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Phil Osagie
Updated Mar 23, 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.
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.
For example, 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 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. Neo Financial takes the opposite approach: they reward you for staying committed to your goals.
With the Neo Savings account, your money works harder as your balance grows.
Unlock a very competitive 3% interest rate¹ once your combined balance hits $20,000. But even before you reach that milestone, you’ll earn a solid 2.25% right out of the gate. You can even open a joint account to combine balances to earn the higher rate.
With no monthly fees to eat into your earnings and with your deposits eligible for CDIC protection, it’s an account designed to help you reach your next financial milestone faster, not just provide a temporary perk.
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, Wealthsimple Portfolios makes it easy to build a nest egg that can help reduce your reliance on government benefits later on.
Their pre-built portfolios are tailored to your retirement goals, risk tolerance and investment horizon, so whether you’re planning for a comfortable early retirement or steady growth over the long term, there’s a portfolio designed for you.
You can automate your contributions inside an RRSP or TFSA and let Wealthsimple handle the heavy lifting: managing risk, rebalancing your portfolio and reinvesting dividends.
Trusted by more than 3 million Canadians, Wealthsimple manages over $100 billion in assets and provides $1 million in eligible coverage through the CDIC for chequing accounts and CIPF for investments. Plus, as licensed fiduciaries, Wealthsimple's advisors must put your financial interests first.
It’s a simple, low-fee way to stay invested without constantly watching the markets. And when you open your first account and deposit at least $1 within 30 days, you’ll get a $25 bonus.
For a limited time, transfer $25,000 or more into an eligible Wealthsimple account and earn up to a 3% match, plus a chance to win a $3-million home. Offer ends March 31, 202
Visit Wealthsimple via our Apply Now button for up-to-date terms and conditions.
If you have multiple investment and banking accounts, an all-in-one money management tool can really help with making sure nothing slips through the cracks — whether it’s catching a recurring subscription you no longer use or monitoring your progress toward a bigger financial goal.
With YNAB, you can link all your accounts to get a clear, big-picture view of your spending and net worth growth. Its goal tracking feature helps you prioritize both short- and long-term objectives — from saving for a dream vacation to funding a down payment on a home.
Plus, detailed reports on your spending and net worth give you actionable insights, so you always know where your money is going and how close you are to hitting your financial milestones.
The easy-to-use platform allows you to simplify spending decisions and clarify your financial priorities. Plus, you don’t need to add your credit card information to start your free trial today.
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!”
Refinancing your home loan through Loans Canada could help you pay off your mortgage early in one of two ways. The first is to secure a lower interest rate and maintain your current monthly payment with more of it going toward the principal. The second way is to opt for a shorter amortization to accelerate your path to mortgage-free homeownership.
When you refinance to a shorter amortization period, you significantly reduce the total interest paid over the life of your loan. Though your monthly payments may increase, you'll build equity faster and own your home outright years earlier.
Simply add your postal code and answer a few questions and you’ll be connected to a mortgage refinancing specialist with Loans Canada.
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 established a comfortable nest egg, consider diversifying your portfolio with alternative assets like real estate, precious metals and cryptocurrencies in order to keep building your wealth.
With discount brokerages like Questrade, building a diversified portfolio is straightforward. You have access to:
- Stocks
- Bonds
- Precious metals
- Exchange-traded funds (ETFs)
- Options
- Mutual funds
- Guaranteed Investment Certificates (GICs)
- Initial Public Offerings (IPOs)
Plus, you can get $50 cash back when you open a self-directed account with as little as $250.
Life insurance is one another tool for protecting 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 tafe full advantage ofconsistent, long-term growth. Over 30 years, with a realistic 8% average annual return, that investment compounds into an incredible $1,359,398.53.
That’s the power of discipline — and the magic of compound interest.
More money moves to make right now
Homewise
Negotiates with 30+ lenders to get you the best mortgage rate.
Questrade
Get $50 cash back when you open a self-directed account with $250.
Wealthsimple
Earn up to 2.75% interest on your cash, plus get a $25 bonus.
- Earnings for the Neo Savings account, a Neo Cash account, are derived from the interest Neo earns on the funds. Earnings are calculated daily on the total closing balance and paid monthly. Rates are per annum. Minimum combined balance required to earn boosted rates. The minimum combined balance required to qualify and the corresponding rates are subject to change without notice. For more details see this page.
Phil Osagie
Staff Writer
Phil is a writer at Moneywise with a background in public relations, financial communications, and copywriting. Educated in Cambridge, UK, he has vast experience creating content for several blue-chip corporations. He enjoys research, and his favorite quote is, "When prosperity comes, do not waste it.
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