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Dave Ramsey Baby Steps + Budget Percentages

The Dave Ramsey baby steps and budget percentages will help you make smart financial decisions.

By following the Dave Ramsey baby steps, you can put yourself on the path to financial freedom.  The Dave Ramsey budget percentages are an useful guide to help you achieve your goals.

Have you ever heard of Dave Ramsey?  He is a financial guru who has inspired and motivated an entire community to become debt free.

Millions of people all over the world have read his books and are working to pay off their debt to follow in his footsteps.

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How Dave Ramsey helped my family on our debt free journey

We had accumulated a good deal of debt over the past few years, especially after I left my job to stay at home with our kids.  When we were going through a hard time financially, we maxed out credit card after credit card just to stay afloat.

Everyone in my family kept encouraging me to file for bankruptcy when they saw how we were struggling to pay our bills.  I grew up with parents that lived off of credit cards, and my siblings and I kept up the charade after we got older as well.

That’s when Dave Ramsey came into my life.

I was at my grandmother’s house one day and when I went to use her bathroom, she had his book sitting by the toilet.  The Total Money Makeover.

That book changed not only my life, but my entire outlook on finances.

So after we received a hefty tax return this year, what did we decide to do with the money?

We took the $6,000 and put it to our credit card debt.

Boy, did that sting!  Seeing that amount of money in our checking account and then it disappearing within a matter of days was hard to watch.

But putting that money to our debt had now eliminated $300 of monthly payments, which gave us a bit of relief.  We still have a way to go, but we are well on our way to paying off our debt.

Dave Ramsey teaches financial advice for a living, and his methods are not complicated.  They are actually pretty simple.  They just take dedication and hard work.

He uses what he refers to as Baby Steps.

Dave Ramsey Baby Steps chart to pay off debt 

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dave ramsey baby steps

Dave Ramsey Baby Step 1

Set up an emergency savings fund of $1,000.  Put it away somewhere that you will not touch.

That means that this savings account should not be tied to your everyday checking account.  It should be in its own account, somewhere where you won’t pull money from it.

Use this money only for emergencies.  Replenish it if it’s used.

Dave Ramsey Baby Step 2

Pay off your debt using the Snowball Method.  This method of paying off your debt involves paying off your smallest debts first, and ending with your largest debt.

Dave suggests this method over paying your debts with high interest first.  He believes people will be more likely to stay on track if they are able to get quick wins.

This will give them motivation to keep going.

Dave Ramsey Baby Step 3

Save enough money to cover 3-6 months of expenses.  (Ideally 6 months of your monthly expenses).

This should include every monthly bill you have, along with your spending money for each month.  This money will become your new emergency savings fund in case of something major happening, like losing a job and income.

Dave Ramsey Baby Step 4

Invest 15% of your household income into Roth IRAs and pre-tax retirement.

Once you have reached this step, you will finally begin to start saving more money.  All of the money you are now accumulating with zero debts on your monthly bills can now go towards this step and the following steps.

Dave Ramsey Baby Step 5

Start saving for your children’s college.  Research how you want to invest in your children’s education and start saving money toward this investment.

Dave Ramsey Baby Step 6

Pay off your home early.  Yes, this is a big one!  Pay off your mortgage now, not in 30 years.

Paying off your mortgage will be a huge milestone in your debt free journey.

Dave Ramsey Baby Step 7

Build wealth and give.  Once you have paid off all of your debts, your mortgage, and are putting money towards your investments and children’s college fund, you can also start putting more money towards charities.

Maybe you might want to help your local church or a family that is struggling.  Maybe you want to donate money to some charities close to your heart.

Dave Ramsey 7 Baby Steps – Achieved

By following these steps, you can achieve financial freedom.  It is not a get rich quick plan.

It will NOT be easy.  But it will be worth it.

To stay on track, Dave recommends working extra shifts at your job, picking up side hustles and other part-time jobs to make extra money every month to make extra cash, selling things you don’t need anymore, and to participate in a no spend challenge (not buying any non-essential items).

The harder you work, the faster you will succeed.

11 Now no discipline seems to be joyful at the time, but grievous. Yet afterward it yields the peaceful fruit of righteousness in those who have been trained by it. – Hebrews 12:11

As the scripture states, it will be hard when working on Dave Ramsey’s baby steps.  You will make mistakes, lots of them, at the beginning.

You will go over your budget and mess up.  But as long as you get back up again, and continue working hard, you will make it through.

And when you come out on the other end, with zero debt to your name, you will finally be free.

Dave Ramsey pie chart

Dave Ramsey has recommended budget percentages to help you manage your monthly budget in a way that will help you succeed.

Check our below Dave Ramsey budget percentages pie chart to see the exact percentages that he suggests.

Dave Ramsey Budget Percentages 

Dave Ramsey Pie Chart

Dave Ramsey percentages – (Dave Ramsey recommended budget)

What part of income should go to rent or mortgage according to Dave Ramsey?

Dave recommends that 25% of your monthly income goes to your rent or mortgage.  It is important to calculate your monthly payments to ensure that you aren’t going too far above this recommended percentage.

Dave Ramsey food budget percentage

Dave’s budget recommendations for food each month is between ten to fifteen percent of your income.

This amount should cover your groceries as well as eating out during each month.

Dave Ramsey saving percentage

Dave recommends saving 10% of your monthly income (if you can).  As you work your way through the 7 Dave Ramsey baby steps, this part of the budget plan percentages should be easier to achieve.

After you complete Dave Ramsey’s baby steps, you can increase this part of your income to save more money each month.

Dave Ramsey giving percentage

Dave recommends giving 10% of your monthly income, if you can.  At the beginning of your debt-free journey, this might not be possible to achieve.

After you complete baby step 2, you can start giving 10% of your income as your work your way through the remainder of the steps.  Once you reach baby step 7, you can choose to give more of your monthly income if you wish.

Dave Ramsey spending percentage

As you work your way through Dave Ramsey baby steps, you will want to try to not spend money on any non-essential items.

However, once you have achieved baby step 2, or at any point that you feel comfortable, you can find the recommendation for the spending budget percentages.

Dave suggested only 5-10% of your income should go towards personal spending.

Let’s review the recommended percentages for budget

Giving: 10%
Saving: 10%
Food: 10-15%
Utilities: 5-10%
Housing: 25%
Transportation: 10%
Health: 5-10%
Insurance: 10-25%
Recreation: 5-10%
Personal Spending: 5-10%
Miscellaneous: 5-10%

By following these recommended spending percentages, we can make sure that our monthly income gets spent the correct way in order to succeed with our debt free journey.

Descriptions of Dave Ramsey budget percentages


You can do this by giving to your church, local community, or other charities that are important to you.

Finding ways to give back to others can help us be good citizens and role models to our children, help those in need, and be grateful for what we have.


This step is important to build your financial independence.  Start by building an emergency fund to use when you have unexpected big expenses (which will be bound to happen from time to time).

According to Dave Ramsey’s plan to get out of debt fast; he recommends saving $1,000 in an emergency fund before you start paying off your debt.  Then after your debt is paid off, he recommends saving up to 3-6 months worth of living expenses.

In today’s day and age, $1000 doesn’t go quite as far as it might have when Dave first created this plan.  You may decide that it’s important for your family to save more than the initial $1,000.

This money is saved for an emergency.  A trip to the dentist that requires a crown might cost anywhere from $800 – $1500 without dental insurance.  A household repair might also cost more than that $1,000 you have tucked away.

Determine what you think you need to save for your emergency fund so that when the day comes that you need to use it, you don’t end up wrecking all of your hard work on paying off your debt.

After your emergency fund has been saved and set aside, you should then start setting aside 10% of your income towards other things.

This money can be saved for a big ticket purchase or can be put in a retirement plan such as an IRA or 401k.


Dave recommends spending 10-15% of your monthly budget on food, such as groceries and eating out.  This is the hardest category for my family to stay on budget with every month.

Either we spend too much money at the grocery store, or just get too tired to cook and end up ordering take out instead of cooking.

I have found that making a meal plan at the beginning of the week really helps us stay on track with cooking at home.  I love using $5 meal plan to help plan out my meals in advance.

If I don’t use it, I can spend hours trying to find the perfect recipes for the week on the internet.  This saves me so much time so I can use that energy on other things.

A few other things that I have found helped me stay on track with our food budget are to make freezer meals and to cook double portions so I can freeze some of it for another night.


Your utilities should be 5-10% of your budget.  This would be your electricity, water, gas, trash, etc. bills.


The amount of money you spend on your rent or mortgage should be no more than 25% of your monthly budget, according to Dave Ramsey.  This will also include your property taxes and insurance if you own a home.

If you are renting, then this is one of the easiest ways to reduce your monthly budget.  By moving from a home that you pay $1800 a month to a smaller home at $1400, you could save money, stay on track with your budget, and get out of debt faster.


Transportation costs should be ten percent of your monthly budget.  These costs will be your gasoline, car insurance, and car payments.

This tends to be another area where people tend to spend more than the allotted amount Dave Ramsey recommends.  By downsizing your vehicle, you can make sure to stick to your monthly budget.


This 5-10% should cover your out of pocket expenses for your health.  It can be used to cover deductibles, sick visits, and emergency room trips.  It can be used for purchasing a new pair of glasses, or that bill for your dental filling.


Dave Ramsey’s suggested percentages for insurance are 10-25%.  For most people, that would fall under 25%.  Besides health insurance, you should also consider life insurance and any other coverage you need.


Recreation will be your “fun budget.”  Anything that you spend money on for entertainment purposes.  This can be taking the kids to the zoo or doing an escape room with friends.

Personal spending

This 5-10% of your monthly budget should cover any type of personal spending you do each month.  It can include getting your hair cut or a mani-pedi.

It can include getting new clothes for your kids.  It can include grabbing that new book you have been waiting to buy.


Perhaps the most important part of Dave Ramsey percentages is the budget for miscellaneous things.  This 5-10% of your monthly budget should cover anything and everything that doesn’t fall into one of the other categories.

Do the Dave Ramsey budget percentages still work in 2023?

The Dave Ramsey budget percentages have helped millions of households plan their monthly budgets in a way that is manageable to maintain.  Dave Ramsey’s recommended percentages can help you figure out what parts of your budget need to be adjusted to stay on track with your monthly expenses.

In 2023, do these same percentages still apply?  You should go through your own personal budget and make adjustments based on your available income each month, as well as your own personal preferences.

For example: this is my own personal family budget percentages based on our needs:

Giving: 0%
Saving: 5%
Food: 20%
Utilities: 5%
Housing: 25%
Transportation: 10%
Health: 5%
Insurance: 10%
Recreation: 10%
Personal Spending: 5%
Miscellaneous: 5%

We currently prioritize our housing and food for the percentages the most because we live on one income.  As my income grows now that I am working from home by starting a blog, we will make adjustments to our budget ratios.

We will prioritize giving more once our income has increased.

You know what is right for your budget and your own needs and wants.  But Dave gives you a great outline of how to get it done.

More useful information from Dave Ramsey

Check out the clip below of Dave’s live show, which can be found on your local radio station, as a podcast, or on YouTube.

Check out his YouTube page for more videos of The Dave Ramsey Show.

Dave also has designed a series called Financial Peace University that you can take in person at local churches all around the country, or online at home.  If you are interested in joining or finding out more information about it, check out how to sign up for it here.

To read about how to teach your kids about money, check out Smart Money, Smart Kids, written by Dave and his daughter, Rachel Cruze.

If you want to teach your kids about saving money in a fun way, he also created a game for kids.  We just got it for Christmas and can’t wait to use it to help teach our kids how to manage their money in a smart and effective manner.

Related post: How to Get Out of Debt on a Low Income: 24 Genius Tips

Dave Ramsey quotes to succeed in paying off debt fast

Dave Ramsey Tips and Quotes to Pay off your Debt

The decision to go into debt alters the course and condition of your life. You no longer own it. You are owned.

We buy things we don’t need with money we don’t have to impress people we don’t like.

You know what you can do when you don’t have any payments? Anything you want.

You don’t build wealth with credit card rewards and airline miles. You can’t beat the credit card companies at their own game.

If you want something you’ve never had, you’ll have to do something you’ve never done.

You’re not a bad parent if you don’t save for your kid’s college because instead you had to choose to feed them and clothe them. Those things come first. They can go to school and do this thing called ‘work’ while they’re in school.

Keep people in your life that are encouraging you to reach your goals.

The thing I have discovered about working with personal finance is that the good news is that it is not rocket science. Personal finance is about 80 percent behavior. It is only about 20 percent head knowledge.

There are no shortcuts when it comes to getting out of debt.

Debt collectors like to play on your emotions because they think you’ll give in and do something you can’t really afford to do. Most of them don’t care about you or your situation as long as they get some money.

You need some quick wins in order to stay pumped enough to get out of debt completely.

The world will try to tell you that you need stuff to be somebody. Don’t listen.

The enemy of “the best” is not “the worst.” The enemy of “the best” is “just fine.”

Live like no else today, so you can live like no else tomorrow.

Debt is so ingrained into our culture that most Americans can’t even envision a car without a payment … a house without a mortgage … a student without a loan … and credit without a card. We’ve been sold debt with such repetition and with such fervor that most folks can’t conceive of what it would be like to have NO payments.

My children were taught at an early age how money works and that it comes from hard work. They’ve been on a commission – not an allowance – since they were little. They learned that if they worked around the house, they got paid. If they didn’t work, they didn’t get paid.

When we talk about kids earning commission for chores, we always have at least one parent who argues that children should do chores because they are part of the family. I agree, but if you don’t involve money in a few chores, you lose the teachable moments in the work, spend, save, and give principles.

It takes some discipline and hard work, but relying on credit when things go wrong is a trap.

Pay your utilities, gas and other basic needs before paying on your debts.

As parents, we teach our kids about things we feel competent in. That’s why so many parents don’t teach their kids about money.

Those who don’t manage their money will always work for those who do.

Broke is normal. Why be normal?

It’s never too late to turn things around. You are the only obstacle.

Change is painful. Few people have the courage to seek out change. Most people won’t change until the pain of where they are exceeds the pain of change.

I’m a Christian. Years ago, I went broke, so I decided to run every part of my life according to the Bible. It sounds hokey, but it works. You run your marriage that way, and it works. It will work with business, too, and finances. Treat people like you want to be treated.

You never cash out a 401(k) or IRA to pay off debt, unless it’s to avoid a foreclosure or bankruptcy.

There is nothing wrong with having nice things, but when you are trying to buy nice things to be happy, you are going to hurt. It’s not going to work.

Your decisions from today forward will affect not only your life, but your entire legacy.

Tools to help you pay off debt

An amazing free debt payoff tracker that is online.  You can input every debt you owe, and track how much money you put towards each account every month.

Budget Binder
A financial planner with 69 pages, including debt tracking printables, budget and bill tracking, monthly lookbacks, monthly calendars, goal sheets, and expense trackers.

This is a printable, but if you prefer to use pencil and paper to do your monthly budget and bills like me and many others, then this is a great option because it is very affordable.

Are you following the Dave Ramsey baby steps to pay off your debt? Leave a comment below!

dave ramsey baby steps to pay off debt


dave ramsey percentages

29 Finance Quotes from Dave Ramsey

Dave Ramsey Debt-Free planHow Dave Ramsey Will Change Your Life and Help You Become Debt-FreePay off your debt with inspiration from these quotes by finance expert Dave Ramsey

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dave ramsey baby steps 7

Budget Percentages by Dave Ramsey

Budget Percentages Recommended by Dave Ramsey

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