All we thrive on is happiness in life. This happiness has many forms and can be found in many alternatives. But, do you know one simple hard fact here? Every form of happiness is more or less related to money. And Dave Ramsey money tips will help you to get that!
Money cannot buy happiness, we agree! But this can act as a tool to guide and motivate you to reach or achieve your major goals.
So, Anyone here, before thriving for happiness, needs to hunt the real meaning behind money and life.
Which we can further term as ‘Money tips’. For this explanation, here comes the savior Dave Ramsey for you. Let’s discuss the 15 important money tips by Dave Ramsey.
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Who Is Dave Ramsey?
Dave Ramsey is a well-known finance guru. In no time, he had become America’s trusted voice on money and business.
Where comes the knowledge; there comes the experience, whether it can be good or bad. Here is his case, he had a very bad experience of losing a $4 million real estate portfolio within 4 years of span after acquiring it at the age of 30.
He has 2 cases after this, Understanding the situations and gaining control over them or reacting either way by getting low and quitting.
Dave Ramsey chooses the former by gaining wisdom with understanding the situations. From then on, he has constantly been sharing money management tips. He is even a popular national radio personality.
What Does Dave Ramsey Say?
“You must gain control over money or the lack of it will forever control you”– Dave.
Way back in 1992, Dave founded The Lampo Group to provide financial counseling from his living room. Now this company has grown vast and helping millions of people to better understand the principles of money management.
This company re-branded as Ramsey Solutions in 2014 by forming a multi-million dollar company. Dave defines his success not by growth in his company but by the number of lives changed through his advice.
Dave says there are a few baby steps(Money hacks)one needs to follow to understand and manage your finance. By following them, you can not only clear off your debts but can also attain financial freedom, which can be one of the forms of happiness.
Dave Ramsey 7 Baby Steps
When you are thriving to achieve something in your life, a very small progressive effort you make in the beginning is considered a baby step.
By following 7 baby steps shared by Dave Ramsey, you can learn how to save for emergencies, how to pay off your whole debt, and how to build wealth.
If these small baby steps are helping this way, what’s stopping you from learning them? follow the article to know more about them.
Baby Step 1: Save $1000 On Emergency Fund
This is one of the major things you need to imbibe in your lifestyle. Saving for a future cause is not our cup of tea from the beginning, But making it a habit can turn things another way good.
Here in this 1st baby step, you need to save $1000 as fast as you can. An emergency is what we can’t predict prior, for this, we need to prepare ourselves from the beginning.
As this situation has the potential to get you as low as possible. You should control it before it starts controlling you.
Baby Step 2: Pay Off All Debts Using Snowball Technique
Do you know debt can simultaneously affect your mental and physical condition? If this can show such an impact, why do you still hold debt? Clear them all! says Dave.
Wait! there is something mentioned as Snowball Technique; what is it? This is nothing but consider a snowball rolling; what will it do? Initially, cover small things and then change form to cover big things.
Here, in the same way, you need to pay your debt by clearing off small and gaining momentum to clear off the largest debt. Will this method work is the main question here.
Yes! “The problem with your money is not your math. It’s the person in the mirror,” says Dave. He also mentioned that winning the money is 80% related to behavior, and only 20 percent is the head knowledge. Give this method a try.
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Baby Step 3: Save 3-6 Months Of Expenses In A Fully Funded Emergency Fund
This is the continuation of step 2 and the improvisation of step 1. By following the above-mentioned step 2, i.e, the Debt snowball technique, you can clear off most of your debts.
What do most people do after clearing their debts? They use the same amount for many purposes by creating new expenses. Never do this! says Dave in his 3rd baby step.
Take the same amount to fill your debts and build the full amount as an emergency fund, and this should cover at least 3-6 months of your expenses.
As we know, a simple emergency fund can protect us from bigger surprises like health, recession, and also debt reconstruction.
Baby Step 4: Invest 15 Percent Of Your Household Income In Retirement
Save for retirement this early? Yes! says Dave in his 4th baby step. Early is the right time to get serious about retirement plans and savings.
Spare 15 percent of your gross household income and invest it into your best retirement plan. Choosing the best employer retirement plan is the key factor here.
Either you invest in 401(k) or any other retirement plan, but the rest of the amount you must spare for your family members’ IRA account without fail.
Baby Step 5: Save For Your Children’s College Fund
This is one of the important money hacks shared by Dave. This seems so easy but can turn difficult without proper planning.
Student loan debt statistics for 2019 show around 45 million borrowers who have collectively owed about $1.5 trillion. This shows how serious the student loan debt crisis is heading.
Saving, as soon as you realize it, is one of the best alternatives to avoid this crisis. A 529 college savings plan or any ESA(Education Savings Account) is one of the best plans to start investing in, shares Dave in this 5th baby step.
Baby Step 6: Pay Off Your Home Early
Depending on the nature of the debt burden you possess, you might have skipped the house loan in baby step 2. Now, this is the time to prioritize clearing off your house loan.
You are not debt-free until and unless you clear your house mortgage. This cannot only save you from heavy interest rates but can also let you explore more options to invest or build your financial state.
Baby Step 7: Build Wealth And Give
Here is the final and important baby step. What will people with no debt do? Anything they want! says Dave.
This is called Financial Freedom. This thing can not only let you live a stress-less life but can also help you to build wealth, passions, and control over time.
One of the best phases is where everyone wants to be placed. Giving after your needs can build you into a better personality.
More Money Tips By Dave Ramsey
Dave shares his message and advice through a variety of mediums and products. He is the main creator of Financial Peace University.
Here this program constantly helps people to learn new behaviors around money tips. Here people tend to dump their debt queries and learn tips to take control of their money.
As Dave shares a wide range of financial tips, We cannot sum them up all at once. But we tried our best to cover the best money tips, learn and imbibe them to build knowledge and accountability over money.
1. Zero Budgeting Technique
This is also known as the ‘Zero-Based Budgeting Technique’. This is a technique in which all the expenses must start from zero per every new cycle.
Confused? Okay, let us give you a brief explanation. Suppose you are an ordinary employee who earns around $3000 per month, and after all your expenses, you were left at approx $500.
What would you do? Either you join the rest in your savings or will carry it forward for the next month. This is the case only with traditional budgeting.
In traditional budgeting, you add the previous savings and manage the whole new budget. But in the zero budgeting technique, you should reset your savings and must consider only what you earn in this cycle.
In any case, you must not touch your previous savings and only adjust with what you earn this month i.e, $3000.
The zero budget technique not only improves the efficiency of execution but can also help in re-evaluating every penny you spend.
Here one must evaluate and create a budget for every task one perform periodically. You need to stop sparing the same amount from the past analysis; this can help in the reduction of redundant activities.
Pros Of Zero Budgeting Technique
- It is a bit time-consuming technique but surely works.
- Your expense ratio will progressively come down.
- Every penny you spend will be under proper supervision.
- Make you aligned with financial discipline in the long run.
2. Financial Literacy
According to the S&P Global FinLit Survey, statistics on financial literacy show around 3.5 billion adults across the world lack an understanding of basic financial concepts.
The main motto behind teaching financial literacy is to assist people mainly to develop a stronger understanding of basic financial concepts simply in the way that they can handle their money better, says Dave.
This allows people to make wise decisions when it comes to spending. Three important aspects you must take care of here are Budgeting, Emergency fund, and debt.
Just question yourself whether you are financially literate or not. If not, start following 7 baby steps right away. Quick actions with wise decisions can make you stand out from the rest.
3. Stop Buying New Vehicles
If you are holding any debts, avoid buying new vehicles, This can be an additional burden on you. He has also shared alternative tips if you really need to pick a new car this year.
The first step is to figure out your car budget; narrowing down your vehicle choices is the second immediate step you need to follow. Reviewing and researching the vehicle you are picking can help you more than you expect.
The next step is to fill and cross-check the new car insurance policy terms. Test drive and car inspections are mandatory to check to have an idea of performance and comfort.
Wait for the best time to grab the best offers and final things never hesitate to negotiate. You need to pre-plan way before buying a vehicle to avoid being in a debt trap.
4. Pay In Real Cash
Thanks to the digital era, we are racing with the latest trends and using different types of payment methods like credit cards, debit cards, prepaid cards, online banking, e-wallets, direct carrier billing, crypto, etc.
This mainly added comfort to our life by not letting us carry money by hand. Is this really a good thing to pay this way? No! not always, says Dave.
When you are using the electronic medium to transfer funds, it is all about the number of games. This can urge you to spend more than what you have intended or planned.
Paying in real cash can help you to stick to your budget, and while spending this way, you can get extra time to think about removing the things of no use. All your goal here is to curb impulsive spending to the core.
5. Payoff Your Cards On Time
Heavy interest rates can slap you hard if you are not paying your cards on time. Holding credit cards can give you additional rewards and fill the void when you lack money.
But do you know they have the equal potential to drag you to a crisis if you cannot manage them?
So, be on time to pay off your cards. This can let you build a better credit score and fewer interest rates. You can also avoid a late fee here.
6. Don’t Turn Down Free Money
Never ever turn down free money, especially when it comes to retirement plans, says Dave. More than 80 percent of workers have access to a 401(k) or any other retirement plan.
But were they all participating in this, is the question? no, most of the workers are missing this boat on that free money.
If you are among one, never ever choose to miss this option. Try to invest at least a total of 15 percent of your income into 401(k) or any other IRA.
7. Learn To Invest
Investing is one of the best money hacks to maintain your financial discipline. Investment is what most of us likely do, But is our stake on the right path?
To assist this, Dave is sharing tips to invest in 5 simple but effective steps here.
- Make room in your budget to invest.
- Start investing in 401(k) or any other best retirement plan.
- Contribute to a Roth IRA.
- Diversify your investment into the best mutual funds.
- Work with investment professionals.
When to start investing? Dave suggests you save at least 3-6 months of expenses as emergency funds, and also, you need to be debt-free before investing.
As we all know, income is an important wealth-building tool; as long as we are piled up with debt repayments, no progress can be obtained.
8. Learn To Stay Affordable
Expenditure is the key element to maintaining a family balance sheet. But the recent trend has shown there has been a significant rise of 25 percent in household expenditure.
Home expenditures take the maximum potential of our income. So you need to take care of it by staying modest life this could be one of the best money hacks.
Living in a lavish house with a middle-income scale can eventually drag you into the debt trap and can create an imbalance in your financial balance sheet. Keep your life simple and comfortable.
Dave Ramsey Money Tips – Conclusion
“If you will live like no one else, later you can live like no one else.”
Here are a few best money hacks shared by Dave Ramsey throughout his works. Dave constantly says change is painful. Few people have the courage to seek out change. Most people won’t actually change until the pain of where they are exceeds the pain of change.
Yes! Damn true this is. For your own good and progress, try to be accountable and answerable to yourself. You must build the courage to accept the wrong you have done all the way along.
Be the real change and try to incur these money hacks into your lifestyle to find a change in your life.
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Hello there, I’m Siva Mahesh, an MBA Finance post-graduate and a Remote Career & Personal Finance blogger for 5+ years. Over the years, my work has been featured on US News, Entrepreneur, MSN, Yahoo Finance, GoBankingRates, EverQuote, Legal Zoom, The Simple Dollar, Databox, Business.com, Business News Daily, Venngage, Score.org, and more. My primary mission is to help our readers maximize their earning potential with legitimate online business ideas, side hustles, and passive income ideas we publish on Dreamshala. Currently, more than 100,000 readers from all around the world visit this blog every month and learn new ways to improve their finances.