Statistics show that American’s total credit card debt is estimated to be a whopping $905 billion dollars. The average household carries a balance of $15,654 in credit card debt.

With so much debt accumulating, it can seem impossible for one to be financially free in less than five years but Dave Ramsey gives seven baby steps to achieve financial freedom with his Total Money Makeover. At age 26, Dave Ramsey’s salary was over $250,000 a year. In a little over two and a half years later, Dave and his wife lost everything due to overwhelming debt.

After losing it all, Dave decided to become educated on how money really works, how he could take control of his, and how he could gain confidence in handling it. At the end of his journey, Dave realized that he was the source of his money troubles and that he first had to develop his character in order to change how he spent his money.

In 1992, Dave formed Ramsey Solutions to help other people realize what he had realized so they too could experience financial freedom. Now, after writing six New York Times best-selling books, he has freed over 5 million people from their financial bondage with his Total Money Makeover, which includes his seven baby steps to financial peace.

1. Save $1,000 in an emergency fund

The emergency fund serves as a safety net for life’s unexpected events such as a car breaking down. This is only a beginner emergency fund and you will add more money later.

2. Pay off debt

List all of your debts from smallest to largest excluding mortgages and student loans. Begin to pay off those debts beginning with the smallest amount. Throw as much money as possible to the smallest amount while paying the minimum amounts on all other debts. Once you have paid off the smallest amount move on to the next smallest amount applying all money towards that bill.

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3. Build your emergency fund

Now it is time to build your full emergency fund. Dave Ramsey recommends saving 3-6 months of living expenses for emergencies like an unexpected layoff.

4. Invest 15% toward retirement

Most Americans retire in their 60s and have little to no money saved up to enjoy the rest of their lives. By investing 15% toward your retirement fund, you are securing your future so that when you’re done working you won’t have to worry about money.

5. Save money toward your children’s college fund

Now that you’re out of debt, have an emergency fund, and have money saved toward retirement it is now time to invest in your