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Phil Osagie
Updated Jan 15, 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. The best way to do figure this out is to create a detailed budget.
That’s where Monarch Money's expense tracking system comes in. The all-in-one money app seamlessly connects all your accounts in one place, giving you a clear view of where you're overspending. It also helps you monitor your expenses and payments in real time.
Whether you're looking to save, buy a car, pay off debt, or simply control your spending, Monarch Money brings everything together to help you manage your finances effectively. For a limited time, you can get 50% off your first year with the code WISE50.
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 Spring Financial.
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 apply in just three minutes and get anywhere between $500 to $35,000. To qualify, you just need a valid government ID and some form of income.
Just fill in a few quick details about yourself and choose your loan amount.
A Spring Financial associate will contact you to review your application and guide you through the next steps. Once you’re approved, Spring Financial will e-transfer the funds directly into your bank account.
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 your debt is only a couple of thousand dollars and you want to clear it as soon as possible, consider looking into Mogo.
You can get a line of credit of up to $3,500, and the online pre-approval takes only 3 minutes. If you fill out their pre-approval form, you have no obligation to sign up for a loan, and it won't hurt your credit score.
The entire process — from pre-approval to funding — is completed online in minutes, so there’s no waiting days to be matched with a lender.
You can easily chat with specialists on the app, and you'll get alerts to remind you of your payments.
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.
Consider parking this 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 4: Invest 15% of your household income in 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). Consider opening a discount brokerage account, like CIBC Investors’ Edge, so you can enjoy low commissions on trades and no or minimal account maintenance charges, depending on the size of your portfolio.
Pay no account fees for RRSPs with a balance of $25,000 or more and TFSAs with a balance of $10,000 or more. For non-registered accounts, the platform waives maintenance fees if the account balance exceeds $10,000.
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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 open one through platforms like CIBC Investors’ Edge, which makes it easy for you to set up regular contributions.
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.
CIBC Investor's Edge provides you with powerful tools to conduct sophisticated investment research to grow your portfolio. But if you're just starting out in your investment journey, the platform also gives you access to free learning guides to help you invest with confidence.
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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 CIBC Investor’s Edge, you have the opportunity to invest in precious metals like gold and silver without the worry of storing and protecting actual bars of them — or managing their mines.
CIBC Investor’s Edge offers these investments in the form of gold and silver e-certificates that you can use to top up your savings.
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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.
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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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