Couple Money

I’m Cheating On Dave Ramsey’s Baby Steps – Sort Of

mortgages and real estate

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This is the first of a series of posts Steve Stewart is sharing on various sites as he counts the days left until he and his wife pay off their house!

My wife and I started our financial journey in 2005. We followed Dave Ramsey’s Baby Steps – sort of.

This week, we are cheating the Baby Steps to pay off the house early!

Working Through Dave Ramsey's Baby Steps

Dave Ramsey, national radio host and best selling author, is known for teaching people how to get out of debt and build wealth using his Baby Step process:

Step 1: Save $1,000 for emergencies
Step 2: Pay off all consumer debt
Step 3: Save 3-6 months of expenses in a bigger emergency fund
Step 4: Invest 15% of household income for retirement
Step 5: Save for your kid’s college expenses
Step 6: Pay off your house early
Step 7: Build wealth and give

My wife and I were married in February 2000 and were somewhat responsible with money. However, we didn’t have a plan.

We used credit cards, had some car loans, and saved a little in our 401(k)s. However, our net worth was a negative ($70,000) because of our house.

In 2003(ish) I bumped into Dave Ramsey on the radio. I quickly realized he had an easy-to-follow plan that even I could understand.

We organized our finances, started tackling our debt, and arrived at Baby Step 6 (saving for our daughter’s college) by the end of 2008. Oh, and our net worth was finally positive too!

It is extremely important to remember that an emergency fund is only to be used for emergencies. If we dipped into our emergency savings for a trip to Disney and had an accident driving home, we might not have enough to cover repairs and medical bills.

For this reason it is important to follow the rules faithfully, except for this one time.

Paying Off Your House Early

This week, I am going to cheat Baby Step #3 and take money out for a non-emergency: Paying off our house early.

In Dave Ramsey’s world, this sounds like blasphemy – but it isn’t.

Here’s why:

If your monthly household expenses, including a mortgage, came to $5,000 then you would want at least $15,000 in savings (5,000 x 3 = 15,000).

However, if you house payment was $1,000 a month (principle and interest) but you pay it off; your monthly expenses would drop to $4,000 a month (5,000 – 1,000 = 4,000).

In other words, your emergency savings would only need to be $12,000 to be a 3-month emergency fund (4,000 x 3 = 12,000).

So we are going to the bank on December 14th, dropping our emergency fund down by a few thousand dollars, and getting rid of that pesky monthly mortgage payment.

It sounds like a trick – but it’s legit! We would have to re-evaluate our emergency fund after paying off the house on-schedule anyway – this just moves our monopoly piece ahead a few spaces without sacrificing a turn.

There are always changes in household expenses and family needs. This little trick will PAY OFF OUR HOUSE SOONER and won’t put any additional risk on our family.

What would your emergency fund need to be without a house payment? Take a look at your situation, follow the process, and I hope you get to pay off your house early too!

Steve Stewart has been teaching and encouraging others how to eliminate debt and build wealth for almost a decade.

This year he left his day job, used cash to buy a car and new windows for his house, and is paying off the house as a Christmas gift to his wife.

You can find out more about Steve, his blog, and his new podcast “No Debt, No Credit, No Problems”, at

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