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Phil Osagie
Updated Apr 24, 2026
Breaking out of the debt cycle isn’t easy.
According to Equifax, total consumer debt across Canada reached $2.55 trillion at the end of the first quarter of 2025 — a 4.6% increase from the same period the previous year.
So, how do you beat debt and build wealth if you’re living paycheque to paycheque?
One option is to follow Dave Ramsey’s 7 Baby Steps. The American radio host and personal finance personality popularized this step-by-step guide as a way for North Americans to take control of their money.
"It's not a fairy tale. Anyone can do it, and the plan works every single time,” explains Ramsey. “Many people have used the plan to ditch debt, increase wealth, and live and give like no one else.”
Whether it’s high-yield chequing accounts or low-fee investment options, here are tools that can help you put Dave Ramsey’s 7 Baby Steps into action.
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Baby Step 1: Save $1,000 for your starter emergency fund
An emergency fund is a savings buffer set aside for unexpected expenses like home or car repairs — so you can avoid going into debt in case of an unplanned financial situation.
“Without an emergency fund, you are one car repair or medical bill away from financial disaster,” Ramsey noted.
But starting an emergency fund doesn't have to be overwhelming.
To kickstart your emergency fund, find out how much you can comfortably save every month after paying your fixed monthly expenses.
Consider parking this extra cash in an account that pays you a higher interest rate than a regular savings account — so that your idle cash can continue to make you money.
One of the fastest ways to find that extra cash is to stop overpaying on your monthly bills. Every dollar spent overpaying on a bill is a dollar not going toward your emergency fund or compounding in your TFSA.
Auto insurance premiums have climbed 18.9% since 2020, suggesting you might be overpaying if you’ve simply auto-renewed your policy. By using a comparison platform like Rates.ca, you could potentially save $500+ by comparing quotes from top-rated providers to ensure you aren't paying a hidden ‘loyalty tax’ to your current insurer.
Just answer a few basic questions, and Rates.ca will show you the most affordable deals in your area in as little as 3 minutes. Not only is the process 100% free, but you could also potentially save 20% by bundling your auto and home insurance together.
Baby Step 2: Pay off all debt (except the house) using the debt snowball
Dave Ramsey recommends using the debt snowball method to pay off your debts. Focus on paying off the smallest debt first while making minimum payments on the others. Once the smallest is paid off, move that payment to the next smallest debt and keep going.
"Debt isn't a math problem; it's a behaviour problem. The debt snowball method helps you change your behaviour by giving you quick wins and keeping you motivated,” according to Ramsey.
Consider consolidating your debt by taking out a single loan at a lower rate with Loans Canada. Instead of juggling multiple monthly payments, you'll have one predictable payment to manage each month.
This can both ease your interest costs and improve your credit score. You can shop for the most competitive interest rates on personal and debt consolidation loans, since Loans Canada specializes in comparing rates offered by different lenders.
You don’t need a minimum credit score or annual income to receive personalized loan offers.
If you owe a substantial amount, you may also want to see if you qualify for a debt relief program to clear a significant portion of your debt.
You can get a free consultation with a debt relief expert who can work with you to help clear your debts and rehabilitate your credit with a plan tailored to your needs.
If you owe a substantial amount, you may also want to see if you qualify for a debt relief program to clear a significant portion of your debt.
You can get a free consultation with a debt relief expert who can work with you to help clear your debts and rehabilitate your credit with a plan tailored to your needs.
Baby Step 3: Save 3 to 6 months of expenses in a fully funded emergency fund
Now that your debt is behind you, keep moving forward with Dave Ramsey’s Baby Steps by focusing on building your fully funded emergency fund. “Take the money you were using to pay down debt and set aside three to six months’ worth of expenses,” explains Ramsey.
This will safeguard you from life’s bigger unexpected bumps – like job loss or a medical emergency – and help you stay on track without slipping back into debt.
Many banks offer you a high promotional rate that expires after a short period, typically after 90 days. EQ Bank takes the opposite approach: they reward you for staying committed to your goals.
Open a personal account with EQ Bank and in just a few minutes you get access to the best features of a chequing account combined with a high-interest savings rate.
When you fund your account and set up a direct deposit, you can earn 2.75% on every dollar deposited into the account.
The account has $0 monthly fees and no minimum balances. Plus, you can withdraw from any ATM in Canada — for free.
Baby Step 4: Invest 15% of your household income for retirement
The next Baby Step is to start investing 15% of your gross income towards retirement.
“By the time you’re 67, you should still be working because you want to, not because you have to,” said Ramsey.
Start by making contributions to tax-advantaged accounts, such as your Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP).
These accounts can hold many assets such as cash, individual stocks, mutual funds or low-cost exchange-traded funds (ETFs).
Whether you’re five or 15 years away from retirement, CIBC Investor's Edge makes it easy to build a nest egg that can help reduce your reliance on government benefits later on.
This self-directed platform allows you to stay in control of every decision, from what you invest in to how often you contribute. You can automate your growth by setting up a Regular Investment Plan to make automatic contributions at intervals that suit your budget—a simple way to stay disciplined without having to watch the market.
You’ll have access to a wide range of assets, including stocks, ETFs, mutual funds, and GICs, to build a diversified portfolio that follows long-term value rather than short-term noise.
It’s a low-fee way to stay invested, with commissions of just $6.95 per trade—or $4.95 for active traders—and no annual fees for your first year. To help your money grow more efficiently, CIBC waives annual fees if you hold over $10,000 combined across your registered and non-registered accounts.
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Baby Step 5: Save for your children’s college fund
By this point, following Dave Ramsey’s 7 Baby Steps, you’ve paid off most of your debts (except the mortgage) and started saving for retirement. The next step is to begin saving for your children’s university or college tuition.
Take advantage of free government grants and tax-free growth by opening a Registered Education Savings Plan (RESP).
You can choose from two plans: An Individual Plan can have one beneficiary, while a Family Plan allows for one or more beneficiaries, plus new beneficiaries in the future.
Baby Step 6: Pay off your home early
Now, bring it all home. Your mortgage is probably the only thing between you and complete freedom from debt. As Ramsey says, “Baby Step 6 is the big dog!”
If you have a mortgage renewal coming up or are looking to refinance, you need a strategy that prioritizes your long-term budget.
A quick five-minute application with Homewise can help you secure a great rate on a new mortgage, without the stress of shopping around yourself.
Their free online tool compares offers from over 30 banks and lenders to ensure you find a mortgage you can comfortably afford, so you aren't overleveraged from day 1.
From approval to close, you can expect support from a personal Homewise Advisor — for free — so you get transparent advice that can potentially save you thousands of dollars in interest.
And the good news is that you don’t even need a credit check to fill out their online application, whether you’re trying to get a pre-approval as a first-time homebuyer, shopping around for the best rate or planning ahead for a mortgage renewal.
Baby Step 7: Build wealth and give
Ramsey said the last step is the most rewarding: keep building wealth, become outrageously generous and leave a legacy.
Once you’ve built a comfortable nest egg, the next step is to think about ways to keep growing your wealth, and that often means looking beyond traditional stocks and cash.
Investing in assets that don’t move in lockstep with the stock market can help shock-proof your portfolio during periods of volatility, giving your overall strategy more stability.
That’s why many financial advisors now recommend incorporating alternative assets as part of a thoughtful diversification plan.
However, while alternative assets help protect your portfolio from market swings, true legacy planning requires a defensive strategy that guards against the unexpected.
Life insurance serves as the ultimate safeguard for your wealth, offering financial security for your family and ensuring your legacy is preserved.
In most cases, Dave Ramsey recommends families choose term life insurance over whole life insurance — and invest the significant savings in a tax-advantaged retirement account.
Term life insurance offers coverage for a period typically ranging from 10 to 30 years. If the insured person dies during this term, the policy pays a death benefit to the designated beneficiaries. Term insurance is usually less expensive and more flexible than whole life insurance — and the payout is tax free
With PolicyMe, you can get an instant life insurance quote after you fill out a form with your age, income and smoking status. You’ll get quotes based on the coverage amount and term length you select.
Bottom line
Dave Ramsey’s 7 Baby Steps aren’t just about crushing debt — they could be a roadmap to real wealth.
Take, for instance, a debt-free household earning $80,000 a year. By consistently investing 15% of their income — about $1,000 each month — into retirement, they can take full advantage of consistent, long-term growth. Over 30 years, with a realistic 8% average annual return, that investment could compound into an incredible $1,359,398.53.
That’s the power of discipline — and the magic of compound interest.
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Phil Osagie
Conversion Copywriter
Phil is a writer at Moneywise, bringing a strong background in public relations, financial communications, and copywriting. Educated in Cambridge, U.K., he has created content for several blue-chip companies, and his work has been featured on MSN, Yahoo, Google, and Apple News.
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