I came across a speech/sermon by Dave Ramsey on Youtube about being intentional with money. His “giving every dollar a job to do” catchphrase is very attractive. I borrowed and read his book The Total Money Makeover to get more details.
I was looking for ways to better manage my finances as I prepare to go back to work after nearly a year of rest. I thought I’ll use his methodology to guide me on my financial journey.
This post documents my attempt at following Dave Ramsey’s Total Money Makeover as a Singaporean.
Quick Links
Financial Goal
My goal is to be financially free to do whatever I want. For me, this means my passive income surpasses my expenses. I would like to achieve this by 2026. It is a tight deadline.
I’ve started to rethink my initial financial goal. From information I can gather, it does not seem appropriate for me to aim to create passive income from my investments because I should be building my retirement funds, not trying to generate income from them. Therefore, I decided to lengthen my investment horizon to fit my age group.
As for passive income, I will actively look at ways to create passive income apart from using investments.
What is the Dave Ramsey’s 7 Baby Steps?

Which Step am I on?
I currently have cash savings of more than 3 months of my take home pay that act as my emergency fund. I also do not have any debt except my home mortgage. This means that Baby Step 1 to 3 are already done. I don’t have any children, so I do not have to do Baby Step 5 Save for college funds.
So, I am currently on Baby Step 4 and 6 simultaneously.
Baby Step 4 – Invest 15% of Household Income in Retirement
Dave Ramsey advocates investing 15% of household income in retirement. Like many, my first question was “Why 15%”. He offered 2 reasons:
- It is an industry standard.
- Leave some money for the kids’ college fund and the home mortgage.
He said that 15% is actually insufficient for retirement, so if I do not have kids or a mortgage, more should go to retirement.
There are differences in the retirement programmes between Singapore and United States so, I need to work out how they affect my Total Money Makeover plan.
1. The Central Provident Fund (CPF)
CPF is similar to the 401K in the US. I contribute 20% of my income to CPF and my employer contributes 17%. A total of 37%. So, it seems like I am already investing more than 15% of my income to retirement. But that is not quite true because CPF has other uses.
I have 3 accounts in CPF. The 37% contribution is split between the 3 accounts:
- Ordinary account (OA) for house purchases and funding education
- Special Account (SA) for retirement
- Medisave (MA) for healthcare
After the split, I’m contributing less than 15% towards retirement in my SA account. On top of that, the interest rate for SA is 4% which is lower than the 10% assumed by Dave Ramsey.
2. Supplementary Retirement Scheme (SRS)
The SRS is a voluntary savings scheme towards retirement that comes with some tax relief. The maximum contribution of $15,300 is an absolute amount. Tax relief is great, but the scheme comes with some limitations.
Firstly, it is illiquid. Withdrawal before the statutory retirement age attract a 5% penalty and withdrawal amount is 100% taxable.
Secondly, the types of instruments I can invest SRS in are limited and again, does not hit the 10% rate of return assumed by Dave Ramsey.
It took a while, but I managed to work out my SRS portfolio strategy.
3. cash retirement fund
I think I need to supplement my retirement besides CPF and SRS. I will invest 15% of my take home income as instructed in Ramsey’s Total Money Makeover to an additional cash retirement fund.
The question now is figuring out a retirement portfolio strategy that suits me. I’m looking for wealth accumulation with regular and automatic contributions.
Baby Step 6 – Pay off your home early
I have a private home mortgage with an interest rate that is rising fast. I am planning to sell it off a year or two later. I will then try to purchase a smaller place without borrowing money. Then I will be debt-free and have completed Baby Step 6.
I will do a separate financial plan for my housing need and see how it impacts my budget.
Is the Singapore Government Reading Dave Ramsey?
As I learnt more about the Dave Ramsey’s principles, I am amused how much the Singapore Government’s policies mirror his Baby Steps.
- The OA acts like forced savings for Baby Step 5 and 6 although Dave Ramsey does not like nanny governments. I’m used to it so that’s okay.
- The MA resembles the Health Savings Account (HSA)
- The SA and SRS are like the 401K
Reading List
Ramsey, D. (2013). The total money makeover: A proven plan for financial fitness. Nelson Books, an imprint of Thomas Nelson. [ Affiliate link] – The Total Money Makeover outlines the 7 steps in the plan and provide key information on each step.
Ramsey D. (1998). The financial peace planner : a step-by-step guide to restoring your family’s financial health. Penguin Books. [Affiliate link] – The Financial peace planner offers more detailed discussion and rationale behind the Baby Steps and their sequence.
Ramsey Solutions. (2022, October 4). How to win with money in 7 baby steps. Ramsey Solutions. Retrieved January 4, 2023, from https://www.ramseysolutions.com/budgeting/how-to-win-with-money-in-7-easy-baby-steps
Ramsey Solutions. (2022, October 20). How to build wealth at any age. Ramsey Solutions. Retrieved January 4, 2023, from https://www.ramseysolutions.com/retirement/how-to-build-wealth
Ramsey Solutions. (2022, October 20). How do I save for retirement, college, and pay off the mortgage at the same time? Ramsey Solutions. Retrieved January 4, 2023, from https://www.ramseysolutions.com/retirement/retirement-college-mortgage
We have come to the end of this post. If you have found it useful, let me know. It is a form of encouragement.
Let me know what you think