Dave Ramsey was not my first introduction to the world of personal finance, but he has definitely been the one to resonate the most with me because of his common sense approach!
Although, I graduated with a major in finance from college, my personal financial education up until I read “The Total Money Makeover“ had revolved around investing in cd’s, mutual funds and real estate.
After reading books like “Get Rich with Dividends: A Proven System for Earning Double-Digit Returns“ and other popular investing books, I have found that these 7 tips are the most basic and yet most essential to any and all whom are trying to get their financial house in order.
Here are the the money saving tips I wish I learned much earlier in life…
Tip# 1 – Start an Emergency Fund with $1,000
Simple common sense to understand. You need to have money accessible in case of an immediate emergency.
Better to be prepared than to fall into further debt or worse yet…no money at all!
Tip# 2 – Pay off all debt using the “Debt Snowball”
The Debt-Snowball strategy is a method by which the debtor pays off the smallest balance first and then works their way up to next larger debt.
Here is an example of the strategy applied:
The only knock on this strategy is that you will end up paying more over time (in interest). You should try to refinance if possible to a lower interest rates. But depending on you monthly budget and how much you can afford to pay down …(after you have saved up your Emergency Fund- Tip# 1) this may be your best solution.
You should start with smallest debt first to pay-off, and then continue using that same amount being paid to add on to what you must pay on the next larger debt and so on…
If you would like a Free download copy of the worksheet click ‘Download’ below….
Just a small gift from me to you! 😉
Tip# 3 – Try increasing your Emergency Fund to 6 months of expenses in Savings
The common sense theme here is to save your money. Spend less, and put the rest away for a rainy day, is pretty much the basic idea of all Dave Ramsey’s tips.
You can start by saving money on the expenses you can reduce or avoid altogether. Don’t buy what you don’t need, (Stop trying to “Keep up with the Jones’s”).
Buy what you need for now…(until your “Safety Net” is secure…at least 6 months worth). Then you start saving up for vacation time 😉
After all, is that not why we grind, to be able to afford creating beautiful memories with loved ones?!
Sacrifice now so you can enjoy later, when your body can no longer grind and hustle. Once your Emergency Fund is established, move on to saving for your Retirement or big future purchases (ie. a home), or big life events.
Remember…The more money you save now, the more options you will have tomorrow!
Tip# 4 – Invest into Retirement Accounts. (Roth IRAs and 401k Retirement)
First option is to contribute to a 401k, up until the employer match, if available to you from your Employer. Then, max your Roth IRA – which is $5,500 currently.
You will not be able to keep working forever. You need to start building your Retirement “Nest-Egg” asap! And the longer you wait the less you will have to support you when you can no longer work!
Depending on how old you are now, the earlier you start can make a difference in millions… Yes, that’s right I said $$$MILLIONS!!!!
If you have maxed both retirement accounts, 401k and Roth IRA then pay off the rest of your debts!
Tip# 5 – Learn To Build “Good Credit”, Not “Bad Credit”
Dave Ramsey’s advise on buying a home is right on… It helps build “good credit” because it’s a strong asset with a low enough interest rate to make it a good debt decision.
For example, when you pay for a car loan, you’ll end up with a depreciating asset. Meaning, it loses value each day moving forward. You don’t need a brand new car that loses value as soon as you drive off the lot. The smarter move would be to buy a 1-2 year old card. Much cheaper and yet, new enough to not give you repair problems (Still under warranty ;-).
When you purchase a home and pay for a mortgage, you’ll end up with something that (Over time), will appreciate in market value, if purchased at the right time = Buyer’s Market... (Real Estate is always in an Up and Down Cycle).
Simple Math: If it makes you money in the long run = Good Debt. If it makes you lose money in the long run = Bad Debt.
Tip# 6 – Start Building Wealth
If you have been able to implement all the prior steps then it’s time to take bigger steps. Any wealthy person will tell you, the true path to Financial Freedom is by building multiple streams of income. Invest in proven asset classes like real estate.
Learn how to make your money work hard for you or you will inevitably continue working hard for it!
That is why I am a firm believer of creating and building your own business! Either way, you will have to work hard, so why not put your limited time on this planet and energy into building something you an call your own!
Tip# 7 – Give Back!
You don’t have to wait until the last step to do this one.
We all have our own passions and devotions in life. Find a cause that you believe in and give towards it regardless of how small a donation you can afford.
I truly believe in Karma, and have found that when I have needed help the most, in some shape or form, God has delivered!
I hope these tips can help shed some light and value into your personal and financial lives.
If you have any other common sense money tips to share I’d love to hear them!
Please feel welcome to Comment and Share!!!
Wishing you blessing along your path to success!