20 Dave Ramsey Money Tips – The Path to Financial Freedom!
Whether you are looking for ways to get out of debt fast or ways to save money when you are on a tight budget and living payday to payday, Dave Ramsey’s money tips can help you a great deal.
Dave Ramsey is one of the world’s foremost experts on personal finances and has been instrumental in helping people take back control of their finances. He hosts the popular podcast The Dave Ramsey Show and his book, The Total Money Makeover, is a must-read.
Over the past year I have benefited immensely from the insights detailed in his Total Money Makeover book.
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More about Dave Ramsey
The former realtor lost everything and filed for bankruptcy in his early years.
Somehow, he managed to get out of debt and began another path of helping others take the same quest.
Known for his Christian background and no-nonsense approach to personal finance, Ramsey gradually rose to become one of the most trusted and sought-after financial advisers in the United States.
He has a huge fan base of followers. With an estimated net worth of $55 million, Ramsey is a living proof that you, too, can turn a bad financial situation around.
20 Dave Ramsey Money Tips
Now, if you don’t have the time to indulge in his book, I have gathered the 10 best Dave Ramsey tips for saving money and living your best life, which you can quickly apply to yourself to finally get out of debt and to get ahead financially.
Take care of your four walls first
Taking care of your four walls first the single most important financial mindset shift beginner budgeters can make. When budgeting it’s always a good idea to prioritise what you spend your
hard-earned cash on, especially if you’re in an emergency cash flow situation.
When your electricity is getting ready to be turned off and you’re struggling to make ends meet, Dave Ramsey recommends focusing on the four most important things in your life first and budgeting accordingly. These should always be accounted for first in this order.
The four walls include:
Put the four walls of your home up first when you’re in a crisis situation. He then recommends working your way through the other stuff.
Create a zero-based budget using the envelope system
Creating a monthly budget is the first and most important step to save money, pay off debt for good and build wealth. By creating a budget, you are essentially telling your money where to go.
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The most important Dave Ramsey tips for saving money is creating a zero-based budget. It ensures all of your income is accounted for. In other words, you assign every dollar you earn a job by allocating it to an expense category in your budget.
The concept of envelope system is simple: you put cash in individual envelopes for each spending category in your budget such as groceries, entertainment and clothing. You will only put the budgeted amount for each spending category in individual envelopes.
When you pay for something, the money has to come out of the appropriate envelope. When the cash in the envelope is gone, you cannot spend anymore. If you are constantly overspending on certain categories in your budget, then you can try the cash envelope system to stick to your budget.
Using cash saves you on average 15-20% just at the store. Studies have shown that we spend cash differently than swiping a card. We question the purchase differently and spend less when using cash.
Cash envelopes are a convenient way to organize your cash for each category and stick to your budget. Using cash helps you stick to your plan and stop overspending.
It is not necessary to use cash for every single bill. You would use cash for shopping and categories that you have a tendency to overspend.
Once you are out of cash in that category, stop spending for that category.
Some cash categories include:
- miscellaneous expenses
- kids expenses
- eating out
- fun money
You can also get a discount at a lot of places for using cash. Especially on someone providing a service and even medical bills. All you have to do it ask; the worst they can do is say no.
When you use only cash to pay for your daily living expenses, the money spent comes out of the appropriate cash envelopes. Using cash to pay for your daily expenses helps you stick to your budget and stop overspending.
Interested in changing your money mindset to live a happier life financially? Then take a look at our post below:
The 24-hour budget rule
This one is going to hurt your soul but help your bank account.
Whenever you want to buy something desperately and think the world is going to come crashing down if you do not get it right this very minute- wait 24 hours. Wait a day before you swipe your card or give away your hard-earned cash.
Our brains very quickly convince us that we NEED what we WANT.
A great example would be the time I discovered an awesome clothing advice and proceeded to convince myself I barely have anything to wear. I then went on to swipe my card before logic kicked in.
The 24-hour rule allows us to process the situation better and put some thought into how we are using our money.
Delayed gratification can be your friend if you would only let it.
Would you like to know how to create a budget, but don’t know where to start? Then see the post below:
You need an emergency fund
Being without an emergency fund is an emergency! In fact, this is so important that saving up a $/£1000 emergency fund is actually Baby step #1 in his #7 step wealth guide. This guarantees you won’t go into debt for the unexpected things in life like an emergency medical bill, dental work or work on your car.
Don’t dig into your emergency fund unless, it’s an – you guessed it, emergency! Sell items around the house, take on a weekend job or however else you can earn money to work your way to the $/£1000 ASAP.
Interested in learning more about creating an emergency fund? Then see our post below:
Use sinking funds
Sinking funds operate in a similar function to an emergency fund, except you are already prepared for the fee. They’re effectively a highly strategic way to save a chunk of money to pay for large expenses that are planned. If you don’t have sinking funds, special events and medical treatments (US people) can quickly sneak up on you and before you know it, you have no funds stashed away for it.
These things can include dental fees, routine veterinary bills, vacations, birthdays, Christmas etc.
These are all things you can save for months in advance and put into a separate cash envelope so it isn’t used in your everyday bank account. Better yet, set up a bank account specifically for your sinking funds. Ideally, you’ll want one with a 2-3% interest rate minimum.
Pay off debt using debt snowball
Dave Ramsey believes that you should make an attempt to pay off all debt (with the exception of your mortgage). There are many different methods that can be used when paying off debt. However, the easiest and best according to Dave Ramsey is the debt snowball method.
Debt snowball means tackling one debt at a time, from the smallest to the largest. You start off by paying all your extra money towards the smallest debt whilst still paying the minimum on all the others.
As you are finished with the first debt, you can then move on to the second, putting all your extra money towards this one whilst still paying the minimum on the others. You continue doing this until all your debt is paid off. And as each debt is finished, you now have even more money to put towards the other larger debts.
Interested in learning about the different methods of paying off debt or advice in paying it off? Then see our posts below:
Get rid of the plastic friend (credit cards)
Dave Ramsey believes that people who are trying to achieve financial freedom should not own credit cards. This is especially for the person who lacks self-control and who cannot stop spending.
You typically hear the saying “just charge it to my card.” Do you know that charging it to your card means you are borrowing this money? Get in the habit of not making purchases unless you have the cash to pay up front. Or if you MUST keep your credit card, be sure to pay it back straight away to avoid high interest fees.
However, Dave would probably encourage you to cut them up and throw them out!
Build credit with good credit not bad credit If you have no other option
According to Dave Ramsey, a mortgage is considered as “good credit” and just about everything else is considered as “bad credit”.
When you are buying a house, it can be a good investment because you think it will rise in value over time. So, when you are paying a mortgage you are essentially building credit (money) with good credit (mortgage).
When you pay a mortgage, it is good credit because it comes with a great interest rate against substantial collateral you expect to rise in value over time.
If you take a car loan, it is considered bad credit because you end up with a depreciating value in your asset.
Pay off your home
If you’ve cleared all your other debts and you’re saving for long-term financial goals consistently, the next step is knocking out your mortgage.
This is the step I’m currently on, though since I just bought a home, I’ve got a long way to go to get to zero.
If you own a home, figure out what you can do to get rid of your mortgage payment ASAP. Refinancing to a new loan at a lower interest rate, for example, means more of your payment goes to the principal each month.
Downsizing to a smaller home with a smaller mortgage is another option. And if you haven’t bought a home yet but want to, figure out what you can afford for your budget so you don’t end up house-poor.
Keep you current mobile/cell phone
People have probably called Dave Ramsey for tips on their mobile/cell phones. If they did, I’m glad I missed it. I’m sure they would have gotten a Dave Ramsey scolding.
This is really a no brainer. If your phone works keep it. Phones are so expensive now and are pretty much worth nothing. The marketing on phones is crazy, they essentially make you think you are missing out by not having the latest greatest phone.
Why would you pay $/£1,000 or more every two years for a new phone that has a few more features than yours? If your phone is broken, there are plenty of refurbished and used phones for sale.
Track your expenses
You can’ stay within your budget if you aren’t tracking your expenses. Dave’s tip is to track your expenses throughout the month, which is exactly what our parents and grandparents did when balancing their checkbook.
To help you do this, Dave created his own app called the Every Dollar app. This app allows you to input your budget and track your expenses.
Tracking your expenses is important so that you know if you’re within your budget or not.
Interested in cutting down your expenses, but don’t know where to start? See our post below:
Make a payment schedule
When you have bills to pay each month, try to schedule them on the same dates each month.
That’s one of the baby steps you can take, which can help you big time later on.
In all seriousness, this is probably one of the easiest things to do.
You don’t even need a high school or college education to see the value of getting into a payment schedule.
Preparing your payment schedule will help to ease stress and ensure that you’ll have the money in your account when the time comes to pay the bills.
Pay off your credit card balances in full each month
When you use credit cards but do not pay off your outstanding balances each month, you accrue interest charges which varies depending on the credit card provider and your credit score.
If you really cannot pay off your credit card bill in full each month, just stop using your card and use cash instead.
Be on the same page with your spouse
Another of the most important Dave Ramsey tips is to be on the same page with your spouse about money.
If you are married, you need to agree with your spouse about the most important elements of money if you want to have a happy marriage and succeed in personal finance. If one of you loves to overspend and doesn’t see anything wrong with racking up tons of credit card debt and never saving for retirement and the other hates debt and wants to save for a nice, comfortable retirement—well, that’s a problem.
If you don’t see eye to eye on money, even if one of you tries hard to do smart things with your money, the other one will either intentionally or inadvertently sabotage your efforts.
Don’t compare your spending to that of others
It’s easy to compare your situation to that of others and say, “Mr. Smith can spend all of that money on a car, so why can’t I?”
You’re not Mr. Smith.
You both have totally different budgets and comparing your situation to that of others, or trying to spend as much money as someone else can lead to an empty bank account and an unhappy situation.
Always view your situation as just that. Your situation.
Act your wage
Live within your means and do not spend more than you earn. Actually, you need to spend much less than you make if you are ever going to become debt-free. In the Total Money Makeover, Dave talks about keeping up with the Joneses.
Don’t let the pressure to conform with the consumeristic norms set by your peers, neighbours, friends, or media drive you into debt.
Want to drive the best car? Live in the biggest house? Send your kids to the most expensive schools? If you live your life only to impress, you better have deep pockets. To quote Dave Ramsey:
Don’t even consider keeping up with the Joneses. They’re broke!
Stop buying named brands
I’m a huge believer that when I buy a name brand, I’m buying the name. There are so many items that are exactly the same. Let’s take food for example. You can look at the ingredients of the name brand and the generic brand and they are exactly the same.
There are a few items that I’m willing to pay for the name brand because I do see a difference. Other than that, I buy generic.
Increase Your Income
There is only so much you can do to lower your monthly expenses. If your expenses exceed your income, this is the time to take up additional part-time jobs or side hustle.
By increasing your income, you can pay off debt faster, save/invest for retirement, and even take a nice vacation without breaking your budget.
Interested in earning some extra cash through a side hustle? Then see the posts below:
Try to get to the conclusion first
Dave Ramsey clearly stated on his website that people should plan their spending correctly, will get ahead. Children usually do what they like.
They don’t plan anything. While spending money, we typically don’t think where we want to go. So, devise a plan like an adult and stick to it.
Always keep in mind that planning your expenses is as relevant as earning.
20 Dave Ramsey Money Tips – Final thought
The journey to financial security can be a long, tough road which requires a great amount of discipline. That is why I always recommending following the advice of people like Dave Ramsey, a financial guru who’s been there, done that.
Condition your mind and set your priorities straight. Follow the tips outlined in this article. And most importantly, remember that the journey might feel difficult at times, but the reward of financial security is worth the struggle. I promise.
Do you have any other financial tips you recommend? Let me know in the comments!
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