Dave Ramsey: Your Complete Money Makeover In 7 Steps

Dave Ramsey: Your Complete Money Makeover In 7 Steps

Who doesn’t love a makeover? The excitement of some much needed change and a whole new look at the end. Oh wait, we're talking about a makeover for your finances right? A money makeover, if you will.

While you don’t get a new lippy, or a new pair of shoes, you do get a pretty attractive looking bank balance if you do it right. That promise has to be enticing for anyone!

The great thing is, there is a logical 7 step formula to follow. Here they are… 

Your Money Makeover In 7 Steps

Step 1: Begin an emergency fund

Just in case the unexpected occurs, you want to make sure you have a little bit put away to cover it. Try to have an emergency fund of $1000 put aside so that you are prepared for anything. You never know if your car might break down, or you suffer an injury that results in medical bills. 

Step 2: Snowball your debt

Debt is like a millstone that hangs around your neck and forces you to pay more for things than you should. So you want to clear all of the debt you have, apart from your mortgage. The way to do this is to make a list of all of your debts from smallest to largest and start paying the smallest ones off first. Don’t worry about the interest rates on each, you are aiming for momentum from fast action. 

Step 3: Flesh out your emergency fund

A true emergency fund should contain around 3-6 months of living expenses. It should be fluid money that you can access in a hurry. Even if you are in secure, long term employment you need to have an emergency fund. You just don’t know what might happen.

This is also the time to save for a deposit on a house if you have not yet done so. The saving process should be relatively painless as by this stage you would have no other debt and an emergency fund stashed. 

Step 4: Save for your retirement

The future is going to be expensive when you don’t have the ability to earn like you do now. So, you want to plan for that. Do that by investing 15% of your earnings every payday. You won’t miss the small amount from your day to day budget, but you will thank yourself in the long run. Explore your investment options to see which is right for you. 

Step 5: Start a savings fund for kids’ futures

When your kids are little, the idea of University degrees, overseas trips, or a car for them to drive seems a long way off. Even though the nights are long, the years are very short. So start putting away a small amount every month for your kids. You can choose what the money is for. Whether it be their education, an OE, a car, or even the start of a deposit for a house. 

Step 6: Pay off your mortgage

By this stage, you should be in a pretty comfortable financial position. So, direct any spare earnings into paying off your mortgage. Wouldn’t it be great if you could spend, invest, or save every dollar that you earned? That could be a reality f you clear your mortgage with the bank! 

Step 7: Build your wealth

Continue to invest your money to build your wealth. Ideally you want to get to a point where you can live off your investment income and not have to work any more.


The steps in this money makeover are taken from the book ‘The Total Money Makeover’ by Dave Ramsey. He has designed the 7 actionable steps to be taken one after the other to gradually strengthen your financial position and allow you to eventually achieve financial freedom.

What do you think? Do you believe the steps are achievable? I'd love to hear your thoughts in the comments below.

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