What the Baby Steps are
The 7 Baby Steps are a sequence popularised by finance author Dave Ramsey. The idea is not clever maths — it is doing one money job at a time, in a fixed order, so you always know the single next thing to focus on instead of spreading effort thin.
The seven steps at a glance
- Save a small starter buffer — around €1,000 — for immediate surprises.
- Pay off all debt except the mortgage, smallest balance first.
- Build a full emergency fund of 3–6 months of essential expenses.
- Invest 15% of income toward retirement.
- Save for your children’s education, if that applies to you.
- Pay off your home early.
- Build wealth and give.
Why the order matters
The power is in the sequence. The small starter buffer in step 1 stops the next minor emergency from pushing you back into debt while you work on step 2. Only once debt is gone does the full emergency fund in step 3 make sense — there is no point earning nothing on savings while paying high interest on debt.
Investing waits until step 4 for the same reason: clearing a debt that costs 12% is a guaranteed 12% return, better than most portfolios promise.
The debt snowball in step 2
Step 2 clears debts from the smallest balance first, regardless of interest rate. Mathematically, paying the highest rate first (the avalanche) saves a little more interest — but the snowball’s quick early wins keep people going. The avalanche vs snowball article compares the two so you can pick the one you will actually finish.
Where to adapt it
The Baby Steps are a framework, not gospel. The exact 15% or the specific buffer size are starting points — adjust them to your income, your retirement system, and your goals. What travels well everywhere is the core discipline: one job at a time, in order.
Run your own numbers
See a realistic payoff date for step 2 with the debt payoff calculator, and use the 50/30/20 budget calculator to free up the monthly amount each step needs. New to budgeting? Start with what a personal budget is.