Prepare for Retirement With the Ramsey Baby Steps

If you listen to my show, you’ve heard me say that preparing for retirement is a marathon—not a sprint. For the first few miles, I want you to create a solid financial foundation. There are some basic habits that you need to develop before you focus on investing and building wealth. Learning how to budget, paying off debt, and saving up an emergency fund come first. Then, you’ll hit your running stride and move into wealth-building mode.

We all need a clear path to follow as we work through the process.


Here at Ramsey Solutions, we talk a lot about the 7 Baby Steps. It’s the proven plan that has helped millions of people get out of debt and begin to build wealth! Each step has a clear goal that measures your progress and helps you stay focused.

Whether you’re on Baby Step 1 or 7, this is your permission slip to chase down your dreams and reach your money goals. It will take a lot of hard work, but struggles help us determine who we are.

Are you ready for Baby Step 1? Let’s go.


Step 1: Save $1,000 for your starter emergency fund.

Let’s face it: Life is unpredictable, and expenses can come out of nowhere. Emergency expenses are a big reason why people get into debt—and get stuck there. With an emergency fund, you won’t have to take on new debt the next time an unplanned expense pops up. Your first goal is to save up $1,000 as fast as you can to cover those unexpected emergencies with cash.

How do you get to that $1,000 goal? By living on a budget. Create a free budget in just a few minutes. 

Step 2: Pay off all debt (except for the house) using the debt snowball.

I’m going to let you in on a little secret: There’s no rule that says you have to have a monthly car payment. Yep—you heard me! It’s time to end your relationship with debt . . . for good.

Using the debt snowball, list your debts from smallest to largest, and then attack them one by one. Make minimum payments on each debt except the smallest one. Throw all your extra cash at that one until it’s gone. Then roll that payment into your payment on the next smallest debt. Your snowball will pick up speed and demolish each debt as it grows.  

Paying off debt is a big goal that’s best done in community. That’s why I encourage you to take Financial Peace University—a class that we created to help people get out of debt and begin to build wealth. Nearly 6 million people have met throughout the country and gone through FPU.

Step 3: Save 3–6 months of expenses in a fully funded emergency fund.

Once you’re debt-free, your focus is on saving. Don’t lose your intensity! Use the money that was going toward debt to save up an emergency fund that will cover 3–6 months of living expenses. And when those pesky car repairs or unexpected hospital bills come up, you’ll stay calm, turn to your emergency fund, and pay the full amount in cash.

Step 4: Invest 15% of your household income in retirement.

This is where it gets really fun. After you’ve built up your emergency fund, start investing 15% of your gross income in retirement.

So, what’s your retirement dream? Do you want to travel the world with the love of your life, exploring new cities and eating strange foods? Do you want to spend long, lazy weekends at the lake house surrounded by grandchildren? Everyone’s goal is different, and that’s why I developed the R:IQ. It’s a calculator that gives you specific numbers for how much money you need to save in order to live your dream retirement.

How much do you need to have saved for retirement? Figure it out with my free tool below.

What’s Your Retirement Dream?

The R:IQ is a free assessment that will show you exactly how much you need to save each month to build your retirement nest egg. Take just a few minutes to get crystal-clear on your vision for the future.

Get Your Number

Step 5: Save for your children’s college fund.

With some planning and hard work, you can help Junior graduate from college completely debt-free! Save for college by investing in 529 college savings plans or ESAs (Education Savings Accounts). This is one of the greatest gifts you can give your children. (And if you don’t have kids, or if they’re already out of school, you can skip this step and head to number six.)

Step 6: Pay off your home early.

In my most recent book, Everyday Millionaires, we learned that it takes the average millionaire 10.2 years to pay off their home, and 67% of them live in homes with paid-off mortgages. A paid-off home is a huge boost to your net worth. And no mortgage payment means you can really step up your investing game! Connect with a mortgage expert to see how you can pay down that debt faster. 

Step 7: Build wealth and give. 

Imagine what you could do if you had zero debt, a mortgage-free house, and plenty of money in the bank. Living generously changes not only your life, but also your family tree. Think about the legacy you want to leave—for your children, grandchildren, and the communities that are important to you. We’re blessed to be a blessing, people!


  • Think long term. Short-term sacrifices make for long-term gains. This process will take years of work. People are always looking for get-rich-quick solutions, but trust me: The path to building wealth is slow and steady.
  • Take the steps in order. Stop trying to go north, south, east and west all at once. Taking one step at a time will get you to the right destination. Trust the process.
  • Celebrate your accomplishments. Enjoy the momentum. Don’t apologize for winning.

You’ve got this. It doesn’t matter where you’ve come from—it matters where you’re going.