Dave Ramsey is one of the country’s most famous personal finance gurus, a famous radio host, successful businessman and bestselling author. He’s also a self-made man who started with nothing and built a seven-figure net worth and annual income of $250,000 at age 26.
See the list: The best banks in GOBankingRates in 2023
More: With a recession looming, make these 3 retreat moves to stay on track
Now in his early 60s, he has spent many years between becoming even richer by helping other people build their own wealth. Here’s a look at some of the best wisdom and wisest advice Dave Ramsey has imparted along the way to his legions of loyal followers.
Eliminate debt before investing
Rule #1 of Ramsey’s investment philosophy is don’t invest a dime — at least not until you’ve eliminated all of your toxic debt, which he views as pretty much anything but your mortgage. Ramsey insists that you can’t build wealth when your primary wealth-building tool — your income — is tied to monthly finance charges.
Take part in our survey: what are your financial priorities in 2023?
Harness the power of the snowball method
Debt elimination is easy to talk about but hard to do, which is why Ramsey has been a longtime proponent of the so-called snowball method. This debt reduction strategy forces you to tackle your debts from smallest to largest, allowing you to get quick wins that close overdue accounts while building your confidence along the way. Once it’s time to tackle your really scary debts, you’ll have momentum on your side – plus, you’ll be able to focus solely on them now that your little debts aren’t nipping at your heels anymore.
Build an emergency fund before building your wealth
The first half of Ramsey’s main investment rule is to get out of debt. The second is to fully fund your emergency savings before trying to grow your money in the market. Debt elimination puts you on a solid financial footing; but, without enough money in the bank to cover three to six months of expenses, you are only one emergency away from having to dip into your retirement account.
Give 15% of every paycheck to your future self
Once you’re debt-free and have enough savings to survive at least a quarter of a year, Ramsey says the most important thing you can do with your salary is save 15% of it. – each pay period – in a tax-advantaged account. The best option is usually a 401(k) because every dollar in an employer match is free money, and free money is always a good thing. But if that’s not an option, a pre-tax IRA or an after-tax Roth IRA are the best things to do.
Keeping up with neighbors is an unwinnable game – don’t play
Sometimes the most important thing is not what you do with your money, but what you don’t do.
In “The Total Money Makeover: A Proven Plan for Financial Fitness,” Ramsey wrote, “We buy things we don’t need with money we don’t need to impress people we don’t. don’t like.
In today’s world, social media influencers are literally betting on your willingness to part with your money to show you off to people you don’t even know, let alone like. Frivolous spending is the bane of wealth creation; remember that every dollar you carry is a dollar you don’t save.
Use money-saving technology
Modern society has access to incredible gadgets and software applications that would have been unimaginable just a generation ago. Many of them can save you money – and Ramsey wants you to take advantage of all of them.
This includes smart thermostats to lower utility bills, banking apps that let you automate savings, smart shopping and coupon apps, budgeting apps and more.
Or, reverse the trend and go low-tech
Technology may offer handy tools for saving and growing your money, but Ramsey has plenty of followers who have been building wealth the old-fashioned way. On his blog, Ramsey profiled a student named Kay N. who said, “Go old school and balance your checking account. What is essential! Balance your checking account so you know where you stand, then start with a basic budget. It’s about taking baby steps.
Put what you already know into practice
Acquiring knowledge is always a noble endeavor – unless it leads to paralysis through analysis. Remember that every hour you spend learning new ways to manage and grow your money is an hour you don’t spend budgeting, creating a spending plan, and investing for your future. Of course, it would be wise to learn more as you go, but start now with what you already know.
In “The Total Money Makeover (Classic Edition): A Proven Plan for Financial Fitness,” Ramsey writes, “Making money is 80% behavior and 20% mind knowledge. not the problem; doing it is. Most of us know what to do, but we just don’t do it. If I can control the guy in the mirror, I can be skinny and rich.
Never walk into a grocery store without a map
On his blog, Ramsey cites USDA research that shows even the average thrifty family of four spends nearly $1,000 a month on groceries.
But you can reduce that number by eliminating what Ramsey calls “budget busters” — small, unplanned impulse purchases that add up to big, badly spent dollars. His solution is to only buy the ingredients for a pre-determined meal plan – and never deviate from the plan no matter what. He also recommends ordering online and shopping to avoid temptation – or at least leaving the kids at home when you go to the supermarket.
Know what you don’t know and work with a pro
According to his own blog, Ramsey still works with a professional advisor to help guide his investments and overall financial strategy. No matter how up to date you are on news and trends, a good money pro will have better insight and perspective based on their own experience and what you tell them about your goals, strategy and your situation.
More from GOBankingRates
This article originally appeared on GOBankingRates.com: 10 awesome things Dave Ramsey says to do with your money