Dave Ramsey’s The Total Money Makeover is a book I have spoken about many times before. His debt payment process of using the Baby Steps is an absolute favourite amongst the debt free community and it has helped many people across the world to become financially free. It is however aimed at financial practices and products in America. The tips can therefore be a little hard to navigate if, like me, you are based in the UK. Here is my guide to the UK version of the Baby Steps.

Please remember to make sure that all minimum payments are being paid no matter what stage you are in your debt free journey.

Baby Step Zero – You Need a Budget

The very first and arguably most important baby step is to set up a budget. It will be impossible to take control of your money without first understanding where it is coming from and where it is going. Sit down on your own, with your partner or with your family and get to grips with every single penny that travels through your bank account and your pockets. Make a note of everything, long forgotten subscriptions and all!

Once you have an understanding of your current situation you can then begin to tell your money where to go. Beginning with the large payments such as rent or mortgage, bills and so on, all the way down to the £1 you pay on a Sunday morning for the paper, begin to track everything that you will be spending your money on and remove anything you no longer need/want/require.

In order to be strict you have to give every penny of your income a job. Don’t be tempted to put rough amounts into your budget or leave a “just-in-case” amount at the end. If there is something left over once all expenses are paid then that can begin to contribute to baby steps one and two and can be labelled accordingly. This method is called zero based budgeting. You can read a great article on it here.

Baby Step One – Emergency Fund

With a budget in place we now need to put a small financial buffer in place. It is time to save your emergency fund of £1000. I’ve written a full blog post about it here which explains the concept in detail. In summary, you want to save a pot of money as quickly as possible and store it in a safe but easy to access place such as a instant access savings account. Dave recommends saving £1000.

Your emergency fund is to be used only for emergencies and you have to be strict with this. It is not for shopping or booking a holiday because the funds haven’t quite arrived in your bank account yet. It is for things like a boiler breakdown or unexpected car repairs for a vehicle that you can’t live or function without.

If you do have to use your emergency fund don’t be disheartened. It has saved you from having to borrow even more money and should make you feel stronger financially. It’s not a set back! Once the emergency is handled top your fund back up as quickly as possible.

Baby Step Two – the Debt Snowball

Once your emergency fund is securely in place it’s time to put all of your focus on your debt. There are many different approaches to this, however the method that myself and the baby steps follow is the debt snowball. To begin with, compile a list of every single debt that you have. This can be a very challenging task if you have been hiding from your total but please do take the time to do it.

Now that you have your full list of debts, order them from smallest to largest. This is the order in which you will attack them. With all minimum payments already being covered it’s time to look at our budget and that “left over” amount that you uncovered at the end. Whether it is £1 or £1000, this is the money you are going to use to get rid of this debt once and for all. Let’s say for example that we have £100 left over in our budget.

To begin with you might have something that looks like this:

  • Debt 1 = £1500  minimum payment = £57 +£100 “left over”
  • Debt 2 = £2700  minimum payment = £88
  • Debt 3 = £3600  minimum payment = £121

Paying the minimum amounts only on Debt 1, it would take you over 26 months to clear the total and that is without interest. Increase this to £157 however and this debt will be cleared in 10 months. Much better!

Now we snowball this amount and add £157 (minimum payment of debt 1 + “left over”) and throw it at Debt 2. Of course debts 2 and 3 would have reduced by a small amount each with minimum payments, but this is just to show the method.

  • Debt 1 = cleared
  • Debt 2 = £2700  minimum payment = £88 + £157
  • Debt 3 = £3600  minimum payment = £121

Paying the minimum amount only on Debt 2, it would take 31 months to clear the total. With the added help of the £157 snowball it would take only 11 months!

You see where I’m going with this? Let’s snowball the payments from Debt 2 and throw them at Debt 3. Now, instead of paying £121 to Debt 3 each month you’ll pay a whopping £366 instead.

  • Debt 1 = cleared
  • Debt 2 = cleared
  • Debt 3 = £3600  minimum payment £121 + £245

With the minimum payments only it would have taken 30 months two clear your third debt. With the snowball method it will take you only 10 months.

This example is based on debts which have no interest to attached to them and each individual situation will be unique, however the principles to follow never change. Use the same approach and you will clear your debts far sooner than you once thought possible!

Baby Step Three – Your Full Emergency Fund

To begin with you set up a small emergency fund to give you a bit of a safety barrier against the unexpected costs that life likes to throw at us. Whilst it can be really helpful and reassuring to have, £1000 won’t last you too long if something like redundancy or long term illness was to occur. This is where the full emergency fund comes in.

Now that every penny of your debt is cleared (YAY), turn your focus to saving 3 – 6 months worth of expenses. To keep things simple you might choose to use the snowball amount that you have been throwing at your debt and put it straight into savings instead. The amount you save is an entirely personal choice based on your own circumstances. The main objective is to have enough stored away so that should something unfortunate occur, borrowing money doesn’t even cross your mind.

Baby Step Four – Invest

With your debt paid off and a healthy emergency fund in place it is time to think about the future. No matter your age it is incredibly important to put long term savings in place for your retirement and the sooner you can do this the better.

Whether you have a work place pension in place, investment in stocks, a lifetime ISA or a combination of different investments it is key to find something that will grow well and remain secure over a long period of time. I don’t personally have the knowledge and experience to be able to advise the best approach to long term savings and investments. Research into the options that will suit you personally is the best way to begin.

Baby Step Five – Saving for Family

In the American baby steps this stage focuses purely on saving for university funding. In the UK we are lucky not to have the same fees involved in further education, although it does still cost a lot of money. There are many stages of life that are costly however and if you have a family you may decide to save money in order to help them out with things like university, wedding and first home expenses in the future.

As with investing, this is a very personal step unique to each individual and so it is best to do your own research.

Baby Step Six – Paying off Your Mortgage

If you are a home owner then you will most likely still have one debt left; you mortgage. Whilst it is considered a “normal” debt as few people have the money to buy a house outright, this doesn’t mean that you shouldn’t aim to pay off your mortgage early.

In the UK it is possible to overpay your mortgage by 10% each year without penalty. I took a quick look at a mortgage calculator to see what impact that might have on my own mortgage for perspective. If I was to overpay as much as I could each year I would be able to pay my mortgage of 8 years sooner than anticipated. 8 years! The thought of being able to liver mortgage and debt free, with only a handful of bills to pay is incredible.

If you currently rent your home, this is stage where you would look to save a large deposit in preparation to buy and then progress with paying off your mortgage as soon as possible.

Baby Step Seven – Build Wealth and Give

You may wonder what there is left to do now that every penny of debt has been cleared and you have strong savings in place. Baby step seven is the stage where true financial freedom is achieved. You now have the ability to grow your wealth and give. After years of working hard to reduce the burden of debt and grow your security you can enjoy your money and share it.

Part of building your wealth may involve looking at how you can increase your income. Of course, you can also look for opportunities to do this at various stages of taking control of your finances. Increasing your income could involve looking for small ways to make extra money, pursuing a promotion, or even starting your own business. If you’re struggling with any of these things, there is always help available.

Some people might find it hard to get a job that suits them and meets their needs. You could benefit from using disability employment services if you need extra support getting into and staying in work. You can also find plenty of career advice to help you forge your path. Increasing your income can also link to investing. Investing in your own future is a fantastic way to make use of your money and grow your earning potential.

Some would argue that you should “give back” throughout your financial journey, no matter which stage you are at. Whether it is donating to charity, giving back to your community or giving to your church for example. Once again this is a very personal decision.


If you haven’t yet read Dave’s book I highly recommend you do. Whilst knowing these fundamental steps is key to the process, the stories and advice shared throughout the book are also invaluable! You can find it here on Amazon. (I’d like to note that this is an affiliate link. There will be no extra charge added to your order, but Amazon send me a small commission as a thank you.)

Do you implement Dave’s steps currently? If not, do you think you will begin to in the future? I would love to hear your thought in the comments below!

The UK Version of the Baby Steps - pinterest

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