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7 Steps to Get Rich Every Time


Many of you that know me personally are aware that I have my degree in Finance and therefore understand all of the benefits of using other people’s money (OPM). If you’re able to earn 10% on your money each year, rather than tie up your own capital (which is typically quite limited) into the operation, you could use the bank’s money at 5% interest and still earn 5% for yourself — all on money that wasn’t even yours in the first place!

The principle of using OPM sounds all well and good when you’re earning that 10%, however, what if your business goes south and you’re suddenly only earning 2%? Now the bank has a hold on you and has you backpedalling. And, when you can’t pay the bank, they have every right to take away your assets that you signed as surety for the loan. You’ll be left with nothing, all because you thought borrowing money was smart. Is it really worth the risk? I say no.

7 Steps to Get Rich

Before listening to his recordings, I thought that Dave Ramsey was an uneducated quack (to put it nicely). Why in the world would I live a debt free life when interest rates were so low? It just didn’t make sense….until I thought about the risk vs. the reward. Sure, I could use the bank’s money and potentially earn $20+ million in my lifetime (with high risk), or I could play it safe and reduce my risk down to practically zero and earn $10+ million. I don’t know about you, but $10 million is plenty for me. Plus, I don’t have to worry each day about losing my shirt at a swing in the economy.

Dave’s plan just flat out makes sense, and it’s super simple! Let’s check out the 7 steps:

  1. Save Up $1,000 for your Emergency Fund – Anyone can start paying down their debts, but if you don’t have an emergency fund set up, you’ll most likely dive right back into debt when an unexpected expense comes up.
  2. Pay Off All Debt Using the Debt Snowball – Start paying off those car loans, the credit card debt, and anything else that you owe besides your home loan.
  3. 3 to 6 Months of Expenses in Savings – It’s wise to have some money saved up and stocked away in the event of a job loss or injury. With this large savings, your credit cards should never carry the burden of an emergency again.
  4. Invest 15% of Household Income into Roth IRAs and Pre-Tax Retirement – This is where the wealth begins to happen. If you can start this investment early in life, you’ll most likely earn millions before retirement.
  5. College Funding For Children – With the rising costs of education these days, it’s wise to invest some of your money into college funds for your children.
  6. Pay Off Your Home Early – With your large savings and your debts gone, paying off the house could happen within 5 years rather than 30.
  7. Build Wealth and Give – Can you imagine a life with absolutely no payments? You don’t even have house payments anymore! This frees up a bunch of cash to get ultra-wealthy and will also allow you to give like never before!

Since my wife and I started this “Dave Ramsey Plan” in 2010, we’ve been blessed with good jobs and semi-lucrative side-gigs. We were able to ditch our college debts in 2011 and were 100% debt free. It was then time for us to build up a solid savings account and buy a house. We did both, and now we’re investing heavily in our future as well as paying off our house in record time. By the time I’m 30 (in about 3 years), the house should be paid off and it will be time to gain some serious wealth. Also, we’re excited about the freedom this move will give us. Perhaps one of us will want to pursue a different career or start our own business full-time? Without any payments whatsoever, we’ll have plenty of options available to us. I can’t wait!

Are you following this plan? If so, what step are you on and what are your goals for the future?

Money Retirement


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. I think the title is a bit misleading but it does help build wealth. Congrats to you and your wife for changing things around.

    • Misleading? I just gave you the 7 steps to create massive amounts of wealth. Plus, it’s super simple! How is that misleading?

  2. I’ve been listening to Dave for nearly 15 years on the radio, and have attended his live event twice. I know he is right about everything, and his plan makes perfect sense… but I’ve never followed it to the tee.

    I’ve never been able to let myself stop investing to do those steps in order. I continue to invest while paying down debts. The power of compound interest will win out in the long run (I think).

    • I hope you didn’t start this plan in 2007 when the stock market began to tank…. The best advice is to pay off the debt super fast and then invest a ton!

  3. I think Dave Ramsey has really got to UP his message now. $1,000 EF? That’s not going to go very far at all.

    I do like paying off one’s home early though, which begs the question.. Does he not advocate renting for life?


    • On the EF – $1K is definitely not enough to weather more than one big storm. In the last year or so, we’ve had multiple large car repair bills & a couple of extra condo assessments, and a $1K EF wouldn’t have been enough. BUT it’s a start. For folks with no EF, having a $1K EF will keep them from adding to credit card debt while they try to pay down that debt.

      It’s all about acceptable risk levels and balance, I suppose. Given that we’re a “DINK” household with relatively stable jobs, it’s better for us to keep a 3 month EF and put any other extra money towards targeted savings accounts and extra debt payments. We used to have a much larger EF, but in doing some review, we decided to use a chunk of it to pay off what was left of my husband’s car loan and one of my student loans (didn’t make sense to make less than 1% on our savings while paying 3.5% and 6% interest, respectively). If we were to bring the EF down to the $1K suggested while paying down debt, then we could pay off my remaining student loan now and toss some more money at our mortgage principal. Sure, it would be great to be rid of one more debt now, I’d prefer to take a couple extra months to pay off that last student loan and be prepared with a larger EF in case the shiznit hits the fan.

      • As I said to Sam, the $1,000 EF is only temporary. After the debt is gone, the EF is upped to 3-6 months of expenses.

    • The EF is only $1,000 because the focus is on paying off the debt! Once the debt is gone, then the EF is upped to 3-6 months worth of expenses.

  4. Funny, I wrote about leverage today too 🙂

    • Ha. Sometimes we’re just on a similar page huh?

    • You’ve got it. It’s simple, but not easy. But, since it is simple, anyone can learn it and become wealthy!!

  5. I like Dave..sometimes his method of getting his point across is a bit crude, but I guess he feels like he’s a crisis counselor therefore he needs to get people’s attention. However, as far as sound advice for the average household, it’s pretty good. The most important thing is to not let your debt get too big (or big at all) in the first place. This is the magic I wish I had known when I was in my 20’s. Luckily, I figured it out in my 30’s!

    • Ha, I like his crude delivery. I wish I could be a little bit more crude sometimes.

  6. I have $1000 saved.
    I am debt free.
    I’m afraid I’ll make a bad decision for investments. I’ve researched enough to know a Roth IRA sounds like a good idea, provided my income tax bracket is low when I open one, which it is right now because the only job I can get is cashier at Lowes Home Improvement company. Another issue I think about is paying off my $140,000 mortgage but with this low paying job I have no extra money. So what can “I” do?

    • Thanks for the comment Cher. I don’t quite understand though… How did you save up money and pay off your debts if your income is so low? Wouldn’t you be able to tranfer what you used to pay over to your investments and home mortgage? We should talk more. How about you contact me at derek [at] lifeandmyfinances [dot] com. Hope to hear from you soon!

  7. Thanks for posting this!
    This year my goal is to pay off my car and accumulate a substantial amount in my savings (which would serve as a 3-6 month emergency fund). Suze Orman says you should get that fund before you tackle your debt, which has been my method so far. I’m itching to get that car paid off though so I’ve been toying with the idea of putting savings money toward my car. This post gave me some clarity about how to prioritize.
    Just to share, I think I’ll put more toward my car and pay it off sooner since I’m paying more toward interest than I’m earning from it. I’m SO looking forward to being debt-free!!!
    Thank you!!!

  8. Hi Derek, I have read Dave Ramsey’s The Total Money Makeover. Trust me it was an eye opener for me, I was really able to follow few of the tips and was able to save a decent amount of money at the end of the year. I was not aware of the ‘Dave Ramsey Plan’ I would certainly love to read it..!

    • Ha, I just call it the Dave Ramsey Plan, referring to the 7 steps. All of Dave’s books are quite good though.

  9. We have a few people in our firm that leveraged themselves with a lot of debt back when the market and economy were booming in 2005-2006. They were riding high but now are extremely stressed because they have so much debt and cannot do anything about it. While in theory using OPM is great, it is a very slippery slope.

    • Great example MSG! If everything goes well, using OPM can be great, but if something goes wrong, it could affect us negatively for life!

  10. We’ve done the steps slightly out of order, making sure to have a sizable EF fund before focusing so heavily on paying off debt. Now, with only a few loans left to pay off, we can begin to really up our game in investments. I understand Dave’s thought process, but I prefer to feel a little more safe with my EF while paying off debts.

    • Yeah, I think that’s a fine plan. Now that you’re almost done with your debt, you can jump right into investing and paying off the house! Let me know when that debt is completely gone – that’s an exciting time!

  11. Let’s say I have done step 3 and 4. I don’t have any kids or a mortgage. I plan to buy a house and have kids in the future. Would you save cash first for your kids education or pay cash for a house? It’s something I have been thinking about.

    • Good question Steve. Pay cash for a house or put money toward education. Well, considering you don’t have kids yet, I would focus on the house. Once a kid is born, then I would start putting a consistent amount into a fund, but then still work to pay the house down (assuming you put a large downpayment down, but still owe some on the loan).

  12. So this posted urged me to visit Dave Ramsey’s site and found the 7 baby steps you wrote in this post.

    Everything is easier said than done. With the recent economic crisis and its effect, it seems saving is a bit more difficult now. But the idea on the Debt Snowball is superb in maintaining the motivation. I love to quote this “Personal finance is 20% head knowledge and 80% behavior. , this is from Dave’s site.

    Best regards,

  13. #6: Paying a 30 years mortgage within 5-6 years is doable. As a matter of fact, my wife & I just did it! It is an amazing feeling that you own your house outright.

    • My wife and I are still doing a pretty good job of this. We have paid our principle down by over $7,000 in just 6 months! Congrats to you guys for completing your goal with the house payoff. I can’t wait to get there!

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