When he was just 26, Dave Ramsey owned a real estate company called Ramsey Investments, Inc. It was worth more than $4 million. He made most of the money by borrowing money in order to scoop up new properties and eventually he was forced to file for bankruptcy due to his risky spending and borrowing practices. He vowed to never be a victim of mindlessly borrowing money again and, in 1991, Ramsey launched The Lambo Group, Inc., a company devoted to counseling people on debt, the ways they spend their money and other financial issues. Soon after, he launched The Dave Ramsey Show, which is still on the radio today. Ramsey has both a syndicated radio show and a TV show on Fox Business Network that are devoted entirely to helping people with their financial problems. He’s commented on everything from the subprime mortgage problem that has devastated the American economy to the way President Barack Obama will be judged as President due to his spending habits.
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Dave Ramsey reveals how his advice works
Still wondering how Dave Ramsey’s financial advice works? This video gives more insight into his methods for reducing debt, saving money and, ultimately, becoming wealthy.
The 20 Best Pieces of Financial Advice From Dave Ramsey
“I’m not against people having new cars. I’m against them having you. We spend a tremendous amount [of money] impressing somebody at the stoplight who we’ll never meet. It makes you broke and it keeps you broke.”
Much of Dave Ramsey’s financial advice revolves around the fact that, from a very young age, Americans want things more than they actually need them. They want a bigger house, a faster car, a larger TV and a cell phone that can do 100 things more than their current one does. In other words, a culture has been developed that requires most people to do everything they can to enrich their lives with material things, no matter what the cost is. What Ramsey says here is that there is a very low survival rate with the people who are constantly trying to keep up and buy new things. They just end up borrowing money and ruining their credit.
“For a period of time, you can win financially and later buy whatever you want.”
As you listen to Ramsey’s advice, one thing he stresses is attacking any debt you currently have and do it quickly. For a short period of time, he asks consumers to do nothing but throw money at debt and watch the debt disappear. Don’t save money, don’t spend money and, most importantly, don’t waste money. Rather, use your money to pay down your debt. By taking even just a couple of months out of your life to dedicate yourself to the task, you can make a big difference later.
Dave Ramsey Explains His “Debt Snowball” Technique
Click on this video for more information on the very popular “debt snowball technique.” You’ll get a better sense of the intensity and aggression Ramsey asks consumers to use when they attack their debt.
“Debt has become a part of who we are. It’s become that spoiled child in the grocery store with their lip stuck out: ‘I want it. I want it. I deserve it because I breathe air.’ And, well, that’s an uphill climb in our culture now, to go against that and say, ‘Hey, let’s be grownups here. Let’s be mature, learn to delay pleasure, save up and pay for things.’”
At some point, Americans need to learn that they don’t need everything in their lives to be perfect in order to be happy. More importantly, they need to learn about patience when it comes to buying material goods. One thing Ramsey stresses often is that people need to try to buy more things using cash because when you have cash in hand, you’re not usually borrowing money or using credit in order to make a purchase.
“Consumers have got to wake up and just say no.”
A great shirt you’ve wanted for months now is finally on sale, your local car dealership is closing and has a bunch of great deals, you simply can’t wait to buy that new video game for your son—too often, an excuse presents itself that makes it absolutely necessary for you to make a purchase… right now! It just has to be done, right? Wrong. Ramsey explains that self-discipline is a large part of becoming debt-free. It means you have to be able to say no and to avoid spending money that you simply don’t have right now.
“Work, get paid. Don’t work, don’t get paid. Everybody is on commission…When you’re 4 and you clean up your room, it really means mom cleaned up and you did two toys. When you’re 14, it means you cleaned up your room. But still, we got the money caused by work, and then, we have teachable moments on how to handle the money we earn.”
From a young age, Ramsey believes, children need to be taught how to properly spend and save money. Think about it: When you’re 4 or 8 or 12, you don’t really have a choice about whether or not you can buy something. You either have the cash or you don’t. At some point in your life you apply for a credit card or find a line of credit that does permit you to make a choice about whether or not you want to buy something, despite the fact that you might not even be able to afford it. Ramsey encourages parents to set a good example by teaching their children about proper spending and educating them about the best ways to save money and buy material items. No matter how they do it, it just needs to be done.
“The average millionaire can’t tell you who got thrown off the island last night.”
Good old-fashioned hard work never hurt anybody—and, in most cases, it’s the only way to turn your financial portfolio into a gold mine. Ramsey knows this and preaches working hard for your money. Here, he makes a subtle reference to the fact that many Americans complain about having little or no money and then, in the next sentence, reference television or talk about trivial things. If you’re serious about making money, act like it and take it more seriously in the future.
“You must tell your spouse everything about your debt, income, financial strengths and weaknesses. No secrets allowed.”
When it comes to marriage and newlywed couples, money is often a huge issue. This is exactly why Ramsey encourages couples to go through marriage counseling before getting married in order to talk about financial issues and get everything out on the table. If you borrow a lot of money and your spouse or better half prefers to pay for everything with cash, you’re going to have problems in the future. By laying everything out on the table, you’ll be able to talk things out, see where you can make compromise and get everything out in the open.
“I know very few financially successful people who have separate lives and separate checking accounts. If you want a life of your own, you shouldn’t get married.”
In addition to talking about your financial situation together, you also need to be able to actually start a future together when it comes to money. As Ramsey notes, few people succeed both financially and in marriage when bank accounts and checking accounts are separately held. While some couples may choose to do this for a variety of reasons, it’s never a good idea and probably means that you should reconsider being together in the future to avoid inevitable fights about finances.
“Too many people try to do the new job, new spouse, new house, and new car thing in 18 months. That’s a good way to end up broke. We’ve got to resist the temptation to catch up with our parents in 18 months. Slow down. You have the rest of your life to play catch up. After all, it’s just stuff.”
Everyone is in such a rush these days, Ramsey explains. They want to put their lives together quickly, make money quickly and live the rest of their lives happily ever after. The problem is that most people who end up doing that live the rest of their lives broke because they can’t actually afford the life that they’ve built. It’s important to take a step back and realize that, while tomorrow is never promised to anyone, you can’t always act like it. Take your time as you build your life and take the steps to ensure that you’re doing it conservatively enough to sustain yourself for a long period of time. There’s no sense in getting in over your head and stressing yourself out at a young age.
“Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.”
So many people believe that material items will make them happy. A new house will show everyone that they’ve finally succeeded. But, in reality, some of the most impressive things a person can do for themselves usually can’t be seen—not right away, at least. Learn to invest your money and save it rather than spending it wildly on things that you don’t really need.
“If you buy a $28,000 car, in four years it will be worth about 11,000 bucks.”
As Ramsey continues on his crusade to make people look at “stuff” as little more than material items that will go out of style eventually, he points out that a car devalues quickly over the course of just a few years. But while the car will be worth significantly less than what a person paid for it, chances are they’re still paying off the car.
“Once you agree, then pinky swear and spit-shake that you will both stick to the budget.”
A budget is one of the most important things a person or a couple can establish. It allows people to earmark money they’re earning for bills, rent, a mortgage and whatever other expenses they have. It also allows them to cut down on needless spending.
“A big part of being strong financially is that you know where you are weak and take action to make sure you don’t fall prey to the weakness. And we all are weak.”
Ramsey’s final words here are important: We are all weak. Not people who make minimum wage or people with five kids or people who like shopping or people who just lost their job, but all of us. All consumers are fighting the same battle and urges to avoid shopping for things they really don’t need or spending money that they really don’t have.
“I don’t want to walk across hot coals because it isn’t fun, but if I can be shown how a short, painful walk will do away with the lifetime of worry, frustration, stress, and fear that being constantly broke brings me, then bring on the hot coals.”
Continually, Dave Ramsey stresses the importance of taking the dive when it comes to finances and going through a short painful period in order to come out on top later. Many people believe battling credit card debt is a long process, but more often than not, people are just so discouraged and frustrated that they never even bother to get motivated and try. Paying off your debt isn’t fun and it isn’t easy but if you put all your motivation and dedication behind it, it can make a world of a difference.
“We have all experienced loaning someone money and finding an immediate distancing in the relationship. We don’t control how debt affects relationships; debt does that independently of what we want. The borrower is servant to the lender, and you change the spiritual dynamic of relationships when you loan loved ones money.”
Credit card companies, banks and other corporate lenders are typically a very impersonal way to borrow money. But not everyone qualifies to borrow from them. In times of need, some people decide to lend money to a family member or close friend. As Ramsey warns, doing so can create tension and can undoubtedly change a relationship forever. So think about what you’re doing the next time you decide to loan a large sum of money to your brother or borrow a couple bucks from your sister. It could change the way you interact with them in the future.
“Debt has been sold to us so aggressively, so loudly, and so often that to imagine living without debt requires myth-busting. Debt is so ingrained into our culture that most Americans can’t envision a car without a payment, a house without a mortgage, a student without a loan.”
Debt has become all too familiar for Americans. As Ramsey points out, it’s become something that most people expect and in order to change the way people handle debt, they need to understand that you can learn how to pay debt off completely and live your life without it.
“We consumers have become a nation of servants to financial institutions. We used to joke that a bank was where you could borrow money if you could prove you didn’t need it. Now, with the advent of aggressive credit marketing strategies, we can borrow even when we shouldn’t be allowed to.”
Keeping with the theme that debt is too ingrained into the American culture, Ramsey also notes that debt used to be something reserved for a select few who could reasonably pay it off. People owned homes after 30 years, owned cars, owned the clothes on their backs and owned the pool in the backyard. Today, everything is financed, sometimes whether people can afford it or not. He suggests understanding this because, when it comes down to it, a bank may lend you money despite the fact that you can’t afford to pay it back and you need to know this before you accept the loan.
“Winning at money is 80 percent behavior and 20 percent head knowledge. Most of us know what to do, but we just don’t do it.”
As you try and become more financially responsible, you’re probably going to need to learn how to do certain things like invest money. The simple fact is that you don’t need to know a whole lot in order to save money and spend more wisely. Ramsey says you need to just learn how to do what you already know you need to do, like avoid making certain purchases, create a budget and cut up your credit cards. Knowing and doing are two different things and actually doing something about your finances will prove to do the hardest part.
“To think that the handling of your personal finances is merely a matter of math control is naïve. You must get better control of all aspects of your life. Until you do, [even the best advice] will have little effect but will instead be neutralized by the other habits in your life.”
While creating a budget and crunching numbers is one of the first steps on the path to financial freedom, it’s not the only step and it’s important for you to remember that dealing with your finances is about more than just calculating dollars and cents. It’s about setting boundaries and being conservative in all aspects of your life.
“If broke people are making fun of your financial plan, you’re on track.”
This piece of advice from Dave Ramsey is one of his best. Don’t be fooled by others or take advice from people who clearly don’t know how to take advice themselves! It will only drag you down to their level and get you into trouble.
How Dave Ramsey’s Advice Can Help You
If Dave Ramsey’s advice has been criticized at all, it’s been because he often tends to oversimplify problems that are quite serious and usually fairly complex. However, the truth is that restructuring your finances and eliminating debt do not require a Master’s degree. It does, however, require you to attack your debt aggressively and, often times; eliminate using credit and borrowing money altogether, if you can manage to do it. Ramsey’s advice is very encouraging: You can do it. Whether you choose to take it or not, listen to what he has to say and at least try to apply it to your current financial problems. Chances are, you’ll pick up a few ways to solve your financial problems.
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