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April 8, 2021

Dave Ramsey Baby Steps Complete! Now What?


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If you've been following the Dave Ramsey Baby Steps, you know there is a sequential order to each and every money decision. So when you've finally reached Baby Step 7, how do you invest your money going forward?

That's what Christie from Cincinnati is wondering today.


I love the podcast. I have two questions.

How long have you been on Dave Ramsey’s Baby Step 7?

We are on Baby Step 7 with 1 paid-for rental. We are considering selling the rental property and just investing in a mutual fund instead. 

I know you keep talking about buying a rental, but after 8-10 years we are finding it really isn’t making as much money as we think the stock market could. And we won’t have to worry about tenants calling with a problem. 

What are your thoughts? 


Christie! Congratulations on reaching Dave Ramsey’s Baby Step 7. That is incredible. I’m a fan of Dave, his company and all that he’s done for our country and our family. 

Now for those of you who don’t know what that Baby Step 7 is … let me try to explain first. 

What is Dave Ramsey’s Baby Step 7?

Dave Ramsey developed a set of financial steps called the Baby Steps. Each of these steps helps lead you one step closer to financial freedom. 

When you’re in Baby Step 7, like Christie, you are now …

  • Debt-free (Step 2)
  • Covered with at least 3 months of expenses in an emergency fund (Step 3)
  • Saving at least 15% of your income into retirement (Step 4)
  • Contributing to your kid’s college funds on a regular basis (Step 5)
  • Mortgage-free (Step 6)

Baby Step 7 is defined by Dave Ramsey and his team as the step when you “Build Wealth and Give”. This is when you feel very secure in your finances and you’re ready for the next major chapter in your wealth-building journey. 

5 Ways to Use Your Money After Completing Dave Ramsey’s Baby Steps

After paying off your mortgage Christie, you probably found yourself with a lot of extra cash. Our family definitely did. After we became mortgage-free and hit Baby Step 7 in 2017, we had around $35,000 extra to allocate each year.

Here are some options we considered and ones you could consider too:

1. Rental Properties

With rental properties, as you know, you can receive monthly rental income and the value of your property grows over time. If you decide to get a mortgage on your property, your tenants and the rent they pay helps you to pay down your mortgage. 

Lately, Christie, it sounds like you’re experiencing some of the disadvantages of real estate investing. Needy tenants can be a continuous bother and the cost of upkeep, repairs, bills, taxes and insurance (even without a mortgage) can be so costly that it makes your actual income smaller than you’d hoped. 

The type of experience you’re describing has kept me and Nicole on the sidelines for investing in real estate. We already have two kids, two jobs and we don’t really want to add another job into our lives at this point. Yes, we could get a property manager (and you could too), but that would cut even further into your profits. 

In short, I get what you’re feeling.

Let’s talk about your desire to invest in a mutual fund instead with these next few options. 

2. Max Out Retirement Savings Options

typing on laptop

There are multiple ways you can invest in the stock market with mutual funds and index funds and save on taxes. When you have no mortgage and a lot of extra cash, maxing out these options can be a smart post-Baby Step 7 money move. 

Here are some of our favorite retirement savings options:


The 401k is a retirement savings vehicle offered as an employer-sponsored plan. It allows you to save on taxes and invest in the stock market for your retirement. 

If your employer matches your contributions like mine does, you will essentially receive FREE money for participating in your plan. For example, in 2019, I maxed out my 401k at $19,000 (the 2019 limit) and received $2,850 from my employer for free. (Thanks boss!)

There are early withdrawal penalties of 10% if you take out your money before the age of 59 ½. You’ll also have to pay taxes on the money given that it was deposited pre-tax so it can be best to consider this money for your retirement and retirement alone. 


If you don’t have an employer-sponsored plan, or if you’re maxing out your 401k to its fullest, look into an IRA. Depending on your income and your specific situation, you have the ability to invest pre-tax (Traditional IRA) or post-tax (Roth IRA). 

In 2021, the annual contribution limit if you’re under 50 is $6,000. And if you’re over 50, it’s $7,000.

Nicole and I contributed to a Roth IRA for years. Recently, we exceeded the income limits so we’ve been investing in a Traditional IRA instead. 


A Health Savings Account (HSA) is a smart way to save on medical expenses. This tax-advantaged account allows you to save and invest your money pre-tax as long as you are a participating member in a High Deductible Health Plan. Your HSA funds can be used to pay for doctor’s fees, prescription medications, dental treatments, and even contact lenses.

If you don’t need the money for medical expenses before age 65, you can use this money however you’d like in retirement. It’s like a stealth retirement savings vehicle.

We signed up for our HSA with Lively. They make the process easy and even give you a handy debit card to cover your typical medical expenses. 

If you’re maxing out your 401k, IRA and HSA, you’ll be saving A LOT of money for retirement and your future health care needs. 

3. Invest in a Taxable Brokerage Account

If you’ve exhausted your tax-favored retirement options, or if you simply want to invest to enjoy some of your investments before retirement age, check out a taxable brokerage account through a low-cost broker like Vanguard or Fidelity

You can invest in stocks, bonds and even REITs (Real Estate Investment Trusts). By investing in REITs, you are getting the ability to invest in real estate without becoming a landlord. (This might be a great middle-ground option for you, Christie!)

Just like rental property income, you’ll have to pay taxes on the income you receive from your investments. But if my investments are growing without me having to do much, paying taxes on my passive income is no problem for me.  

4. Have More Fun

When you have a lot more money available after reaching Baby Step 7, it’s time to have some more fun! This can come in the form of …

  • Vacations
  • More Date Nights
  • Upgrading your car
  • Hosting parties and events
  • Updating your home (Nicole’s favorite)
  • And more vacations!

After working hard on hitting our financial goals, over time, we can forget to let loose and relax a bit. Craft a budget that feels fun yet still allows you to invest and give. 

5. Give More

Another REALLY fun way to use your money is to give it away. 

In 2017, Nicole and I were giving away 1% of our take-home pay to charity. Last year, we increased our charitable giving to 5%. In the process, we learned more about organizations, causes and charities that we feel passionate about. 

Outside of charitable giving, you can become a more generous person in your everyday life. How about giving $100 randomly to a hard-working neighbor in the service industry during the holidays? Wouldn’t that feel incredible to make someone’s day with a gift like that?

Since achieving our 5% charitable giving goal last year was so fun, Nicole and I developed a new goal for this year. We’re going to give an additional 5% away to family, friends and neighbors. This will be in the form of cash, gifts and random surprises. 

I’m inspired by my brother Mike who shows his love through giving. I want to be more like my brother Mike this year. 

So, Christie, take stock of how much you’re giving. People often talk about all the things that need to change with the world to make it a better place. With your financial position, you can start by being the change you want to see in your community, in our country and the world. 

Final Thoughts on Completing the Dave Ramsey Baby Steps

I hope by hearing some of these additional options, you might be able to think about which sounds the most appealing to you … and maybe it’s a bit of all of them. 

But if you’ve been doing the rental property thing for 8-10 years and it’s not as profitable as you’d like and it’s sort of pain, then I think it’s time for a change. 

A little variety and change can be good for you.


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Carpe Diem Quote

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Are you working through the Dave Ramsey Baby Steps and wondering about investing?

Please let us know in the comments below.

Andy Hill

Andy Hill is the award-winning family finance coach behind Marriage Kids and Money - a platform dedicated to helping young families build wealth and happiness. With millions of podcast downloads and video views, Andy’s message of family financial empowerment has resonated with listeners, readers and viewers across the world. When he's not "talking money", Andy enjoys being a Soccer Dad, singing karaoke with his wife and watching Marvel movies.


  • I’m intrigued by real estate investment but don’t know all the intricacies of handling handling the property, repairs, payments. I’d take out a mortgage (with hopefully 20% down) for the property. Is it a bad thing to get started with a property manager with the intent of taking over this responsibility in 1-2 years?

    • I’m yet to actually buy a rental property, but from the people I’ve interviewed, getting a property manager can be a smart way to enjoy the benefits of real estate investing without some of the hassles (screening tenants, repairs, upkeep, etc).

      You can expect to pay around 8-10% of your monthly rental income on their services so make sure to factor in that cost to your plans before proceeding.

      Good luck!

  • Real estate investing as landlords would not be for us. I value family time, new family experiences, and solitude to pursue my interests. For us, travel and being set for retirement and our daughters college (possibly PT school) are top priorities. We have been at debt free step 7 for about 9 years and grateful to be here!

    • 9 years of complete debt freedom. That is awesome!

      Your post-debt life description sounds very appealing to me!


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