Yahoo Finance Dave Ramsey: Do These 4 Things To Build Wealth
The popular personal finance expert Dave Ramsey recently appeared on the Lewis Howes podcast The School of Greatness. At one point, Lewis asked Ramsey how people can build wealth over time. Ramsey’s response to this question was insightful, and below we’ll break down the advice he shared if you want to build wealth.
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1. Get Out Of Debt
Ramsey believes in prioritizing debt repayment, as he’s known for the “debt snowball strategy” that involves paying off your lowest balance first. The biggest issue is that when you have debt payments, like a car loan or credit card balance, you have to spend money on this. You can’t build wealth when you’re making debt payments for the items you financed. This debt holds you back from saving money and building your financial future.
Getting out of debt also leads to freedom since you can use your money for yourself. Ramsey elaborated on how getting out of debt can help you take risks since you don’t have to stress about making payments to creditors. When you have no debt, you can switch careers or take chances since you’re no longer limited in what you can do.
2. Live Below Your Means
The goal is to live on less than you make so that you’re consistently setting money aside. When discussing the idea of living on less than you make, Ramsey joked that it may sound glib. However, it’s evident that you can’t save money or pay down debt if you’re spending more than you have coming in. You have to figure out how to live within your income so that you don’t end up with massive amounts of debt.
3. Create a Budget
Ramsey stated that if you don’t do things intentionally, it won’t work because nobody wins accidentally. You need a plan which comes in the form of a budget. When you create a budget, you know where your money’s going and have a clear outline for reaching your financial goals. Without a budget, it will be challenging to figure out where you stand and what actions you need to take to get closer to your goals.
4. Save And Invest
The goal is to save and invest your money so that your funds are growing for you. Ramsey wants you to start with an emergency fund and then focus on investing your money for the future. Ramsey has always been a proponent of setting up an emergency fund where you have enough money to cover three to six months’ living expenses if something happens.
Ramsey urged listeners to invest in mutual funds or safe investment vehicles to plan for the future instead of chasing short-term schemes, noting how people often chase get-rich-quick schemes and new investment opportunities that don’t yield results. He acknowledges that people will look for the path that requires the least effort to reach their goals since long-term investors get flack from those who seek instant results.
Ramsey admitted to making foolish financial mistakes in the 1980s with real estate and investment strategies that were essentially gambling. If you want to build wealth, you’ll want to prioritize saving and investing with a long-term horizon.
Bottom Line
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We want to remind you that there isn’t a one-size-fits-all solution for personal finance and wealth-building. However, if you focus on these four principles, you’ll be in a much better financial situation by this time next year. If you want to build wealth, focus on creating a budget, paying off debt, living below your means and investing for the future.
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This article originally appeared on GOBankingRates.com: Dave Ramsey: Do These 4 Things To Build Wealth
