Dave Ramsey’s 6 Steps For Dumping Debt

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I first attended Dave Ramsey’s Financial Peace University in the winter of 2009; ever since I’ve been leading FPU in our local church and strongly recommend the program to anyone interested in dumping debt. Yesterday our class reviewed the week 4 lesson titled “Dumping Debt” which highlights Dave’s six steps to getting out of debt. Let’s list the steps and analyze them now.

1. Quit borrowing money

How do you get out of a hole?

  • Stop digging – You have to stop overspending before you can reduce debt and build savings.
  • Lose the shovel – Whatever your “shovel” is, lose it. If you have a problem with credit cards – close em, shred em, and forget em.
  • Start climbing out – Now that you’ve stopped digging and lost your shovel you need to climb out of the hole. You’ll learn how in the steps that follow.
The bible says, “The rich ruleth over the poor, and the borrower is servant to the lender.” Proverbs 22:7. If all your extra money wasn’t going toward debt, what would you do with it? Would you save more, give more, enjoy it more? Think about this a bit before moving on to step 2.

2. Start saving money

Building an initial Emergency Fund is fundamental. While you are forming your budget you must set money aside for budget busters – unexpected things happen to everyone, so they’re not really unexpected are they? Be prepared for emergencies or be continually caught off guard and financially vulnerable… it’s your choice. Don’t worry about saving a ton, focus on building a temporary cushion that suits your situation. Dave recommends $1,000 as a starting point, me and Betsy saved $3,000. Do what works, just make sure you do something (save at least a $1,000).

3. Prayer works

What can your God do? Hopefully you answered, “Anything.” God promises to intervene for those who love Him and obey His commandments. Need to polish up on His commandments? Make bible reading – and prayer – a part of your daily routine. Doing so has given us peace of mind and increased blessings. Remember that God is righteous and we are not; to receive His blessings we must approach Him on His terms… He’s waiting for us.

“Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you: For every one that asketh receiveth; and he that seeketh findeth; and to him that knocketh it shall be opened.” – Matthew 7:7-8

Prayer is powerful, start tapping into it.

4. Sell something

You may think you have nothing valuable. I wager that 99% of the people reading have something of value to sell, you just have to put your mind to it. Selling stuff is hard for most people, and the first item is always the hardest. The more you sell the easier it gets and the lighter you feel. Start with an item of decent value that you want to keep but seldom use; for us it was our kayaks. In Michigan the summers are short so our boats would only see the water a handful of times. We made the hard decision to sacrifice wants for needs (financial security), created the Craigslist ad, and ended up selling them to friends who live on a river. We recouped our initial investment, gave the boats a loving home, and padded our bank account. Subsequently we sold our pop-up camper to a happy home for the same amount we paid for it. Next up, my scooter.

The point is, you have things you can sell. Focus on turning infrequently used items you want into the cash you need. I promise getting rid of stuff feels good afterward. I challenge you to prove me wrong.

5. Make extra money

To make extra money you can take more hours at work, get a part time job, or start a business on the side. There are many ways to earn extra money but I encourage you to do something that excites you. When first digging our way out of debt me and Betsy were both salaried employees so picking up extra hours wasn’t in the cards. I’m not huge on trading time for money so I opted instead to start a side business focused on work I had to do once that would continue to pay us far into the future. Do what works best for your situation, just be sure to do something.

Aside from making extra cash, developing multiple sources of income is wise because it diversifies your risk of job loss. Be creative and don’t be afraid to fail.  Who knows, you even may find a new career.

6. Use the debt snowball

Last but not least is the debt snowball. Whether you decide to follow Dave’s FPU plan of paying debts in order from smallest to largest, or opting instead to pay the highest interest debts first… just make sure to put your snowball in place and follow through with the plan.

The debt snowball is as simple as listing your debts and prioritizing their repayment in a way that works best for you. Dave recommends paying debts in order from smallest to largest so you have “little wins” along the way. To specify, you pay minimums on all debts except your smallest, which you throw any extra money toward. Once it’s paid off you move on to the next smallest debt adding all extra money to its minimum payment, then the next, and the next. The amount you pay gets larger and larger (like a snowball) as you pay each debt off. Eventually you are out of debt which means you can actually keep the money you make and use it however you wish. I recommend using it to save more, give more, and experience more.

What will you do when you’re out of debt? It’s a great question to ask yourself often as a source of motivation to continue dumping debt!


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1 Bob

Great article!! A lot of people complain about being in debt… but people rarely do anything about it. Hopefully articles like this will motivated people by giving them realistic advice!

2 Sun

> 2. Start saving money

Consider spending less too. For example, if your rent is $1,750, move to another place that only charge $1,250. You have just freed up $500 per month. You can be out of debt that much faster.

3 Matt Jabs

I like it!

4 Kevin @ Debteye

I think he left out one of the most important piece…stop spending money on useless crap!!! 🙂

5 Matt Jabs

Have to agree w/you on that one. Perhaps that’s the next big debt program, one that focuses on simple living AND getting out of debt.

6 Kevin @ Debteye

Hey Matt,

That’s actually an interesting point. We’re actually focusing on helping people reduce their spending and find applicable savings so people can apply more payments to their debts.

7 Matt Jabs

Awesome, then it’s a sure success… that’s exactly what our country needs!

8 paige

i needed this today! thank you!

we are constantly downsizing, selling things, scaling back. people find it very odd, but you’re right, it’s very freeing. plus i don’t like paying rent for inanimate “stuff” that isn’t doing anything for me!

9 Matt Jabs

“People find it very odd.” It’s a weird world we live in… hoarding unused items is normal behavior and simplifying based on purposefulness is odd. Congrats for going against the grain here Paige. 🙂

10 Richard Brown

Interest is one of those things that people end up paying too much of their entire lives. They don’t realize that a few small tweaks here and there over the long haul can really eliminate debt and avoid losing so much money to interest.

11 Barnabas Willis

Great post Matt. I just got married and my wife and I are on the track to eliminate debt and build wealth. These tips are definitely going into our handbook. Thanks!

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