Dave Ramsey is a financial expert who has been helping people with their debt for decades. He’s the author of several books, including Financial Peace and The Total Money Makeover: A Proven Plan for Financial Fitness.
Dave Ramsey Money Tips
Ramsey’s advice is simple — spend less than you earn, invest 15 percent of your income, and avoid credit cards like the plague.
Here are some of his best money tips:
- Pay off your smallest debts first.
- Start an emergency fund with three to six months worth of expenses.
- Get out of debt as quickly as possible by using the debt snowball method.
- Save up for emergencies by putting money into a high-yield savings account in case something unexpected happens that could put a dent in your finances (like car repairs).
The best way to get a handle on your finances is to make a budget. But it’s not easy to do, and you may not know where to start.
Here are some money tips from financial guru Dave Ramsey:
- Know where your money is going.
- Start with the end in mind.
- Make a budget and stick to it for one month before evaluating progress.
- Save 10% of every paycheck into a separate account earmarked for emergencies and other surprises (like car repairs or medical bills). This will keep you out of debt while building an emergency fund that works as a cushion against unexpected expenses. The amount should be enough so that if you lost your job tomorrow, you could cover your living expenses for three months without having to touch any other savings or investments (and without having to borrow money).
- Pay off high-interest debt first — credit card balances, lines of credit, personal loans — as soon as possible (within six months). Once that’s done, start focusing on paying down other debts like auto loans, mortgages and student loans by making extra payments each month or increasing monthly payments from whatever they are now.
The “Cash Flow” concept is the basis of everything Dave Ramsey teaches. Cash flow is the amount of money that is coming in, minus the amount of money going out. You need to have positive cash flow for your financial life to work.
The best way to get positive cash flow is by paying off your debt. Dave Ramsey teaches that you should pay off all debt except your house (if you have one). This will free up tons of money that you can use for other things like investing or paying off student loans.
Once you have paid off all of your debt, start building an emergency fund so you aren’t living paycheck-to-paycheck and can avoid getting into more debt!
- Start saving for retirement early
- Pay off your house in 15 years or less
- Make a budget and stick to it
- Cut the fat from your budget
- Keep separate checking accounts for each family member
- Don’t buy new things until you pay off your debt and save up an emergency fund (3-6 months’ worth of expenses)
- Automate your savings so that money is taken out before you even see it
- Take a pay cut to save money. It’s not easy to take less money than you’re worth, but it can be the best decision you ever made. The first step to getting out of debt is to start spending less than you make. When you find yourself in a position where your income is higher than your expenses, don’t spend the extra money — save it!
- Live below your means. If you have a $100,000 salary but can only afford to spend $75,000 on your lifestyle, then make sure that’s what you do. In other words: Pay yourself first by putting some money in savings before paying any other bills or spending anything else on yourself or your family.
- Don’t carry credit card balances from month-to-month. The average American household has $15,654 in credit card debt and pays an average interest rate of 14 percent on that debt — which is just crazy! Pay off all of your credit cards each month so that you don’t end up paying exorbitant interest rates on things like groceries and gas for your car (which are two things we all need!).
