9 Dave Ramsey Tips to Improve Your Financial Position

Dave Ramsey is a pro when it comes to financial planning. He is an American radio show host, an author, and a businessman. Ramsey has helped millions of people tackle their debts with his very famous snowball method. Some of the financial management tips are genius because they are so simple and easy to follow. You start with a few baby steps and become your own financial advisor. 

9 Dave Ramsey Tips to Improve Your Financial Position

Improve your financial position with these tips from our favorite, Dave Ramsey:

Start with a zero-based budget

A zero-based budget is where you account for every single dollar of your income. You create a detailed plan for all your expenses. You justify all these expenses.

Write down your zero-based budget. It’s not something you account for in your mind, or even on a piece of paper. Open a spreadsheet and create that budget.

Create Cash Envelopes

Once you have your expenses listed, get some envelopes. Label them and put each expense money in their designated envelope.

Use only cash with your transactions. Research suggests that we use our cash a little differently than we use our cards. We use it more frugally. With cash, you actually see the money getting out of your pocket. The same doesn’t happen with a credit card. Seeing the money makes a lot of difference in how you spend your money.

Sacrifice Your Present

If you have debts, or even when you want to save money, you need to sacrifice your present. Stop looking at what others are doing. Don’t follow their example. Do your own thing and pay off your debts first.

A majority of the American people are living with debts. They are living like any other person. They might even be spending more than debt-free people. Ramsey advises against such a lifestyle. He recommends getting rid of the debt and the stress before really enjoying your life.

The Snowball Method

The Snowball Method is Dave Ramsey’s claim to fame. In this method, Ramsey suggests paying off your small loans first and moving on to the bigger ones later. You still pay the minimum amount of debt every month, and if you are still left with more money, you pay the smallest loan first.

Take out a short-term mortgage

 Ramsey suggests you opt for a 15-year old mortgage plan. Pay off 20% of the home value in down payment. When you take a 15-year mortgage plan, you will be able to retire earlier and spend a big part of your life without having to pay debts.

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Save $1000 for emergencies

Even if you are paying off debts, you should still work to save $1000 for emergencies. You should always have some savings in case you lose your job. Also, when you have savings, you won’t have to take out any additional debts.

Plan the saving in your zero-based budget plan.

Save 3-6 months of your expenses

Once you have paid off your debts, the first thing to do is save 3-6 months of your expenses. When you don’t have debts to pay off, savings will be easier to maintain. If you have a high-risk job, then save 6 months of expenses and if you have a very stable one, 3 months are good enough. This money will act as a buffer if you lose your job.

Change your Spending Habits

Dave Ramsey advises on a lifestyle change when it comes to spending our money. If you want to change your financial condition, you will have to change your living conditions. Don’t go about buying shiny, expensive cars when you can’t afford them. Live within your means. Save money.

Changing habits is often not easy. That’s why Ramsey has what he calls baby steps. You aren’t expected to change your spending habits in a day but slowly work towards your financial independence.

Invest 15% in Retirement Savings

You aren’t going to earn your entire life. After 30-50 years, you will have to retire. If you don’t save for that time, how do you expect to stay afloat? Plan your retirement savings once you have paid off all your debt. This will help you retire earlier and in a more stable position.

Ramsey suggests you should invest 15% of your income. Ideally, you should be investing enough to match with your company’s 401k plan and the rest in a Roth IRA.  

Give Wealth

Think of all the people you can help if you aren’t sinking in debts. The world could do with more financially stable people.

When you have paid off your debts, you will gain some financial confidence. And in this financial confidence, you will likely find a lot of satisfaction in helping others wade through theirs. 

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