In honor of financial literacy month, we wanted to share some of the best tips from money expert Dave Ramsey. Dave’s timeless money tips have helped millions of Americans achieve financial stability. His advice is helpful for everyone, but beginners will find it especially useful.
Here are five clever Dave Ramsey tips to help you improve your finances and reach your goals.
1. Start an emergency fund
If you don’t have an emergency fund, you’re not alone. According to a recent survey from Bankrate, a staggering number of Americans (56%) can’t cover a $1000 emergency from their savings.
Emergency funds are vital to your financial health because expenses can arise when we least expect them, causing financial hardship. Building an emergency fund ensures you won’t have to use credit cards to pay an unexpected medical or car bill.
Dave’s advice is to save $1000 for your emergency fund as quickly as possible, then pause and focus on paying off debt. Once most of your debt is paid off, continue building your emergency savings until you have 3-6 months of expenses tucked away for a rainy day.
2. Create a zero-based budget
A budget is a powerful financial tool that helps you organize your finances and achieve financial stability. Dave Ramsey is a strong advocate for the zero-based budgeting strategy, which says you should give every dollar a purpose. For example, if you make $4,000 a month, your spending (including money you save and give to charity) should add up to $4,000.
What makes zero-based budgeting special? One of the main benefits is its ability to help you become more mindful and intentional with your money. When you know where every dollar is going, you can identify areas where you could spend less or save more.
3. Create a debt repayment plan
Dave Ramsey knows how challenging it is to build wealth while in debt, which is why a lot of his advice focuses on this topic. Dave’s favorite debt repayment strategy is called the snowball method. The debt snowball involves paying off your debt from smallest to largest. Every time you
pay off a debt, you roll the minimum payment to the next smallest debt. This creates momentum and helps you pay off debt faster.
4. Invest for your retirement
Saving for retirement is essential to your future financial security. Dave recommends investing at least 15% of your income into a tax-advantaged retirement account such as a Roth or Traditional IRA (individual retirement accounts). Dave also emphasizes the importance of starting to invest as early as possible to give your money more time to grow.
5. Give to charity
Generosity is a beautiful thing. Dave suggests allocating a certain percentage of your income to giving back. Review your budget to determine what you can afford to give, then identify organizations or causes you care about. If you’re unsure how much you can afford, start small by donating 1-3% of your income, then increase or decrease as needed.
Resources
If you want more money tips from Dave Ramsey, check out his radio show or pick up his best-selling book, “The Total Money Makeover.”
Attend a free financial literacy workshop!
Want to get answers to your most pressing money questions? Register for a free financial literacy workshop hosted by our sister organization, The Michael’s Daughter Foundation, in partnership with Chase Bank and the Crenshaw Community Center. RSVP by April 28th, 2022.
References
https://www.fool.com/the-ascent/personal-finance/articles/these-are-dave-ramseys-3-best-pieces- of-advice/
https://www.ramseysolutions.com/budgeting/how-to-make-a-zero-based-budget https://www.nerdwallet.com/article/banking/savings/emergency-fund-why-it-matters
