Dave Ramsey’s Baby Steps and Crown Money Map Review

Dave Ramsey's Baby Steps

Do you prefer Dave Ramsey’s 7 Baby Steps or the Crown Money Map?  Dave Ramsey created the Baby Steps and Crown Financial Ministries created the Money Map for prioritizing and setting financial goals.  I think both are great resources that help provide focus and prevent you from diluting your efforts in trying to work on too many goals at one time.

Related to these tools, is there a right or wrong answer or a better or worse solution?  Both help you work towards the same objective of financial freedom, or financial peace.  Both focus on savings and debt elimination which eventually positions you to build wealth and give more.

Right or wrong or better or worse?  It may be more appropriate to determine which approach works best for your situation.  I invite you to follow along as I walk you through both tools, discuss my observations, and hopefully, stimulate your thinking.  I complete the post with some summary thoughts.

But first, let’s take a look at some of the important things Crown recommends doing sooner than later (before you start their plan).  I thought I would highlight these recommendations because they provide some excellent to do’s I think are important no matter which tool you choose.  They can be found on the flip side of the Money Map.

Crown Money Map Getting Started

crown money mapThe “Complete My Life, My Purpose, My Goals” section on the Money Map is provided to help stimulate thinking around your life mission and your goals. I personally believe in focusing your financial planning and goal setting based on your life values and what you understand as your purpose in life. Knowing your life purpose will help you carve the right path and avoid disappointment once financially free.

Start Giving – Start giving to the Lord’s Work. Giving or tithing to the Lord’s work is top priority for a Christian. It is a step of faith in putting your money and personal finances in God’s control.

Execute a will – Estate planning is critical for your family. My wife and I met with a lawyer a few years ago who created a will and other legal documents for us.

Evaluate your career and income potential – I think it’s a good idea to continually think about your career goals. A few years ago I learned about Dan Miller while listening to Dave Ramsey’s podcast. I started listening to Dan’s podcast and read a few of his books. He was part of the reason I was inspired and so motivated to start One Money Design. He coaches people to follow their passions and do what they love to do, which will ultimately lead to better performance, earnings, etc.  I highly recommend, “No more Monday’s” by Dan Miller.

Teach Children – If you have children, begin teaching them God’s way of handling money.  It’s never too early to teach your children the differences between saving, giving and spending money.

Acquire Basic Insurance – Acquire basic insurance, depending on your needs, age and financial ability (auto, health,life,disability,and long-term care).  A good place to start with insurance is to meet with a financial advisor to discuss the options available to you. However, do a little bit of research on your own first. I learned a lot about insurance in David Bach’s book, “Smart Couples Finish Rich.”

Employer Retirement Plan Matching – Take advantage of employer matching for your retirement plan as long as you can continue to make forward progress on the Money Map (or Baby Steps).  This one almost goes without saying. However, consider your debt situation. If you’re able to snow ball your debt and focus on paying it off in the short-term, you might consider postponing the contribution to your retirement fund. Both the Money Map and Baby steps say to pay off debt before funding retirement.

Calculate Your Net Worth – Make a list of all your assets and liabilities to get a clear picture of your net worth.  In order to start moving forward towards your goals you need to know where you’re starting from today.

Dave Ramsey Baby Step 1 versus Crown Money Map Destination 1

What does the Baby Step say?

  • Baby Step:  $1000 in an emergency fund.

What does the Money Map say?

  • Begin using a spending plan & save $1000 for emergencies.

Observations

  • Crown suggests creating a spending plan as part of destination 1.  I think Dave assumes you have one when starting his Baby Steps and this is covered in Financial Peace University.
  • Is $1000 the magic number?  A $1000 isn’t a small amount of money, but it’s not big amount to save either.  Most gurus say that a $1000 can handle most small to medium emergencies.  I tend to agree.
  • Crown uses a scripture theme for each of their destinations which I think is pretty cool.  Here’s the first scripture:  “The wise man saves for the future but the foolish man spends whatever he gets.” (Proverbs 21:20 TLB)

Dave Ramsey Baby Step 2 versus Crown Money Map Destination 2

What does the Baby Step say?

  • Pay off all debt with the debt snowball.

What does the Money Map say?

  • Pay off all credit cards and increase savings to one month’s living expenses.

Observations

  • It’s obvious the Money Map takes a more conservative approach to emergency savings because it recommends saving up one month’s living expenses before paying off all debt.  It advises to only pay off credit cards and then focus on building a bigger savings account.  Dave Ramsey feels strongly about focusing all attention on debt, but others believe the emergency savings should be built up at the same time.  I tend to agree with Dave Ramsey’s approach here because I think it’s important to put your debt behind you as fast as possible.
  • The Money Map scripture for this destination is Proverbs 22:7:  “The borrower is servant to the lender”

Dave Ramsey Baby Step 3 versus Crown Money Map Destination 3

What does the Baby Step say?

  • 3 to 6 months in savings.

What does the Money Map say?

  • Pay off all consumer debt & increase savings to 3 months living expenses.

Observations

  • The Crown Money Map pays off remaining consumer debt in this phase.  Remember, in Money Map Destination 2 you saved 1 month’s living expenses before paying off car loans, student loans, etc.
  • Both approaches discuss saving up to 3-6 months of living expenses for an emergency fund.  This seems to be a standard recommendation from financial experts.  Interestingly, there is a large gap between 3 and 6 months of living expenses.  Depending on how much you’re contributing to your savings, 6 months of living expenses might keep you in this phase for a while.  Obviously, the more emergency savings you build up the more you reduce the risk of going into debt, which is a great thing to consider.  See more below.
  • The Money Map scripture in this phase is Romans 13:8:  “Keep out of debt and owe no man anything”.

Before moving to the 4th Baby Step and Money Map Destination, please allow me to digress and explore 3-6 months of savings a little further.

3 Months Emergency Savings versus 6 Months Savings

How do you know whether to lean more towards the lower side (3 months savings) versus the higher side (6 months savings) of the emergency savings fund?

During an episode of the Dave Ramsey Show, I head Dave state this is a negotiation between husband and spouse. One person is typically the spender and one person is the saver. The person who is more conservative with money will generally feel more comfortable with having a larger savings account.

Aside from the emotional aspect of the decision, Dave provides some practical advice. Consider the job situation for your family. What’s the stability of the industry in which you’re working? If you have a stable public sector job, you may feel more comfortable with a smaller savings. However, if one spouse is employed in a more volatile industry, the emergency fund may need to be more.

Husband and wife should discuss the amount they both can feel comfortable with when they go to sleep at night. Dave stated he saves more (not because it’s in his nature), but for the comfort or blessing it provides to his wife who is more risk adverse.

Dave Ramsey Baby Step 4 versus Crown Money Map Destination 4

What does the Baby Step say?

  • Invest 15% of income into Roth IRAs and pre-tax retirement plans.

What does the Money Map say?

  • Begin saving for major purchases (home, auto, etc.)
  • Begin saving for retirement.
  • Begin saving for children’s education.
  • If you want to start your own business, begin saving for it.

Observations

  • We see some key differences between Destination 4 and Baby Step 4.  The Baby Steps are more specific on what amount should be contributed to retirement.
  • The Money Map recommends savings across four areas, including retirement where Dave Ramsey is more focused on retirement savings as a priority in this step.  Note:  college savings comes in Baby Step 5.
  • I think it’s important to have a plan to save for major purchases beyond retirement and children’s education.  Once the emergency savings is fully funded (after debt is paid off) it’s important to create a car savings each month.  Otherwise, when the need for a car presents itself, you’ll be forced to go back into debt.  It’s also important to have separate savings contributions for a home, if one hasn’t already been purchased.
  • The Money Map scripture in this phase is Proverbs 21:5.  “Steady plodding brings prosperity.”

Dave Ramsey Baby Step 5 versus Crown Money Map Destination 5

What does the Baby Step say?

  • College funding.

What does the Money Map say?

  • Buy affordable home.
  • Begin prepaying home mortgage.
  • Begin investing wisely.

Observations

  • As a reminder, Baby Step 4 told us to begin investing 15% of income into Roth IRAs and pre-tax retirement plans.  In the 5th Baby Step we are to fund college for the kids.  Dave’s advice throughout each step is to complete that step before moving to the next step.  So, with all the debt gone, an emergency account saved and 15% of income dedicated to retirement, the focus becomes saving for education.
  • If you remember, the Money Map Destination 4 had a goal to begin saving for children’s education.  Once this savings has begun (along with retirement and major purchases), the Money Map tells us to buy an affordable home and begin prepaying the mortgage.
  • I think it’s important to note a few key differences that are becoming clear after going through this exercise.  The Baby Steps seem to draw clear lines around what has to be completed before moving to the next step.  The Money Map uses the word “begin” a lot (retirement, children’s education, investing, etc.)  And many of these milestones are completed in later phases.   Again, neither is right or wrong.  It’s just an observation.
  • The Money Map scripture in this destination is Ecclesiastes 5:13-15.  “Savings are put into risky investments that turn sour…he man who speculates is soon to where he began—-with nothing.”

Dave Ramsey Baby Step 6 versus Crown Money Map Destination 6

What does the Baby Step say?

  • Pay off your home early.

What does the Money Map say?

  • Home mortgage paid off.
  • Children’s education is funded.
  • Confirm estate plan is in order.

Observations

  • Essentially, both approaches are coming in-line with one another again in phase 6.  At the end of this phase, both the Baby Steps and the Money Map have us paying off our homes and funding our children’s education.
  • As an aside, have you ever thought about what it would be like to not have a home mortgage?  Many people don’t think about the home mortgage as being debt, but it is just another form of debt.  There are tax advantages to having a house payment with the interest, but imagine all of the money you would have each month and over an entire year if the mortgage payment was going to other financial objectives.  The home mortgage in the Money Map and Baby Steps is the last remaining debt to be paid off.
  • The Money Map highlights a very important step in planning and that is confirming your estate plan is in order.   Since Destination 6 is near the final destination of retirement and in most cases the elderly years we are reminded to check our estate and make sure it’s in order.  Setting up a will was recommended as an initial step noted on the Money Map.
  • The Money Map scripture in this destination is John 8:32.  “You will know the truth, and the truth will make you free.”

Final Destination, Recap and Concluding Thoughts

In this final section I bring both approaches together and discuss the ultimate benefit in following either one of them to manage your finances.  But first, let’s look at each step and destination again.

Baby Steps

  1. $1,000 In An Emergency Fund
  2. Pay Off All Debt With The Debt Snowball
  3. 3 To 6 Months Expenses In Savings
  4. Invest 15% Of Income Into Roth IRAs And Pre-Tax Retirement Plans
  5. College Funding
  6. Pay Off Your Home Early

Money Map

  1. Begin using a spending plan & save $1000 for emergencies.
  2. Pay off all credit cards and increase savings to one month’s living expenses.
  3. Pay off all consumer debt & increase savings to 3 months living expenses.
  4. Begin savings for major purchases (home, auto, etc.).  Begin saving for retirement.  Begin saving for children’s education.  If you want to start your own business begin saving for it.
  5. Buy affordable home.  Begin prepaying home mortgage.  Begin investing wisely.
  6. Home mortgage paid off.  Children’s education is funded.  Confirm estate plan is in order.

Dave Ramsey Baby Step 7 versus Crown Money Map Destination 7

What does the Baby Step say?

  • Build Wealth and Give.

What does the Money Map say?

  • My retirement is funded.
  • I am free to be more generous with my time and money.

Observations

  • The Crown Money Map scripture in this destination is Matthew 25:21.  “Well done good and faithful servant.”
  • Obviously, both plans come together in the final phase with the key theme of giving and building wealth.

Final Thoughts

The ultimate benefit in following either of these two approaches is financial freedom.  You see, there is no longer a need to get rich or pursue quick money making schemes or chase after fruitless desires.  Most of those things, if pursued, don’t produce anything but a pile of problems.  Don’t misunderstand, I don’t think there is anything wrong with having toys, fun vacations and more, but pursuing these things without a plan for the future (for financial freedom) isn’t wise, or biblical.

These approaches bring focus and precision to financial goals.  You can’t get to a destination if you’re constantly taking a wrong turn or getting distracted along the way.  You must have a “map”, or “steps” to guide your direction.  You have to know the impacts of stalling out.  For instance, if I continue to acquire debt, or don’t make progress towards paying off existing debts, I’ll probably never have enough for retirement and to ultimately build wealth and give more.

My wife and I made a decision a long time ago to pursue a financially free life – a life in which we could give more of our time and money to help others for God’s purposes.  I truly believe we can only get there by following the path presented by these two approaches.  Wouldn’t you agree it would be great to someday hear, “well done good and faithful servant?”

Is either approach right or wrong?  Which one is better?  In my opinion, neither approach is right or wrong.  The one that is better is the one that fits your preference or situation.  That sounds like a bit of a cop – out given all my commentary around this comparison, but it’s true.

So, what about you?  Do you use the Money Map or the Baby Steps to guide your path to financial freedom?

About Jason Price

Jason Price is a family man saved by grace, passionate about faithful financial stewardship (1 Cor 4:2 NIV), soccer and the Pacific sun.

  • http://twitter.com/StumbleForward Chris Holdheide

    That’s interesting Jason. I’ve never heard of the Crown Money Map before. It sounds interesting though.

    • http://www.onemoneydesign.com/ Jason Price

      Chris, yes the Money Map is a great approach. I think you’d like it. A Money Map only costs a few dollars. Might make a good blog post for you. :)

  • http://www.figueroafinancial.com/ Jose Figueroa

    Excellent article Jason! We used the Dave Ramsey Baby Steps as we went through FPU and they worked well with us. One point of clarification is that Dave always teaches that you work on baby steps 4-5-6 in parallel. Basically, fund retirement first (15%), with what’s left over fund college, and if anything is left, then pay extra on the house.

    I am familiar with the Crown approach as I work with a group of Crown coaches in DFW. But the point is, you need a steady plan towards financial freedom and either one of these plans will get you there. They are both based in Scripture so they will both work. Thanks!

    • http://www.onemoneydesign.com/ Jason Price

      Jose, thanks for commenting! I haven’t taken FPU yet, but hope to do so soon. Thanks for clarifying on steps 4-5-6. I definitely agree that both of these plans lead to financial freedom!

  • jon

    Thankx for the article Jason. I haven’t heard of this either but think I will take a look. Who doesn’t want Financial freedom?

  • Steve Burgess

    Great article. I agree with you – I don’t think there is a right or wrong when

    it comes to this, it’s simply a matter of preference. Achieving financial

    freedom is a very important matter in today’s world. Personally, I
    prefer Dave Ramsey’s Baby Steps.

  • cgalloway

    I began with the Money Map program and later read Dave Ramsey’s book Total Money Makeover and the debt snowball concept put me into overdrive!!!! Both programs are awesome!! We are debt free except for mortgage, have an emergency fund and am looking to retire in 10 years!

  • Rebecca Earley Craven

    I appreciated your comparison as I have been following Ramsey for several years and just started reading ‘The Money Map’. A further clarification on Ramsey’s plan is that he also suggests saving for large purchases in what he calls Baby Step 3B. Once debts are paid off and the emergency fund is fully funded then you would start saving for large purchases such as a new car, down payment on a house or starting a business. He also uses many of the same biblical references in his teachings to support the baby steps they just aren’t listed so close to the steps like on the map. Thanks