon!
Hi Charlotte do you have to complete each step before moving onto the other?
Hiya, yes Baby Steps 0-3 are done separately and then 4/5/6 can be done together 🙂
Thank you for this. Making it relevant to the UK is fantastic..
Love this very good
This sounds great, but we seem to be those sort of people, that no matter how hard we save something costly happens that we have to fix
Great post with some good insight
Thank you for this! It’s a great plan!
If I’d have looked at that when I was younger I would have been terrified, but now, I can see that I’ve actually achieved a lot of the targets and am now able to save more towards my retirement so that I’m on track.
you have some fab posts, advice on money is always welcome, though I find during the lockdown I have more in my bank than before – perhaps it’s the lack of spending on superfluous stuff lol!
Practical guide easy to read – invaluable for all parents
Found this post very interesting, there is a lot we can do here, thank you for the heads up, have bookmarked so i can revert back to it
I think it is far less daunting when you break it down like this. I like the idea of hitting smaller debts first and tackling them one at a time. (while always paying the minimum on others)
Great plan, thank you
Great plan thanks for sharing
This is so useful thank you much appreciated
Do you know of a mortgage company who would be willing to take on customers without credit? We used a mortgage company in the USA who were recommended by Dave Ramsey when we lived here, but are now living in the UK, and want to go the same route. Thanks.
Hi Julie, your best bet would be to talk to a mortgage broker and see what they can do for you as they have access to a lot of deals and info 🙂