George Kamel - Why Dave Ramsey's 7 Baby Steps Still Work (Address The Criticisms)

Episode Date: August 11, 2025

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Let's call out the elephant in the room. Some people have beef with Dave Ramsey's financial advice. And one of the most common issues they have is that they think his plan doesn't work in today's financial landscape. Sure, it might have worked in the 90s, but a lot's changed since then, except for Paul Rudd, still fresh as a daisy. But if anyone can say with absolute confidence that this plan still works, it's me. I went from drowning in $40,000 of debt to a million-dollar net worth

in less than 10 years by following Dave Ramsey's baby steps to AT. No leapfrogging, no shortcuts, no half-buttery. So today, you're going to find out why the seven baby steps are still the move in 2025 and learn how anyone can build wealth using this plan. All right, first up, let's talk about baby step number one. Save $1,000 in a starter emergency fund. Now, immediately, I can hear the haters. But $1,000 isn't enough to cover anything these days. There's no use.

What's the point? Okay, George Costanza. Let me know if you want to slice a sourdough with that wine. Because there's a reason it's called a starter emergency fund. It's not supposed to cover everything forever. And it didn't cover everything back in the late 1900s when Dave created this plan with nothing but blood sweat and a tear-soaked typewriter. That thousand bucks is supposed to cover the little ankle biters that pop up unexpectedly and knock you off the debt payoff wagon, like an unavoidable car repair, a home maintenance snafu, or a visit to the ER because little Johnny Jr. doesn't know the meaning of stop running with Memo's Pampered Chef Spatula. She paid good money for that, and it's the only kind of money they had.

A thousand bucks might not be a lot of money for you, but get this. Four and ten Americans, don't have $1,000 in savings, so that money is a lifesaver to at least 40% of America to help them break free from this cycle. A starter emergency fund of $1,000 still works for three reasons. Number one, it allows you to throw all excess money at your debt, which creates momentum fast. Number two, it does give you a small cushion when life happens while you're becoming debt-free. And lastly, it's small enough that it lights a nice friendly fire under your dairy air so you can

get past the debt payoff stage as quickly as possible to get back to a fully funded emergency fund and to building wealth. Now, Baby Step 1 also works because it gives you a really quick win, and that momentum is what actually gets people out of debt once and for all. And remember, the goal is to get through Baby Step 1 really fast in order to get to Baby Step Number 2. Because if there's one thing Dave learned after three decades, it's that personal finance is 80% behavior and only 20% head knowledge.

So you need that psychological win early on to convince yourself it's actually going to happen this time. All right. On to Baby Step number two. Pay off all of your debt except the house. the debt snowball method. Why is this still important today? Because any debt you have to your name is actively working against you by putting your net worth in the negative. And with record levels of debt, rampant inflation and crazy high interest rates, consumer debt is more crippling

than ever. And let's be real. Juggling dozens of minimum payments every month just to stay afloat is about as chaotic as the scene in Mrs. Doubtfire, where Robin Williams has to be two different people at the same fancy restaurant. Now you might be wondering, well, George, why is the focus on consumer debt and not the mortgage here? Well, the reason you can hold off on paying your mortgage is because real estate is an asset that will reliably grow in value over time. Plus, it's a mountain to pay off that giant loan. So your monthly house payment can stay for now while you're prioritizing other goals, i.e. officially breaking up with consumer debt.

And the best way to get out of debt, according to Dave and millions of people who have actually done it, is the debt snowball method. This is where you list all of your debt balances from smallest to largest, and you attack the little one with a vengeance while making minimum payments on the rest. And the reason the debt snowball has worked for millions of people is because of that momentum we were talking about earlier. Momentum covers a multitude of sins. I think that's in second opinions.

Two Corinthians. And inevitably, there will be someone in the comments talking about how the debt avalanche method is superior because it focuses on the highest interest rate instead of the smallest debt, which theoretically could save you a little money along the way. But mathematical expertise is not how we got into debt, and it's not what's going to get us out.

When you're on a roll, you don't have to be the best, and things don't have to go perfectly for you to still have success. Look at Jojo Siwa, for example. Raw talent? Eh, momentum. Definitely. We can all use a little JoJo Siwa energy in our life.

Just kidding. That's bright garbage. And you know it. Once the debt is paid off, we move on to baby step number three. Increase your emergency fund to include three to six months of expenses. Now, why is the step important? Why does it work? Because this is your never-go-into-de-de-dead again insurance plan.

When you have three to six months of expenses saved up, we're talking $10, 15, $20, $25, $30,000, and you have solid insurance coverage in place, you have sinking funds to cash flow future savings goals, there is literally no reason to ever go into debt again. And by the way, 99.9% of the finance world agrees that emergency savings of three to six months of expenses is a necessity. Because when an emergency does inevitably happen, it turns a crisis into a minor inconvenience.

And where you store this fund is very important. I recommend tucking this fund away in a high-yield savings account so it can grow safely over time until you need to dip into it for an emergency. And this is a spot where people go, I can breathe. I'm out of consumer debt. I have three to six months of expenses saved. This is the financial piece that we talk about. Now, baby steps one through three are all about laying the foundation for financial health.

And baby step four is where we stop paying for the past and we begin building for the future. This is where the wealth building actually begins. And before we open that can of sour gummy worms, I want to tell you about another reliable part of my life that I can always count on and cuddle with. And that is cozy earth products. Cozy Earth has sheets that are so soft, so smooth, so insanely comfortable, you will sleep like a baby. Or actually more like a lazy, groggy teenager when the bus is waiting outside. And if I were a blonde mom on Instagram, I would tell you, they literally just feel like butter, you guys. Must have.

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or click the link in the description below. That's joinedeletme.com slash George. All right, back to the baby steps. Let's talk about baby step number four. Invest 15% of your household income into retirement. Now, why does investing even matter? How is it different than saving? while investing is a long-term play, like an all-day crockpot recipe when Christian Girl Autumn hits,

or when Jim Helper was waiting to shoot a shot with Pam. We're talking almost three lengthy sitcom seasons, people. If Jim can do that, you can be patient with investing, I promise. In that case, let's get to work out. By strategically putting money into these accounts that grow significantly over time, compound growth will do the work for you while you leave it alone and let it cook. So why 15%? Why tax-advantage retirement accounts compared to other options? well, let's walk through this with our handy-dandy investing calculator.

We found that 15% is a good sweet spot. It's not a magic number. This is not based on any studies or anything like that. We've just found that if you invest too much, you don't have any extra margin to throw at saving for college or paying off the mortgage or sinking funds for vacations and car repairs and upgrades. And if you don't invest enough, well, you're not going to have enough in retirement to actually live off of and retire with dignity.

So 15% is a good sweet spot. Let's walk through some numbers to demonstrate this. And for this example, I'm going to use the average household salary in America today, which is around $80,000. So 15% of $80,000 is $12,000. That's $1,000 a $1,000 a month we're going to invest. And let's show a range of numbers here. Let's say you are 25 and you retire at $65. You have zero in retirement and we're going to invest $1,000 a month and we're going to see an average annual return of 10%.

Calculate, $6 million. Not bad. That's plenty. Now let's say you're even older. you're 35 and you start doing this. 2.2 million. I can live with that. And then let's bump it up to 40.

Let's say you don't even invest a dime until you're 40 years old. And now we're going to retire at 67. Give us a little wiggle room here. Boom. $1.64 million. So as you can see, that 15% is a solid number regardless of your age. And remember, once you've got the house paid off, you can invest even more. And we'll get to that as we move through these baby steps.

And before we move on, keep in mind that baby steps, 4, 5, and 6 are done simultaneously, but in order. So once you've got your 15% invested, keep investing, but you can move on to baby step number 5, which is safe for your kids' college. Now, you'll notice there's no specific numbers here. This looks different for everyone. And is there a rule that says you have to pay for your kids' college tuition? No. Once the kid turns 18, they're technically on their own. And that's why this step comes after you've already got your own investments going. Because there's a 100% chance you will have to retire one day and you will need a nest egg to live on. There's a 50-50 chance.

your kid goes to college or even finishes. So if you want to set your kids up for financial success with a college fund, I recommend setting up a 529 plan to prepare for those future college costs. And there's a few reasons I love the 529, but mainly it's this. Investments will grow tax deferred at the federal level and any unused funds can roll over into the beneficiaries Roth IRA up to $35,000. And with the 529 plan, the contribution limits are amazing. And you can contribute to this account at the same time you're investing 15% into retirement and paying off your house. Which brings us to baby step number six. Pay off your mortgage early. I know, I know. It sounds insane. Sounds like something only nerdy overachievers do, and you may not be wrong there. But as a

lifelong nerd who sleeps like a baby prince and a paid off home every night, I'm here to tell you it, and I only take minor offense to your statement about being a baby prince. Well, the jerks store called, they're running out of you. So let's talk about the advantages of paying off your house early. Number one, you free up a mortgage payment, which for some of you might be two or $3,000 that you can now use to spend more, save more, and give more. Another reason is you fully own your house. You've reduced your risk. You're able to do whatever you want.

You can retire earlier. Maybe a spouse wants to stay home. It gives you so much financial wiggle room that you can now use to live your best life. And I know you're already writing in the comments going, well, George, I have a 2.8% rate. Why would I ever pay it off? That's financially stupid. Listen, you know what you are? You are Jafar at the end of Aladdin?

When he becomes the genie? because that was his big wish to have all the power in the world. But then he realizes he's in a prison of his own making. He literally has handcuffs on, and that's what you've done with your mortgage rate. You're unable to move, you've reduced your flexibility, and you've reduced your freedom. And to that I say, no thank you. I'll take my 0% rate. Oh, there's a big surprise.

So, you paid off the mortgage early by putting extra on the principal and what now? Well, that brings you to baby step seven. Live and give like no one else. This one's squishy on purpose. This looks like whatever you want it to look like. Maybe you want to give outrageously. Maybe you want to build outstanding wealth and become a philanthropist. Maybe you just want to upgrade your lifestyle, retire early, whatever you want to do.

When you own the roof above your head, the dirt beneath your feet, it's a freedom like nothing else. And it's what you're able to do with that freedom that not only changes your life, but the lives of those around you. Being able to live generously and give to those you love, give to causes you care about, or just give spontaneously to those in need, that's what makes the baby's. steps worth it. When your money's taken care of, you can be outrageously generous to others and live your best life. So here's the bottom line. Can you build wealth other ways? Sure. Can you get rich quicker? Absolutely. I wish you luck. But the baby steps have worked for millions of people over the last 30 years and we've created more millionaires than any plan you could ever think of. And they still work today because common sense has no expiration date. Now you've heard it from me, but I think you should

hear it from the man himself. You got to check out the total money makeover. It is the goat of finance books for a reason, and there's an updated edition that you will love, including a new audiobook read by Dave Ramsey himself. So I will put a link in the description if you guys want to check that out. And if you're starting to buy into this stuff, you really want to kickstart your baby steps progress. Check out this video called 32 Ways to Save Money Right Now, where I give you quick, easy tips to get started. Click the video or click the link in the description below to check it out. And be sure to hit like, hit the subscribe button, share this video with a friend. Thank you guys for watching. We'll see you next time.