Read this post to learn about the most popular Dave Ramsey money tips that will help you build a financially secure life for your family.
Dave Ramsey is one of the most famous and well-trusted financial advisors. Not only people from the United States but from across the world follow him for his practical financial advice.
At just the age of 26, he became a millionaire with a $4 million in real estate and making a quarter of a million dollars in a year. He started several businesses at such a young age to build that kind of wealth. But unfortunately, he filed for bankruptcy a few years later.
He didn’t give up and came back even stronger, building a bigger empire using his learning from his previous financial mistakes and biblical-based principles. He is often seen quoting Proverbs from Bibles to teach people the best money-management practices.
His radio program “The Dave Ramsey Show” and the book “The Total Money Makeover” are among the top financial resources in the United States. He has been teaching millions of people about his best money tips to improve their financial situation through them.
In this post, you can find 11 of the best Dave Ramsey money tips that will help you take control of your finances and build the best financial practices for life.
1. Use a Zero-Based Budgeting System:
Budgeting is the first and foremost step to your financial overhaul.
A budget provides you a plan on how you are going to spend your money during the month.
The first Dave Ramsey money tip is to create a zero-based budget where every dollar you earn is assigned to an expense.
Here, an expense doesn’t necessarily mean spending but it also includes the money set aside for savings.
In a nutshell, with zero-based budgeting, you should have a zero dollar amount in your bank account at the end of the month after your expenses and savings and each month you start afresh.
2. Use the Cash Envelope System:
Dave Ramsey recommends using cash for all your expenses. It is harder to spend hard cash than swiping your card. Also, unlike credit cards, when paying cash you spend only the money that’s available with you.
Also, Dave Ramsey money tips recommend using a cash envelope system where you maintain different cash envelopes for each category of expense like groceries, fuel, dining out, etc.
This helps you to keep a better track of your expenses and avoid any kind of overspending.
3. Build an Emergency Fund:
Not having enough money in your bank account can get you exposed to the worst of financial vulnerability.
That’s why one of the most important Dave Ramsey’s money tips is to build an emergency fund for such situations.
He recommends doing it in two steps. First, he insists on building a $1,000 emergency fund if you have a debt. This should be sufficient to cover your everyday expenses during the unexpected events of life.
Then, once you have paid off all your debts, you need to build a bigger emergency fund. This fund should have enough money to cover at least 6-months worth of your expenses in case of an emergency like job loss, medical condition, etc.
Also, he recommends parking your emergency fund money somewhere where they are easily accessible. It could be simply a checking account or a money market account.
4. Pay off your Debt:
If you have a couple of loans or a mortgage, that takes away a considerable sum of money out of your monthly income and leaving very little for the savings.
Dave Ramsey recommends the debt snowball method to pay off your debt. He insists on paying off your debts in order of smallest to largest.
It helps you knock out one debt after another without getting overwhelmed. Once you pay off one, you move to the next smallest one until you are debt-free completely.
This eventually helps in freeing up your income that can be redirected towards your savings goal.
5. Automate your Savings:
Pay yourself first before you pay for anything else. And you are paying yourself by saving for your future.
Set up an automatic transfer from your checking account to a savings account and other investment accounts. Also, it would be best if you can set up to transfer 10% of your salary to a savings account on the first day itself.
If you plan to transfer manually at the end of the month, you might spend the money lying in your bank account for savings on something else.
Hence, automating your savings helps you build wealth without any challenges.
6. Let go of all Automatic Subscriptions and Memberships:
There is a huge possibility that you have multiple online subscriptions like Netflix, Amazon Prime, Hulu and so on and you are not even using them all. Also, they might be on auto-renew and the money is being deducted from your account automatically.
So, now is the time to evaluate all your subscriptions and cancel all that you are not using currently or don’t use on a regular basis.
Also, remove them from auto-renew so that you can review them each month and see if you have room for them on your monthly budget or not.
7. Declutter and Sell Things you don’t Use:
Have you ever decluttered your house and found so much stuff that you haven’t used in ages.
Clean out every corner of your house and decide what you actually need and what you don’t. Then, make some money out by selling whatever extra stuff you have on Craigslist, Facebook, or a garage sale.
It’s all about making money out of your junk and then using it to pay off your debt.
8. Unsubscribe from all Promotional Emails:
Email marketing is really powerful and can seriously lure you into buying stuff that you don’t actually need.
It’s the job of the email marketers is to tempt the subscribers through flash sales and high-value coupons to buy their products.
So, if you are someone who can’t avoid the shiny object syndrome, then you should unsubscribe all the promotional emails from retailers.
9. Don’t Buy a New Car:
There are many reasons why Dave Ramsey recommends buying a used car rather than a new one. One of the major reasons is that the value of a new car depreciates by a considerable amount as soon as it is out of the showroom.
It doesn’t mean that you have to buy a really old outdated car. But, he recommends buying a year or two-year-old car that comes with almost the same features as a new car.
Apart from value depreciation, you also save money on car insurance and registration fee with a used card.
10. Buy Generic Brands:
One of the ways you can save a good amount of money is to buy generic-brands than the name-brands.
If you notice generic brands have the same ingredients as the name brands and they may have been manufactured at the same place.
If you don’t want to switch to generic entirely, you can start with a few items like milk, juices, spices, flour, sugar and produce. This way you can test and decide what you like and what you don’t.
Just test it out for a month and you will definitely see noticeable savings on your budget.
11. Build Good Credit vs Bad Credit:
Dave Ramsey stresses on building good credit.
What does that mean?
He refers to “mortgage” as a good credit since you are putting the debt money to work and investing in an asset that will grow in the long run.
Apart from this, he considers everything a bad debt since you will lose your money in the long run. For example, if you decide to take a car loan, you are investing in a depreciating asset.
The above-mentioned Dave Ramsey money tips are practical and easy to follow. They help you get started and guide you in creating a financially secure future for you and your family.
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