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Baby Steps Toward Recovery: An Interview with Dave Ramsey

  • Joy Messimer
  • 2013 16 Aug
Baby Steps Toward Recovery: An Interview with Dave Ramsey

Recently I had the opportunity to ask Dave Ramsey some questions that have been on my mind during recent months, questions many of you have voiced as well. It’s a pleasure to share with you Dave’s wise, encouraging responses. Our own family has faced some tough times the last few years, and we’re glad to be on the path out of debt—we’ve paid of nearly two-thirds of our debt since our own personal downturn. Dave’s words give me such courage to keep at it until the debt is all gone!

TOS: The economy has hit many families quite hard, and it seems as if few have yet recovered from the downturn. What hope and advice would you bring to those who have been devastated by loss of income as they are slowly beginning to recover? What baby steps would you recommend to them?

Dave: I think the first thing they need to know is that it will get better. Yes, people have lost jobs and money coming into the household may be less, but that just means we have to readjust and make changes to our spending. Our country has gone through worse economic times before and made it through, and we can be just as resilient now.

This is a great time to mentally reset when it comes to our finances and start making a plan for it each month. Making a budget is the easiest way to account for your income and outgo and is essential if you want to make it through the hard times.

You also need to start an emergency fund. This is the first in our Baby Steps that we recommend because it means no surprises. When you have money set aside for when life happens to you, that emergency doesn’t sting as badly.

TOS: At the beginning of the downturn, the number of people who had savings was rather low, while the average debt load was quite high; now the number of people who are saving in the U.S. is notably up, while debt loads are lowering. You’ve stated for years the absolute necessity of this flip. What are your thoughts now, as we are three years into this downturn? Is it enough?

Dave: I do think that people have probably gotten more realistic about their finances than they were before 2008. Back in 2008, however, the use of debit cards was higher and use of credit cards was lower. A new study by First Data is now showing us that people are using credit cards more than they are using debit cards. People are reverting to their old ways of spending, even if their income is lower than it was pre-2008. The banks and credit cards companies make it so easy for people to use credit, and it is hard to resist the idea of no yearly fees or rewards incentives. But the fact still remains that people tend to spend more when they use credit cards, and they statistically don’t pay them off at the end of each month.

TOS: The student loan crisis has been making a lot of news lately. What would your recommendations be for a student who finds himself mired in student loan debt? What steps can he take to gain financial freedom?

Dave: The U.S. Department of Education says that the average student has more than $20,000 in loan debt coming out of college. So, students are coming straight out of college with this huge debt load before they even get a job! For a long time, student loans have been the “norm” in this country. But we don’t want to be normal! While he is in school, a student can get a job in order to start saving money and begin paying off that loan. A college graduate with student loan debt can begin paying off that debt as a part of his debt snowball.

TOS: Many of our homeschooled high schoolers are considering college options. Parents are poring over applications with their older children. What are some of the steps they can take to avoid the pitfalls of student loans and enjoy a debt-free college or university education?

Dave: There are some basic things to consider when you are looking at college and furthering your education debt-free. First, look at in-state public universities or technical schools. They are more likely to be financially friendly and, particularly with technical schools, can be more tailored to what you are wanting to learn.

Second, get a job! I said this before, but a student can get a job to help pay for college and living expenses. It doesn’t have to be a full-time job, but bringing in extra income can only help to ease the burden of paying for school. Even if you are taking a full course load, you still have time to work.

TOS: What is the single biggest change any family could make to begin a life of being financially free?

Dave: Stop going into more debt. It’s a simple phrase that doesn’t seem like an easy task, but once you stop using debt and are able to start getting control of your money, over time debt is no longer an option. You begin to realize the freedom that comes from not owing someone else, and suddenly your money doesn’t control you. Instead, you control your money.

TOS: What are the biggest mistake families often make while trying to pay down debt?

Dave: Not having an emergency fund can be fatal to your debt snowball. That’s why Baby Step 1 is having a $1,000 emergency fund, so that when emergencies do happen (and they will), you are prepared for them and don’t have to put them on a credit card. The credit card has replaced the emergency fund for most Americans, and that’s one reason why so many people can’t get ahead.

TOS: For those who are still facing unemployment while supporting a family, what would you say to them? Many are working odd jobs to make ends meet. What is the wisest use of their finances while unemployed? What should stay, and what should go? How should they talk to creditors?

Dave: I know how it feels to be financially broken. I know what it’s like to have more month at the end of the money. It’s one of the toughest things you will probably go through in life. But I also know what the other side of it feels like. I know how it feels to be released of those burdens by working hard and sacrificing in order for my family to survive.

Take as many side jobs as you can to make extra money, and sell so much stuff that the kids think they are next! We all have things around our house that we can afford to let go of, especially when it means we can make money off of them.

Also, focus only on the necessities: food, clothing, transportation, and shelter. If nothing else gets paid, those four things are the most important, because they quite literally keep your family afloat.

TOS: Many homeschooling parents are confused about saving while still having debt. Can you talk about that? One of your first Baby Steps in your books is to save an emergency fund of $1,000 while you continue to pay down debt. How does that work when there’s just nothing left at the end of the month?

Dave: Baby Step 1, which is the $1,000 emergency fund, is the most important step because it’s the step where you decide if you want to actually change your behavior. Have a garage sale this weekend, eat rice and beans every meal for the next month, work extra hours, or anything else that will help you reach this goal quickly. This, along with your written budget, will start you on the path to begin paying off debt. Don’t start paying off debt until your starter emergency fund is in place. Focus all of your attention on one step until you complete it.

TOS: With the downturn, the number of individuals and families who are renting is up. What are your thoughts on renting? Is it a financial black hole, or is there a way to rent wisely while moving toward financial freedom?

Dave: Renting is buying patience while you lay the foundation in your financial plan. If you move into a house with debt and no emergency fund, everything that can go wrong with that house will go wrong, and you don’t have any wiggle room to take care of it. Even though the payment is the same when you rent or buy, owning a house is more expensive than not owning a house. However, it’s still a good investment, because it does go up in value. I wouldn’t buy until you get through Baby Step 3, where you have no debt and a fully funded emergency fund of three to six months of expenses.

TOS: What books would you recommend to a homeschooling family who is wanting to learn more about becoming financially free? What is on your own nightstand to read these days?

Dave: It seems like I get new books to read all the time, so that list is constantly changing. For homeschooling families, I would recommend The Total Money Makeover for learning more about the Baby Steps and how to gain control of your finances. Thou Shall Prosper by Rabbi Daniel Lapin and Today We are Rich by Tim Sanders are also great books that have inspired me in the past with my financial and personal goals.

Thank you, Dave. By God’s grace we’ll all keep taking those Baby Steps toward financial freedom. Thank you for speaking words of hope to us today.

Joy Messimer is a second-generation homeschooling mama to four boys and two girls who range in age from 9 years to ten months. She lives in the balance between the joy of children and homeschooling and the pursuit of faith and artful expression. She writes about the intersection of faith, he{art}, and life at

Dave Ramsey is America’s trusted voice on money and business. He’s authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover, and EntreLeadership. The Dave Ramsey Show is heard by more than five million listeners each week on more than five hundred radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at

Copyright 2012, used with permission. All rights reserved by author. Originally appeared in the February 2012 issue of The Old Schoolhouse® Magazine, the trade magazine for homeschool families. Read the magazine free at or read it on the go and download the free apps at to read the magazine on your mobile devices.

Publication date: August 16, 2013