The 7-Step Plan to Live Debt Free


– Well, it’s a new year, it’s a new you. And this episode is all
about taking control of your money with the Baby Steps. (upbeat music) Can you believe it, you guys? It is 2019. We are a week into the new year, and it is just already so fantastic. So, a lot of you are going to have some New Year’s resolutions that you’re going to be working toward, and some of them are going to be
some financial resolutions. In fact, the second
most popular resolution in America is paying off debt. So if that is you, you have
come to the right place. Because for 25 years,
there is a proven plan that has helped millions
of people get out of debt, live on a budget, fund
retirement, fund college, pay off their house, and be
able to be crazy generous. I mean, all the things. And I’m dedicating this
entire episode to this plan. The plan is called the Baby Steps. And I’m really excited about it because I’m going to bring on two special guests to help me out. You’re probably not going to be
very shocked on who they are. That’s right—Dave Ramsey is coming over and Mr. Chris Hogan. So, we’re going to be sitting down together, walking through this plan. Now some of you—you
have completed the plan. You’re just like, being
incredibly generous, making all the money. You’re doing awesome. Some of you are in the
middle of this journey. Maybe you’re paying off debt or you’re funding your emergency fund. And others of you haven’t even started. But no matter where you are, you’re going to enjoy this episode. But I can’t stress it enough— for you to win, you have to have a plan. And the Baby Steps are seven steps that are so easy to understand, so you’re not going to be
confused in this episode. You’re not going to be like, what? No, very easy to understand. But here’s the kicker: It’s hard to do. (soft piano music) All right, this is the time in the show, Real Talk with Rachel, where it’s usually me
talking about how I decided to quit the marathon, quit training, because running is stupid for me. It’s true. Or maybe about me purchasing a workout app that was a hundred dollars
that I’ve never used. You know, all the things
that I’ve messed up on, which I’m great at sharing. But I decided that this Real
Talk—it’s gonna be about you. Because you need to have
Real Talk with yourself. That’s right. If you’re
sitting there watching this and you’re like, I am
miserable financially. I feel like we’re living
paycheck to paycheck, we’re not making progress. I need something different. Well, guess what? This is your year. But here’s the deal, if you don’t like where you’ve been and you don’t like the results, you have to change. That is the definition of insanity: Doing the same thing
over and over again and expecting a different result. You have to do something different. But that is going to be
very uncomfortable for you and it’s going to be hard. But it is worth it. None of us like change. When you get in a habit of something, changing is really, really hard. But again, in order to make
better results for your money, you have to change. So I want you to look at
yourself in the mirror and you say, okay, I’m doing this. I’m gonna do something different. And here’s the deal—if
you feel overwhelmed, why don’t you try this
for the next six months. In July, if you hate this plan and you like your old life better, go back to your old life. Listen, I’m not mad about it. But I guarantee you, 99%
of you are going to be like, this is the most free I
have ever felt with my money because suddenly you have
learned to control your money— and your money doesn’t control you. So, that’s the deal, you guys. New year, new you. We’re going to change. (upbeat music) Well, you’re still here, so we’re going to begin the
journey with Baby Step 1, which is save a thousand dollars in the bank as a starter emergency fund. This is key because this is
going to be your cushion between you and life before Baby Step 2. So, this is a very important step. But here’s the deal— this is probably the easiest
step of the Baby Steps, but it’s also the hardest. It’s the easiest because
it’s a thousand dollars. Like, you can do this within
a few weeks or a few months. Like, I want you to do
this so, so quickly. You know, work extra if you have to, sell something, do whatever you can. Scrape up a thousand
dollars and put it away. That’s all you gotta do. But it’s going to be the hardest step because that means that
you are now entering into a journey that you have
never experienced before. And you’re actually saying out loud, okay, I’m doing this. I’m going to be committed to this change. But this thousand dollars, it is going to be like the
pat on your back going forward because once you can accomplish this, you’re going to have more money in savings than the majority of Americans, and it’s going to feel so incredible. So, how do you get a thousand dollars? Well, here are 10 quick ways for you to save a thousand dollars. Number one: get an extra job. Bring in some extra income. Maybe you want to drive
for Uber, wait tables, or maybe you have a skill like photography, and you can charge for it. Whatever it is, find that
extra income—work extra. Number two: work overtime
at your current job. Make some money. Number three: sell something. You guys, we have so much crap
in our lives and in our house that we don’t need, that we don’t use. Get rid of it! And then, after you’re
further along in the steps, maybe if you want to go back and
buy something else, you can. But for now, get rid of it
and sell it and make money. Number four: stop eating
out for a couple of months. That’s right. Restaurants—
quick place to spend money. Number five: get rid of cable. Number six: drop memberships
and subscriptions that you aren’t using like
Spotify or your gym membership. If you’re not using
these things, drop them. Don’t pay for them every month. Number seven: Airbnb your
house while you’re out of town. Number eight: shop your insurance rates. You can save a lot of money doing this. Check out our ELP program
by clicking the link below. Number nine: reevaluate
your cell phone plan. Look and say—okay, are
we using all the data? Maybe we can change something, maybe we can go get a cheaper plan and save a lot of money that way. And number 10: buy generic brands. Medication, makeup, food, all the things. Make sure that you are
saving money that way. And to help you keep track
of the thousand dollars you’re saving for and to help you reach your other financial
goals as you pay off debt, make sure to download my goal tracker. So click the link below for that. Alright, coming up next is the man who created the Baby Steps, my dad, Dave Ramsey, to talk us
through Baby Step 2. (upbeat music) Well, welcome back to the show. – Wow, I’m here. – I know. You’re back. Thanks, you couldn’t stay away. I know, I know. – Well, The Rachel Cruze Show calls, you come. – It is true, people, it is true. So, we’re on to Baby Step 2, and Baby Step 2 is paying off all of your debt except for your house. And you do this by
using the debt snowball, and that is where you list
out all of your debts, smallest to largest, regardless
of the interest rate, pay minimum payments on everything, and you pay off the smallest debt first. And so, we find that people
gain incredible traction and they really win with this method. And, on average, people are
getting completely out of debt, except for their house,
in 18 to 24 months. So, it’s pretty powerful—this whole idea. So, when you started this whole program. I mean, you’re like the Godfather of the Baby Steps and all of the things. So what caused you, first and foremost, to be like, yeah, you
need to be debt-free. Like, what’s the point
of even being debt-free? Those people watching that are like, eh? Is it that big of a deal? What would you say? – Well, I mean, I saw in the Bible that it says the borrower
is slave to the lender, and we had just gone broke and lost everything because of that. And so, just from a risk-management standpoint— that’s where it started,
because it’s like pain avoidance, because we’ve been through
so much crap, you know? And then the next thing that happened was I started realizing you actually— your most powerful wealth-building tool is your income. And when you don’t give
it to someone else, you can use it to become
an everyday millionaire. You can use it to change your family tree. You can use it to be
outrageously generous. But when you give it all to Countrywide and Citibank and Lexus
in the form of payments and Mastercard and Visa and
American Express, and so on. You know, you don’t have any money. And so it’s kind of a math thing that you’re giving up your power, your mathematical power to build wealth. – It’s so good, and there’s such freedom. We’ve talked about it on the show. Not only mathematically and financially— when you don’t have debt
and you don’t have payments— but emotionally and spiritually. It changes your whole life, your whole being when
you have no payments. When you don’t owe anyone anything, you do have this sense of freedom that you get to choose things in your life that you otherwise wouldn’t be able to if you had to go to that job and make that money just to pay the bills. – And, you know, I kinda
thought the first time, my first understanding of the borrower is slave to the lender was the math thing. – Yep. – That when you give all
your money to someone else, you’re kinda owned by them, right? I got that part. But what I didn’t realize is, slaves don’t have choices. Slaves—it’s tough to have relationships because people are pulling you around. You know, you’re going to
a job you hate everyday, putting up a toxic environment
just to pay freaking bills. You know, slavery has
societal, relational, spiritual, not to mention
mathematical, implications. And so that Scripture really
does have a lot of layers. You can just keep peeling them
off and then it keeps going. – Yeah, absolutely. So, when you look at the math side of doing the debt snowball and paying it off smallest to largest, I’ve heard the argument
over and over again. (Dave groans) We should pay off the
highest interest rate first because mathematically, that’s correct. And we laugh all the time like, well, if you’re doing math, you wouldn’t be in credit card debt. So math doesn’t always
apply to the situation. But 25 years ago, when you started this and you fought against that, what made you do smallest to largest? What was kind of the “aha” moment? – Well, what we realized
was the problem is not math. And if the problem’s not math,
you can’t fix it with math. The problem is the person in the mirror. And so, what happened was,
the first thing I ever did, you know, in terms of
interacting with the public, trying to help people,
was one-on-one coaching. And we would have people come
in that were in foreclosure and they were behind on
their credit card bills, and I would get everything
arranged in their budget to where they could get caught up. And then they would be okay
and avoid their bankruptcy. It was a one-on-one coaching
session, that’s all we had. – Yep. – And then I would see them six
months later and I would go, How’s it going? “Oh, we filed bankruptcy.” What? You know, I had all the math done for you. And it wasn’t a math thing. – Yep. – It was a behavior thing. The stuff that was going on in their lives was still going on in their lives, and if you don’t change the
person, the math doesn’t change. When people change, numbers change. That’s what Hogan says. Not when numbers change, people change. It doesn’t go that way. So, what we figured out
was that personal finance, and we say it all the time, is 80% behavior, 20% head knowledge. The problem is not math. The problem is me, I’m
the geek, I’m the guy. When the problem is
chocolate chip cookies, if I’m trying to lose weight, you know? So we figured out the chocolate chip cookies are not the problem. It’s the guy eating the cookies. It’s 80% behavior, it’s
20% head knowledge. You know we really— you cannot work out enough to lose weight if you eat an elephant. I mean, you just can’t do it. And the same thing is true
here with your money situation. You know, you cannot make enough money to outearn your stupidity. I tried it. I’m good at making money, but you have got to control
the person in your mirror. And once we understand that, then we go, well, if we’re going to solve this— if it’s a psychological behavior problem, then we’re going to solve
it with a psychological behavior answer/solution. And so that’s why the debt snowball works. And all these other theories, and all these people who
want to talk about this are just people that don’t want to do it. They don’t want to do the hard work of dealing with the person in your mirror. That’s harder work than trying to find some math thing that fixes it. Math thing’s not going to fix it. It’s not going to fix it. The thing that’s going to fix
it is when you fix you. That’s it.
– And yes, it is. It is so true. But the hard thing is, no one likes change, right? You’ve been doing the same
thing over and over again and you get in this rhythm in life, and to get out of that orbit
and to do something different is hard and it’s intimidating. So, what would you say
to someone that’s like, I know I need to, but I
don’t even know what to do, if I can even do this. Like, what would you say to someone?
– List from smallest to largest, when you pass
the little one, you’ll go, maybe I can. – Yep. – And then, when the
second one goes (gasps). Maybe I can (gasps). And your hope starts to increase because your successful level increases. – Yep. – You know, the first time
the child rides the bicycle and you let go of the seat, (gasps) maybe I can. That’s all it is. And it’s a behavior thing because
you’re building confidence and hope and you’re saying, this system will work. Maybe, finally I can get
control of my money. – Yep, it’s so good. And I think when you get
to the point in your life, and we say this over and over
again, that you say like, I’m sick and tired of
being sick and tired. Because I do talk to some people like, yeah, I kinda sorta think I
wanna kinda get out of debt, maybe, kind of. (laughs) I’m like, yeah, that’s
probably not gonna happen because getting out of debt’s hard, right? It takes sacrifice, it
takes intentionality. So what would you say to someone? Because a lot of people watching are in the middle of getting out of debt. So what encouragement would you give them? – It’s hard. But it’s worth it. It’s hard, but it’s worth it. You know, putting up with
your spouse at times is hard, but Sharon and I’ve been married 37 years. It’s worth it. I get to play with grandbabies,
my babies, and you know, it’s worth it to pay a price to win. It’s worth it, but it’s hard. If it was easy, everybody’d be rich. – (laughs) So good, so good. Okay, you guys, that’s it! Baby Step 2. You heard it straight from the horse’s mouth. (Dave laughs)
Is that a saying? – Could be the mouth.
– Is that a saying? (Dave and Rachel laugh) So good, okay. Well, we’re going to bring
you back on the show later on the episode to talk
about another Baby Step, so thanks for being here. (upbeat music) Once you are completely debt
free, except for your house, the next step is Baby Step 3, and that is getting three to six months of expenses saved in the bank. A question I get asked a lot is, Well, should we have like
three months of expenses or should we be more like six? And I’m like, it doesn’t really matter. Wherever you want to go. And I’ll be honest, it’s funny. Usually a lot of men land at
like the three-month mark. Like, once they get three
months, they’re like, alright, let’s move on, Baby Step 4. A lot of women are like, I like to be more around
the six-month mark. Women’s number one financial
fear is the lack of security. So naturally, they’re going to lean more toward the six month. I know I do. We actually have an emergency
fund for our emergency fund because that way I just want to make sure we have a ton in savings. It just makes me feel better, so I personally lean more toward six. Winston’s probably like most guys. He’d probably lean more toward three. But whatever you want to do. Now again, these expenses
are your operating expenses. This is not you, you know, budgeting, Okay, if I wanna go on a
huge fashion shopping spree or we’re going to go on vacation. No, no, no, your operating expenses. Like, what is the amount
of money you need to have to keep the lights on, to
keep food on the table, to keep things operating
like they would be otherwise? That is what the emergency fund is for. It’s there in case of a job loss, it’s there in case of a medical emergency. Whatever comes up that is
unexpected and a big emergency— this fund is there to catch you. It’s like your major safety
net between you and life. And you have to think
of this as insurance, not an investment. Say it with me through
your phone or computer: Insurance, not an investment. You’re going to get a pile
of money saved in the bank and some of you out
there are going to be like, oh my gosh, we could invest this and make so much more money. It’s just sitting there, making nothing. Listen, that is what it is for. You have to think of this as insurance. Because you want to be
able to keep it liquid— you wanna be able to get to it quickly. So, I would recommend having
this in a money market account, or even you could do a
traditional savings account. But it needs to be there so
that you can get to it quickly. I went into my Facebook community and I found some people
that are in Baby Step 3, and this is what they said: “It feels like my worries dissipated because of no-debt life and the fact I was able to accomplish Baby Step 2 on schedule. Losing extra overtime
to spend with my kids doesn’t bother me anymore. That was the very
surprising experience I had. I listen to the podcast every day, write on my journal, do
my budget religiously, and being intentionally
positive 98% of the time. Single mom of two here
and it can be done.” Melrose, you’re killing it. Such a great job. Tiffany said, “We stayed
motivated by sacrificing a lot so that we could see a lot of
progress being made quickly. We looked at our budget often and forecasted when we would
get the next $10,000 paid off and when we would be
completely debt-free. It feels great knowing that we were on our way to building wealth now instead of just paying
for bad decisions.” Guys, Baby Step 3—it is possible. It is possible, and
could you just sit there and imagine having no debt and having three to six months of expenses saved in the bank? Incredible. It put you at a
completely different place mentally and financially. It’s so great. You can do this. Alright, coming up next is
the man with the voice of God Chris Hogan. (upbeat music) Welcome back, Hogan. – Thank you, it’s good to be with you. – Thank you! Seriously, last time you
were on, everyone raved. They loved you, so I was like, gotta get him back.
– Oh, they’re so nice. You’re nice. You all are very nice. – Okay, so now we’re in the
process of the Baby Steps where you are completely debt-free, you have a fully funded emergency fund. So Baby Steps 1, 2, and
3, you do individually. Now Baby Steps 4, 5,
and 6, you do all together. – Rachel, thank you for
for pointing that out because a lot of people
get confused there. So it is important—you’re doing 4, 5, and 6 at the same time. – But in this order. So, Baby Step 4 is— – Yes, this is where you’re investing 15% of your household income into
retirement types of accounts. Rachel, that can be 401(k)s,
403(b)s, IRAs, or Roth IRAs. It’s very important to set that money aside each and every month. So, you want to sign up to
where it’s done automatically— it’s not anything you have to think of. You can do that in your HR department as you enroll in your 401(k). But listen, make sure you get with an investment professional to guide you. They’re a lot of options of
things that you can invest in, but you want to make sure you’re
picking the right things. But as you do this 15%
of household income, over time what’ll happen is
you’ll start to build wealth. This is not money for a
down payment on a home. This is not money for a wedding, and Rachel, it’s not money for a vacation. So let that money sit
there and grow for you. I promise you, it will put you on the path to becoming an everyday millionaire. – Because if someone cashes
out that money early, what happens? – Well, there’s a lot of penalties. I mean, I tell people you could lose 40% or more of that money
to taxes and penalties. So, you don’t want to do that. You want to leave that money alone, and if there’s something
you’re wanting to save up for, get an extra job, work
overtime, get some cash. But this is a dream fund. A lot of people don’t understand, with the 401(k) and 403(b), what you’re trying to do is save up enough money to replace
your paycheck later. So the money you’re putting in will become your paycheck later in life. But we need to let it sit there. Rachel, money has two best friends. – Ooh, BFFs.
– Time and compound interest. So when you put money in your 401(k) and let it sit, it’ll grow. – So good. So that kind of reminded me that you guys, if you’re on Baby Steps
1, 2,or 3, that means you are not funding retirement. You’re stopping retirement. Now that’s going to freak
some people out because— especially people that have
been doing it for a while. – It is.
– The fact that they have to stop, they’re going to be okay, right? – Right. Oh, you’re going to be okay. And what I’ve told people, because a lot of people have said that. Chris, I don’t want to stop. I said, Okay, don’t
think of it as stopping. Let’s pause. We’re going to pause the
401(k) so you can give all your effort and attention
to attacking the debt. And so it helps them to be able to see it. And someone said, “Well,
Chris, I feel bad.” I go, “Yes, feel bad about the debt. So move focus forward faster so you can start investing again.” – That’s good, so Baby Step 4— you’re taking care of
yourself with retirement. And then you go on to Baby Step 5, which is funding your kids’ college. So, there’s a couple of
ways you can do this. You can do it through an ESA, which is an Educational Savings Account. And this is great
because it grows tax-free. Now, there is a limit of how much you can put in per year
and an income limit. So if you make too much money, you may not qualify for an ESA. But if you do, what’s great
is you look at it and you say, Okay, let’s just say
you have a newborn baby and you start putting
$2,000 in every year. By the time they’re 18 years old, they’re going to have $120,000
to be able to go to college. I mean, it’s phenomenal. So starting early. Now, some people, you’re like, okay, that’s great if I had a newborn, but I have a 10 year old. So if you do the math that way, if you fund it for just 10 years, let’s say, maybe eight years, it’s going to be around $38,000, which is still a great
head start into college savings. But if you can’t do the ESA— again because you want to put more money in your college account,
your kid’s college account, or you make too much money to qualify— then you can look into 529 plans. And a 529 plan I would
say, like your retirement— you’re going to want to go and talk to someone who’s a professional in this because there are some bad plans out there. – There are. I don’t like the state-directed ones. State-directed means they’re picking out what you can invest in. I want people to have freedom and options to be able to pick what works for them. – Yes, so talk to a SmartVestor Pro for all the things with retirement, and when you’re starting
to fun your kids’ college. But the beautiful thing
about college too is that if you are at the point and you’re like, wow, I have a junior in high school or a senior in high school and we aren’t even on Baby— you know, we’re doing Baby Step 4— and we’re just now
starting Baby Step 5. You can still help your
kids go to college debt-free because people can still go
to college debt-free today. – Oh, they really can.
– It is true. – And Rachel, guess what? I tell people all the time. They go, well, my kid, I don’t want them to work
while they’re going to school. Well, listen to me. Yes, they can. They can work and go to school at night, or they can work at night and go to school during the day.
– Or part time! I mean, yes, it’s insane, I know. And actually, students
that work 20 hours a week graduate with higher GPAs
than students that don’t work. Isn’t that fascinating?
– Well, and Rachel, they learn time management,
they learn life skills that they’re going to have to
apply when they graduate. Oh, and by the way, there are scholarships and grants out there too, Rachel. I’ve heard you tell people
about that for years. – Yes, that’s free money. And then also parents out there— number one piece of advice through all of this, if you have a student going to
school soon is school choice. Picking a school you can afford. Private colleges on
average are costing $26,000 a year in tuition versus
an in-state school, which is around $14,000. Community colleges are sometimes free, depending on your state,
and even as low as $5,000. So, check out those options. Don’t just assume, okay, my kids have to go to a private college or this great college to succeed. That’s a lie. That’s not true. So, you’re funding, again, retirement with Baby Step 4, and then the extra money you have, you’re putting toward your kids’ college in an ESA or a 529 plan. And then you’re going to put any other extra money you have toward the house, which is Baby Step 6. – Yes, Baby Step 6 is about attacking and paying off the house. You know, a lot of people say, Chris, the American
dream is to buy a home. No, the American dream is to own a home. There’s a difference
between buying and owning. Buying is where you’ve
signed the paperwork, right? I’m a former banker, I know that. But owning it is where you’ve
attacked it and paid it off. So, a couple of things
I want to tell people. As you’re doing Baby Steps 4 and 5, you’re saving for your future,
you’re saving for college, I want you to throw any
extra money toward the house. An extra $200–300 a month
will make a big difference in you attacking and paying off the home. And a lot of people, Rachel, have never envisioned them
owning their home, right? And this is where you have it. They’ll send you the deed in the mail, and that means you
don’t owe on it anymore. So, how do you get there? You have to do it intentionally. So that’s looking at it— be aware—and budgeting
is absolutely crucial. And so if you’re out there right now, and you’ve got a 30-year
fixed rate mortgage, I want you to go get a quote on refinancing to a 15-year fixed. – That’s good. – The payment’s going to go up $400–500, but we’re talking about a
difference of 15 years, Rachel. This is a big deal. So, for the people that are intentional, attacking and paying off
the house is a big step. But imagine this. Let’s say you’re behind saving
for retirement a little bit. Imagine your mortgage payment
not leaving you, right? Imagine whatever it is
you’re paying right now on a mortgage payment not leaving you, but you’re able to save
more toward college, and then invest more
right for your future. It would allow you to
catch up exponentially. So, attacking and paying off
the house is a huge step. Don’t listen to the
people out there that say, hold on to the mortgage for the tax surge. – For the tax surge, okay? That’s a big lie. So explain that.
– Yeah, it makes my hair grow. It makes my hair grow. It gets me riled up
because it’s not truthful, and I want people to know the facts. You want to pay off that home and own it and remove the risk out of your life. If you own it, nobody
can ever foreclose on it. Nobody can take it away from you. So I want to encourage
people to stay on the path. It leads you to progress. – Yes, and majority of people with the whole tax deduction
thing, mathematically speaking, you’re going to be paying more in interest than you would it not
being written off, so. – Oh, it is. And you have to fully itemize
to be able to deduct that. And you can only deduct it
for a certain number of years. So anyway, it’s an excuse
to keep a mortgage. – Pay off the house, people. Pay off the house.
– Pay off the house, free up your money, and be
able to save for college, be able to save for your future, or be able to take a
trip and enjoy it, right? I want people to keep
more of their own money. – So good. So, you guys, if you could imagine being at the end of that step, which means you have no
debt including your house, you’re funding your retirement, and you’re funding your kids’ college, you have an emergency fund— like all the things are taken care of. At that point, you might
even be self-insured, meaning that if something
were to happen to you, you have everything taken care of. So you may not even need life insurance. But a lot of you are probably
not there yet and that’s okay. But while you’re working
through the Baby Steps, you need to make sure you
do have life insurance. And with the correct amount
of coverage that you need, isn’t that right? – Oh, it is. Life insurance is absolutely important. It’s a part of making sure
that your family is protected. And I also want to encourage people to make sure you’re getting some quotes. Look at this and understand— find out if you can save money because that saved money
creates margin in your budget, and that allows you to be able
to do more in other areas. Rachel, it boils down to being more intentional with your money. – Yeah, it’s so good. And Winston and I use Zander Insurance because they make it so easy. And you use Zander too, don’t you? – I sure do. – Yeah, they’re so great. They will do all the work for you to make sure that you’re
getting the best rates possible. So we recommend getting 10 to
12 times your annual income. So make sure to go to zander.com
or click the link below. Alright, coming up next, I’m going to bring my dad back on to join us, and we’re going to finish
out with Baby Step 7. The last and final Baby Step. – It’s gonna be fun. – It’s a good one. (upbeat music) So our big saying around here is: Live like no one else, so later you can live and give like no one else. So our goal for you is not
just to win with money, but to be able to win with money so that you can become an
incredibly generous person. So, you all are here to talk about probably the most fun Baby Step. – I think so. – So at this point people
are completely out of debt, including their house. They don’t even have a house payment. They’re funding retirement, putting money away for kids’ college. And now there’s nothing left but to really build wealth
and be incredibly generous. So, that’s pretty fun, right? – It puts you in a position
to have that kind of fun. – Yes, so let’s talk
about the fun you can have and the importance of giving and truly living with that open hand. – Well, for the first thing that happens, for Sharon and I when
we finally got there, is this weird thing happens. You’re like, I’m going to be okay. And you can take your eyes off of you. And as soon as you do,
you know what you see? Other people. And you see this need. And so the first thing
that happened with us was just some random acts of giving. But and then it’s like, you know, I just had this blast, like
Christmas the other day, right? You know, a month ago our company, we gave $800,000 to our team. A thousand dollars each for
Christmas for 800 people. But I mean, it was fun! I had fun! I did not like go, oh, I hate doing this. It was fun because we had the money and everybody had a blast. And, you know, you just don’t find people upset about generosity. – It’s so true. And, Chris, I feel like we
talk about the joy of giving because really giving gives
you this amount of joy that you can’t get anywhere else. – It really does. I mean, Rachel, when you put yourself in a position to be able to be aware, when the Lord prompts you to give or to do something and
you have that margin, you’re able to do it with joy. And giving has a two-way blessing. You bless the person that receives it, but you also feel a blessing. – Yes.
– Absolutely. – And I’ll never forget a time that I was at Waffle
House with one of my boys and met the waitress. Turns out she was about
five months pregnant. Her fiance had broken up with her. I mean, she had gone
through some life stuff. And I felt in that moment that
I knew what I was going to do. I knew I was going to leave a big tip. Well, my son saw this
dollar amount that I put out and I said, “Alright, buddy, let’s go.” He goes, “No, dad, we
gotta wait on your change.” And I’m like, “No, no.” Now, you all know I can’t whisper, right? I’ve been banned in 48 of the
public libraries in America. But I’m trying to get him
out before she comes back because have you ever had somebody try to block your blessing? You know, you try to do something nice? – Yeah, yeah, yeah,
yeah, totally, totally. – Well, it creates awkwardness, right? So anyway, I’m like, little boy, if you don’t get up I’m
gonna tase you, you know? So I get him outside and we get over to the side of the building. And she comes back and she
sees the dollar amount. And I’ll never forget her picking it up and putting it to her heart. And that expression, and I’ll
never forget standing there with my son where I’ve told
him it’s good to do good. You need to do good. But Rachel, he did something
you talk about in your book, Smart Money Smart Kids. It’s more caught than taught, right? And my son caught me doing something good.
– Sees it, so good. – And I will never forget that moment. It stuck in my head. And so I want people to give. I want people to do it,
but let your kids see you. Let them be a part of that
and watch what happens. They learn to give as well. – Totally, I think that’s
such a great point. And so for you guys working this plan, you may not be at Baby Step 7, but the beautiful thing that we teach, that we are hardcore on is
that you need to be giving no matter where you are in the process. So even if you are getting out of debt, giving is still at the top of your budget because it’s a habit you create. And a lot of people believe, well, if I just make more
money, then I would give. And that’s not the case. It’s not, it’s not a math– – You would give more, but
you won’t start giving. – That’s right, that’s right. It’s not a math issue, it’s a heart issue. Kind of like what we talked
about earlier, but it’s true. So, making it a habit now, giving a little until you can be able to give a lot here in Baby Step 7. Well, I think this is
so fun having you guys be able to talk about this because it is, it’s a point for people
to look at that Baby Step and to work toward—
because what you can do in your life and others
is just incredible. And just like you said, it’s true there was a study done that said you have momentary happiness
when you receive a gift, but you have longer term happiness when you are actually the giver. And what it does to change
you and your family, and it is— it’s just—I say it over and
over again, but it’s true. It is the most fun. – Yes, it is.
– It is the most fun you can have with money. So, if you had one last
piece of encouragement for people throughout all the Baby Steps, what would you say? – When you pay a price
to win, it’s worth it. We say it all the time, and the Baby Steps are a
process you’re going through, and you are living like no one else, so that later you can live and give like no one else. What if you could do some of the things we’re talking about right here
and it not affect your life because you’d done such a good job? You can do it. – It’s good.
– Yeah, I would tell people that regardless of
where you are right now, don’t get distracted
and believe in yourself. You know, it is a plan worth
working, and I promise you, once you get there, you’re going to look back and you’re going to be able
to encourage other people. So stay plugged in. Keep understanding why you’re doing this to be able to be a blessing to others. – So good, so good. Well, you guys, if it makes
you not want to start this plan, I feel like you’re not
alive watching this. So I’m excited for you guys
and the journey you’re on and the fact that we all get to sit here and help with that is a
true honor on our part. So, thanks you, guys, for being on. Seriously, I really appreciate it. – Thank you.
– Very cool. (upbeat music) – Well, it’s my favorite time of the show. That’s right, celebrating you guys with She Works Hard Saving Money. Sarah said, “As soon as we
finished Baby Step 3, we started an international adoption and now we help others adopt. I started a group to help people come up with adoption fundraising ideas.” So great, Sarah. I love that. Cassandra said, “We had mismatched, hand-me-down furniture for 10 years. We agreed when our mortgage
was 3/4 paid we would celebrate so we sold the old
furniture and got this. It makes me so happy to
have furniture that matches and I know nothing will compare to that paid off mortgage in 2019!” So awesome, Cassandra. Kelsey said, “Three years ago, my dad graciously gifted
my husband and myself with our honeymoon hotel in Maui. My dad travels all the time for business, so he’s saved up quite a few hotel rewards from his business trips, plus he’s gone through FPU with my mom. I guess you could say they’re living and giving like no one else. We are still to this day humbled and thankful for such a generous gift.” I love that, you guys. You guys are killing it. So remember, if you want to post on social what you are saving up for, or how you’re working to save money, post a picture and put “she works hard saving money” as the hashtag. Well, this was such a fun episode. I hope you guys feel encouraged and have the tools you need to start winning with your money. Now, if you want to take it a step further, you need to go through
Financial Peace University. And Chris Hogan, Dave Ramsey,
and myself—we’re all in it. It is the proven program
that will help you never worry about money again. The average person that goes through Financial Peace University
pays off $5,300 in debt and saves $2,700 in the first 90 days. You guys, that’s crazy. Alright, well, for you all watching, thank you for tuning in to this episode and thanks to Dave Ramsey and Chris Hogan for coming on and sharing their wisdom. And for you guys, always remember to take control of your money
and create a life you love.

100 thoughts on “The 7-Step Plan to Live Debt Free

  • Excellent advice! We paid off over $48,000 in the last 18 months since we really committed to getting out of debt. House is paid off, kids are grown and all done school. Now we are gunning to pay off our vehicle in 18 months or less and save for retirement. I work a full-time job and we run a small cleaning business on the side that really helps too. I`ve had a few setbacks but am now focusing on my goal! Thank you Rachel, Dave and Chris! God bless!

  • Baby Step 1: Save $1,000 for starter emergency fund

    Baby Step 2: Pay off debt using the debt snowball

    Baby Step 3: 6 Months of living expenses

    Baby Step 4: Invest 15% of household income for retirement

    Baby Step 5: Saving for kids' university

    Baby Step 6: Pay off home early

    Baby Step 7: Build wealth and give

    Hope this helps.

  • Super excited to begin leading Financial Peace next week for the first time! The class change my life in my twenties and now I am on Baby Step 7 and loving it!

  • Awesome show. Having 2 of the best on your show Dave Ramsey & Chris Hogan. Wonderful advice as always and a great show to start off on 2019.

  • Baby step #1 sue YouTuber s for making a video of calling you out

    That’s what dave Ramsey did but dave Ramsey is a “Christian” lol loser

  • I’m so pumped for baby step 7!!! I’m 19 and working on getting through college completely debt free and hearing Chris and Dave’s stories about generosity motivated me even more!! I love hearing about people’s ability to be generous-please bring more of these stories on the show!!

  • Rachel you all have to talk about motherless ppl. What are we doing on baby step 5? Also, I'm not buying a home until I'm at baby step 7. Need to pay cash for my first home♡♡♡

  • Rachel, my husband and I discovered your dad on January 14, 2018. We've been following the plan for almost a year! We are out of debt – woohoo, and our Emergency Fund looks great. Last year it got us through scary times when our parents fell very ill and had to be admitted to hospital for weeks (they have fully recovered now, praise Jesus!). The bills in the private hospital were so expensive but we breezed through every one of them thanks to the Emergency Fund! It's real wisdom to follow what you and your dad teach! Greetings from us in Papua New Guinea 🙂

  • Am I the only one that noticed Rachel said the phrase "all of the things" like 6 times this episode?!? lol I say that all the time! Your awesome Rachel!

  • HI Rachel, I am on Baby step 1 & 2, Excited about my financial journey! Thank you for doing this epsisode! ~Brandy

  • We were at a fast food pita restaurant over the holidays and saw the tip jar for the night – it has 5 cents in it!!! (People tap their credit cards and go, no tip)…. it gave US more joy to give cash to the employee and wish her a Happy New Year than eating our meal – be a blessing!

  • Ppl giving dislikes to this video? Really? It’s free advice for a better life! What’s there to hate about free advice? Smh!

    If you don’t like the video, just click on the X and close it. Move on

  • oh wow, my comment was featured thanks Rachel and Dave Ramsey! You .. changed..my..life! More power to your family and Chris and all who work for the purpose of helping us who needed the hope of getting out of our misery.

  • Great show. I would like to see a montage of Daves BS6 calls or a RC show all about BS6. KEEP GOING EVERYONE X

  • THANKYOU for doing the show on the details of baby steps. It made me laugh when you said that hogan has the voice of God! You are so right. He seems like such a kind man. Great info Rachel. Jolie/ Northern California

  • THIS PROCESS WORKS!! My husband and I have paid off a little more than $60,000 in 6 months. We cut back a lot, but it has been worth it. In the next 2-3 months, we will be debt-free (excluding mortgage). We estimated Babystep 2 would take 15 months, but once we got going, we cranked it up and cut that time in half!!

  • I cut my cell phone bill by more than half by shopping around. I was the only one on my Sprint plan paying $135 a month. I left and got a plan for $52 a month with AT&T (military discount helped as well). I'm just mad I didnt look sooner…. saved by switching my insurance as well.

  • FUNNY. THE THING IS WHEN I STARTED I CAME TO REALIZE HOW MUCH OF A DRUG SHOPPING WAS FOR ME! TOOK ME ABOUT HALF A YEAR TO REALIZE I WAS USING SHOPPING TO FILL A VOID. HAD NOTHING TO DO WITH THE JONESESS. NEVER CARED WHAT OTHER FOLKS THOUGHT OF ME. BUT LIKE AN ALCOHOLIC OR DRUGGIE. I SAW THE PULL SPENDING HAD ON ME. IT FILLED A VOID, MADE ME FEEL GOOD, KEPT ME GOING REALLY.
    ONCE YOU FINALLY SAY WHAT MR. RAMSEY SAYS "I'VE HAD IT" YOU WON'T EVEN REALIZE WHATS HAPPENING. THEN SOMETHING SHIFTS.

  • For the most part I think the baby step program is a fantastic way to win at finances. BUT in this day in age, I believe that baby step 2 and baby step 3 should flip. It just seems for most, that when it rains it pours so having that 3-6 months savings before working on the debt snowball seems like a better way to go.

  • It can be done!! My two older kids went to undergrad debt free on a scholarship that REQUIRED them to work at least 20 hours a week or they lost the scholarship. Daniels Fund. One is a doctor now and the other is in his second year of Medical school. The doctor joined the National Guard and they paid for his Medical School. People, they can be DO IT!! Don't baby those young adults!!

  • hmm.. interest rates matter. Im making minimum payments on everything and focusing on the higher interest rates first. I see the logic in paying the smallest debt off so that you can apply that amount to the next debt on the list. but interest rates matter in the long run.

  • Im getting very close to that debt free milestone. between my 401k, other stock contributions, and the extra money I now have, it will be close to 30% of my annual income invested every year. I love it!

  • just started this, got my budget set my 1k emergency fund and paid off 10, 000 of my 50, 000 debt so I'm seeing a difference already…

  • Loved this episode, so inspirational!! We sold our house and we are currently living in a camper on our new property, we are going to live in a shop first (which we have cash for), then build our house after the land is paid off, so that all we owe on is the house. This way we can get that sucker paid off in 15 years or less. We are living like no one else so later we can live and give like no one else! Let me tell you the Joneses' think we are Crazy right now!!!! #worthit

  • +Rachel, I paid off 4 credit card in full, and put almost all on the last one I still owe. I saved $1000 easy, added $1000 to a savings and I started a 6 month CD of $280 where I will add/rollover when it matures and switch to a CD that will allow me to add money to it when I want with automatic renewal. I am doing it.

  • RC "Coming up next, the man with the voice of God, Chris Hogan"

    Me "Oh he must be pretty wise, I guess"

    Chris Hogan speaks…

    Me "Ok, ya thats God"

  • Help, I have a close friend who wants to use his 401 to pay off debt. I told him this was not a good idea. He said that since he is over 59 1/2 he won't have to pay a penalty, just the extra taxes. What can I say to convince him otherwise?

  • Love it that Dave has such self-awareness, he can throw himself a little self-deprecating remark, like suggesting that "straight from the horse's mouth" may have come from a different part of the horse.
    Keeping that ego in check, allows us to step in closer. Thanks!

  • Hello everyone and Rachel !!!!! I heard from D.R. and yourself that you're Mom "SHARON" and Wife of Mr. D.R. made an appearance on your show, can someone give me the link to that particular show ??? …. I've been hearing about Sharon all these years (East Hills of Tennessee Olympic Iron Frying Pan Throwing Champion) and I am super curious if she truly exists ??? Much love to the D.R. Personalities !!!!! I'm working on Step 3 !!! my 6 month FF E-Fund !!!! Thank You For Everything !!!! You Guys are Thee Best !!!! Sincerely, Oscar……. P.S. Say Hi to George !!!!!

  • Hi I would like to try this but question for you. I have two accounts in collections that are really old. Do I pay them off with the collection company or with the company themselves, even though really old.

  • I borrowed from my 401 because I was house broke..borrowed 30k. Did not have enough money every month and was stressed.. I started watching Dave Ramsey and you and I started getting scared.. I made a commitment to myself that I would do whatever I have to do to be debt free…I started working OT at my job and started off rough but I was all in and little by little I knocked out step 1. I started managing my money every check was accounted for.. than I learned that I could delete my PMI, so I was at that two years and the LTV was at 75% so I got the PMI deleted which removed $250 from my mortgage payment.. that has helped me on BS2 and just like that, I have over 10k in my savings in 7 months. I can't wait to pay it off, the $300 dollars they take away every check will be all mines as soon as I am debt free and can go to my 401k. Thank you, your dad and Chris Hogan for laying the foundation for become debt free. I am a single parent of two teens that I have full time and I get no child support but that is not stopping me from become debt free.

  • I became my own slumlord. $12.3K cash for my new home. I'm told as is, I can get $15K for this place. According to city acessor it's worth $35K Zillow calls it $48k . I'm sitting on it going to wait for the next bump in oil prices right now the market is depressed all want to sell. The town's main business resource is the oil and gas industry; flat right now.

    This town is the best I have ever seen to retire if you hate traffic and don't want a car here you don't need it. When you need to get things done it is real easy when everything is within a 2 mile radius if you want use a bike. Spent $15 on fuel last month and I have 150 more miles to drive before I need to get fuel. Granted I drive a Prius but I just don't have far to go so I stay local

    We became debt free in 2009, 2017 my wife of 17 years wanted to see what it was like living on her own . So she stole my life savings rented a place and lied to get a restraining order/divorce. Sounds fair doesn't it? Life is not fair and no longer am I . Not entertaining the idea of another union. Enjoying the peace and quiet of the missing psycho that use to wake up cussing screaming yelling.She Never was happy I'm predicting she never will be. There was no reason for her actions I did everything I could to help her she is a black hearted criminal con artist. The worse person you could lie to is yourself.

  • I'm on baby step 6! Can't wait to get the house paid off; got about 88k to go. Gonna take some years to do this but the thought of being completely debt free and being able to max out all retirement just sounds heavenly

  • I saved up to $1000.00 three times… I had it wiped out all three times by the dentist and my doctor… I'm saving again to $2000.00 and I'll tackle the 14k and I'll be free!

  • Just calculated after 15months i got to settle my car and credit card. So i can focus paying my second car and student loan. Felt better honestly. I'm going to be consistent

  • Great Video! I love the baby step philosophy. I am shooting for having $1000 saved by Oct 2019 if not before. Then I definitely want to move onto the next steps.

  • YOU GUYS ARE SOOO AWESOMEEEE!!! THANK YOU SOO MUCHH. You guys represent Christ and are giving Godly counsel. Thanks soooo much!!! You three are blessing me, my family and sooo many other people! You guys are like my online financial fam. May God continue bless you and prosper your who being!!! 🙌 We love you guys so much!!! ♥️♥️♥️

  • If you are in a 30 year mortgage it would make more sense to invest the margin you would pay into 15 year fixed rate. Compound interest on the few extra hundred dollars a month over 30 years would be a small fortune as opposed to the compound interest you would earn on the mortgage amount over the 15 years after the mortgage is paid off, likely more than the cost of your house plus the interest paid.

  • Got up to $800 in my Emergency Fund, then had a car repair of $400 …. working to build it back up ….

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  • How about Avalanche debt free technique ?? Especially if you have got a high intrest debt credit card to smash the intrest down quicker instead of paying for it like with the debt snowball affect

  • Emergency fund I say 12 months will be better. I been out of work for 8 months in the past. A 12 month fund would of made things so much better.

  • Retirement? What would be the the best retirement investment to have the biggest payout? I was thing of going with a roth IRA but I have heard a s&p 500 index would be best. So if i could get some answers or opinions that would be great.

  • You guys are so wonderful! 💗😃I thank God for all of you. I can see the light at the end of the tunnel. Hopefully one day I will give my testimony of being debt free and on the path to financial freedom 🙏😇💗🥰

  • I had your book for two years “sleeping” in a box, I moved and I took it with me but still was “sleeping” in a box because I was SCARED to read it, so I donated it and… I got an audiobook and finally I did it! I am changing my life and I want more intentional life and now I found you here. Thank you!

  • «if you own your own home, no one can take it away from you.” -no, that is not true Chris. You don’t pay your property tax, you get your home taken away when you OWN it !

  • Watching this again for a refresher! We have our phones paid off and have paid off $4,000 + since the beginning of the year! One of my student loans is even under $1000 now! It's so exciting!

  • so this all makes sense.. we are working on babystep 3..but what would you advise to those who are older, near retirement age? No way to do all steps to 7.

  • Contradictory to what Dave says regarding refi to a 15 year mortgage… He explicitly told one of his listeners with a 30 year mortgage to not bother with the costs of a refi and just use a calculator to see how much extra you have to pay per month to pay your mortgage off in 15 years. He said it makes no difference and only costs you more money to refi.

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