Unless you’re financially inclined, we’re sure that you can agree that managing your money can feel like trying to solve a puzzle. It can be really tough, but thankfully, there are financial experts like Dave Ramsey to help us, a man who has built an entire career helping people figure it out.
Famously, he keeps things simple and practical, helping countless people to ditch their debt and build wealth. Today, we’re here to celebrate his hard work with the following smart financial tips from Ramsey.
Build a Starter Emergency Fund
The first thing Ramsey tells anyone to do when it comes to money is stash away $1,000 as fast as you can. Obviously, this isn’t going to be a long-term safety net, but it’s simply to stop a minor emergency from knocking you off course. For example, flat tires or unexpected vet bills could all easily cost $1,000, so being able to cushion this blow can prevent you from getting into debt to solve an emergency.
Pay Off All Debt Using the Debt Snowball
Nobody likes to juggle tons of debt from all angles, so Ramsey recommends starting to pay off your smallest debt and tick it off the list, permanently. Then, it’s time to move on to the next! It really is that simple, helping progress with debt to feel more achievable.
Build a Fully Funded Emergency Fund
Once your debt’s gone and you have $1,000 put aside, it’s now time to build a real buffer. As a general rule of thumb, Ramsey recommends saving three to six months’ worth of expenses in case life hits you hard, such as through job loss or illness. Trust us – you’ll sleep so much better at night knowing that you’re prepared for the worst!
Invest 15% of Your Income for Retirement
Retirement might seem far off, but it’s not going to fund itself, so Ramsey says once you’ve got your emergency fund and no debt, it’s time to start putting 15% of your income into retirement accounts like a 401(k) or Roth IRA. Don’t be tempted to gamble on stocks; invest with safety and consistency in mind, and the compound interest will do the heavy lifting for you.
Save for Your Kids’ College
It’s a sad fact of life that, here in the U.S., college education is extremely expensive. Considering how anti-debt Ramsey is, he advises that you help your children to avoid it too, so if you set up a 529 plan or an ESA, they’ll be able to avoid falling into crippling educational debt.
Pay Off Your Home Early
A paid-off house means one less bill to worry about, permanently, and it’s easy to see why Ramsey’s not a fan of dragging a mortgage out for 30 years. Therefore, if you can send extra payments each month or chunk down a big amount when you’ve saved up, he claims that you should take that opportunity. Ultimately, you’ll shave off years and tens of thousands in interest, so we’d tend to agree.
Use a Zero-Based Budget
It’s definitely smart to track where your money goes each month, but in addition to this, Ramsey pushes for telling every dollar where to go before the month even begins. A zero-based budget makes sure your income minus expenses equals zero, with every dollar being assigned to a job.
Cut Up Credit Cards
Of course, people who are already financially healthy can make credit cards work well for them, but that’s not a good attitude to start off with. Because of this, Ramsey hates credit cards, claiming that they make it far too easy to spend money you don’t have.
So, if you always end up in debt and never feel fully in control of your finances, cut up your cards to remove the temptation. Then, pay off your balance, and never look back!
Stick to Cash for Daily Spending
Dave Ramsey’s famous “envelope system” involves putting cash in labeled envelopes and stopping the spending as soon as the envelope is empty. It’s a way to physically see how much you’re spending on the previously mentioned “zero-based budget”, making it feel a lot more tangible.
Avoid Leasing Cars
These days, it’s increasingly common for people to lease cars that they can’t afford, a habit that Ramsey prefers to call “fleecing” rather than leasing. Yes, it sounds convenient, but it’s expensive in the long run, as buying a used car in cash avoids all of these unnecessary interest payments.
Don’t Co-Sign Loans
You might see it as noble to co-sign on a loan for a friend or family member, but according to Ramsey, it’s a guaranteed setup for emotional and financial stress. If the other person misses a payment, you’re on the hook, and do you really want that hovering over your financial security?
Give Generously Once You’re Stable
Similar to the last point, Ramsey advises against giving generously, at least until you’re financially stable. He’s actually big on generosity, but only once you’ve built a strong foundation, and that includes being debt-free and ticking off other pieces of advice on this list.
Buy Term Life Insurance, Not Whole
He couldn’t be clearer on this: Ramsey tells us to get term life insurance, not whole or universal. Term is cheaper and does what it needs to, which is to protect your family if something happens to you. That way, the extra money you’d spend on whole life can go toward investments that actually grow instead of lining the pockets of insurance companies.
Keep a Written Financial Plan
Winging it doesn’t cut it when it comes to financial security, so listen to Ramsey’s advice: write your goals down. It doesn’t matter whether your next step is a budget or investment plans – it all needs to live on paper or a spreadsheet. Ultimately, writing it down helps you take it seriously, measure progress, and make changes when life throws you a curve.
Wait Before Making Big Purchases
Everyone knows that feeling of being tempted by a big purchase, but before you act on it, take Ramsey’s advice and give yourself a 24-hour pause before making the decision. This can save you a lot of regret, with such a cool-down period helping you to tell the difference between a want and a need.
Use Sinking Funds for Irregular Costs
Instead of getting caught off guard by Christmas or car repairs, Ramsey suggests setting up small “sinking funds” each month. You slowly save for big expenses in advance, so when they inevitably come around, the money’s ready and waiting. It’s the same idea as an emergency fund, but remember to keep them separate.
Say No to New Loans
You’ve probably guessed by now that even if you’ve seen a loan advertised for “only” 0% financing or a store credit card offer, Ramsey advises against any form of debt. When it comes down to it, his philosophy is simple: if you can’t afford it outright, you’re not ready to buy it.
Teach Your Kids About Money
Sadly, so many kids enter the “real world” as adolescents without any form of financial education, which is a real shame. It’s not their fault either, according to Ramsey – it’s their parents’.
Ultimately, kids don’t magically learn smart money habits; rather, they copy what they see. So, he suggests giving them small jobs and teaching them to budget, save, and give, giving them real-life experience that they will never forget.
Avoid Get-Rich-Quick Schemes
It should go without saying that “get-rich-quick” schemes are always a scam, yet people fall for them every day. To illustrate why they’re terrible ideas, Ramsey reminds us of the importance of steady progress. He’s seen way too many people fall for flashy “investments” that promise massive returns but end up being scams. Meanwhile, real wealth, in his view, comes from consistency, not chasing shortcuts.
Stay Gazelle Intense
Last but not least, this phrase pops up a lot in Ramsey’s world. Essentially, it means going all-in when you’re attacking debt, like a gazelle running from a cheetah. Cancel subscriptions, sell whatever you need to, and work extra hours, because this situation is temporary. Eventually, intense focus will change your financial situation quicker than you think, and once you’re free, the pace can slow down.
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Parts of this article were developed using AI assistance.