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Learn the best Dave Ramsey tips for managing your money to create financial freedom!
Becoming financially stable and secure is a huge money goal to have. But if you’re living on one income or your budget is stretched thin, it can seem completely out of reach.
Money was tight and it was overwhelming at times. So I started learning all I could about personal finance.
One of the money gurus I discovered was Dave Ramsey. He’s been a huge help in getting a better handle on my finances and he’s got some great advice that may be able to help you, too.
Who Is Dave Ramsey?
Dave Ramsey is a personal finance expert who’s probably best known for writing “The Total Money Makeover” and creating Financial Peace University. He also hosts a radio show that’s focused around money.
What he’s probably best known for is his “Baby Steps” approach to paying off debt and building wealth. The steps (there are seven altogether) are a blueprint for how to turn your financial situation around.
If you’re not familiar with Dave Ramsey at all, you might be surprised to know that he wasn’t always a money guru. In his 20s, he built a multi-million dollar real estate portfolio, only to end up filing bankruptcy and losing everything.
Dave Ramsey isn’t everyone’s cup of tea. He doesn’t mince words and some people might argue that his advice is too simple.
But his “baby steps” have worked for me and countless other families. And if your financial situation has plenty of room for improvement, keep reading.
Best Dave Ramsey Tips for Achieving Financial Security
Ready to find out the best ways to improve your finances, with no fluff? I’ve rounded up the best Dave Ramsey tips that can help you change your money outlook for the better.
One thing to know before you dig into the tips: They only work if you commit to putting them into action.
If you’re not serious about saving or paying down debt or achieving financial freedom as a family, then no amount of financial advice can help. But if you are, here are the best Dave Ramsey tips to know.
Let’s start with the “baby steps” first.
1. Save $1,000 for your starter emergency
If you’re starting the baby step plan, the very first thing you need to do is save $1,000 just for emergencies.
Easier said than done, though, right? I mean, 4 in 10 Americans say they’d have to borrow money to cover a $1,000 emergency.
But there’s a reason Dave Ramsey recommends having $1,000 in emergency savings. Having a cash cushion means you can cover smaller unexpected expenses without having to whip out your credit card to pay for it.
Saving $1,000 is something you want to knock out as quickly as possible so you can move on to the other steps.
2. Pay off all your debt (except your house) using the debt snowball
Step 2 is probably the hardest of all the steps in the plan. Once you get over this hump though, the rest is smooth sailing.
At this stage, you’re going to pay off all your debt except your house. That includes:
- Credit cards
- Personal loans
- Car loans
- Payday loans
- Lines of credit
The goal is to finish this step with no other debt besides your house.
There are lots of ways to pay down debt but if you’re following Dave Ramsey tips, you’ll use the debt snowball method.
This method involves ranking all of your debts from the smallest balance to the highest, throwing as much money to the first debt on the list each month as you can, while paying the minimums on everything else.
Once you pay off that first debt, you take the payment you were making to it and apply it to the next debt, along with your regular minimum payment.
You keep doing that over and over, with the monthly payment to your next debt getting bigger each time. That’s the snowball.
Once you get to the last debt on the list, you should be making one big payment to it each month until it’s gone.
More tips on paying off debt:
3. Save 3 to 6 months’ worth of expenses for emergencies
A $1,000 emergency fund is a good place to start. But Dave Ramsey recommends taking that up a notch and increasing your emergency savings to 3 to 6 months’ worth of expenses.
So if your monthly expenses are $3,000, you’d want to have $9,000 to $18,000 in emergency savings.
Having this much money can help the bigger curveballs life can throw at you, like getting laid off from work or having a medical emergency.
As you’re building up savings, make sure you’re keeping it in the right place. A high yield savings account is a great choice because you can earn a solid interest rate on savings and the money is still accessible when you need it.
CIT Bank is my personal pick for high yield savings. They’ve got one of the best APYs around with the fewest fees.
So if you’re looking for a place to park your emergency fund, check out CIT Bank today!
4. Invest 15% of your income for retirement
Retirement planning is next on the list of Dave Ramsey tips.
Specifically, he wants you to invest at least 15% of your income for retirement. That’s investing, not saving.
There’s a difference between the two. You keep savings in the bank; you invest money in the stock market, real estate or other securities.
Investing gives your money more room to grow over time if you’re getting solid returns.
There are different ways you can invest but the easiest might be starting with your 401(k) at work if you or your spouse have access to one. You can also invest for retirement with an individual retirement account (IRA).
If that sounds overwhelming, the Acorns app can build investments for you with pennies at a time. Acorns makes it super easy to invest in stocks using your spare change.
5. Save money for your kids’ college expenses
College was expensive when I went over a decade ago and tuition prices only keep going up, up, up.
Once you’ve got your retirement investments squared away, you can start beefing up your kids’ college fund.
I save for my kids’ college using a 529 account. You can take money out of these accounts tax-free as long as you use it to pay for qualified education expenses.
Setting up a 529 college savings account is easy. You can do it in five minutes online through UNest.
This mobile app lets you open and fund a college savings account right from your phone. You can set up automatic monthly contributions to keep saving so the money for college is there when you need it.
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6. 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.
7. Give generously and build wealth
The last part of the baby steps puzzle is giving and building wealth.
Dave advocates donating to charitable causes and continuing to save and invest for the long-term. The goal at this point is to build wealth so you can leave a financial legacy for your kids and their kids, while also being generous with the money you have.
And those are both worthy ways to put your hard-earned dollars to work.
8. Use the cash envelope system to budget
Making a budget is crucial to making these Dave Ramsey tips or any other financial advice work for you.
Dave’s preferred budgeting method is paying cash and using the envelope system. He actually touts the zero-based budgeting system, which involves giving every dollar of income a job each month.
(And here’s a guide to how zero-based budgeting works that I wrote for Miss Many Pennies!)
With zero-based budgeting and cash budgeting, the goal is to know exactly where your money is going and have nothing wasted for the month.
If you’ve never made a budget before, this post offers a step by step tutorial on how to do it. You can also download my free monthly budgeting template + guide to get you started on your budgeting journey!
9. Don’t waste money on new cars
New cars can be fun to drive but if you’re not paying cash for them, all they do is create a pile of potentially expensive debt.
I’m always astounded when people take out car loans for 5, 6, 7, 8 years at a time. Like, why would you make payments and pay interest on something that loses value as quickly as most cars do?
For example, I bought my current car in 2016 when it was a year old. I took out a $23,000 loan to pay for it — but, I paid the loan off in 14 months by following Dave Ramsey tips.
And since this car only has about 50,000 miles on it I expect to keep it for many more years. My next car purchase will be made with cash.
Unless you can pay off a car loan quickly it doesn’t make sense to spend tens of thousands of dollars on new cars. The better option in Dave’s book is to save consistently so you can pay cash and drive off the car lot debt-free.
10. Keep your old cell phone
Pricey cell phones are something I will never spend money on. I just don’t see the point.
It seems like cell phones are a money trap because either: A) They’re so easy to break you need to replace them often or B) There’s so much pressure to buy the latest models.
Know what Dave Ramsey says about cell phones? Skip the upgrades. You don’t need the fanciest phone as long as the one you have does the basics.
And if you’re paying a ton of money for cell phone service each month, here’s my best tip: Cancel your contract and switch to prepaid.
That’s what I did way back in 2014 and I’ve never regretted it.
If you want to save money on cell phone bills as a family, then you need to try Tello.
Tello offers prepaid phone plans starting as low as $5/month, depending on what you need. Plans are customizable so you can add only the features you need and want most.
If you’re tired of wasting money on cell phone service, switch to Tello today!
11. Pay your credit cards in full (or skip credit cards altogether)
Credit cards got me into so much financial trouble in my 20s. And it took me a long time to get rid of that debt, costing me more money in interest than I’d like to think about.
One of the best Dave Ramsey tips to follow is paying your cards in full every month, or better yet, using cash to pay for everything.
Credit cards are convenient, yes. But if you’re carrying a balance with interest they just make everything you buy more expensive.
You can justify it by earning rewards but if you’re paying a 20% APR while earning 2% in cashback, the math doesn’t really work out does it?
If you absolutely can’t get away from using credit cards for some purchases, then stick with just one card that offers decent rewards. And repeat after me: Only charge what you can pay off at the end of the month.
12. Eat meals at home to save money
Eating out is a major budget-killer but it’s so easy to do, isn’t it?
We’ve all had nights where the thought of making dinner after a long day is completely soul-crushing. So you get takeout or go out to a restaurant instead.
But if you want to get serious about saving then you have to cut out wasteful extras like dining out and eat at home more often.
It takes a little work to meal plan and find ways to save on groceries, I know. But it’s so worth it if you can feed your family healthy meals on a budget.
And if you don’t know where to start with meal planning, $5 Meal Plan is exactly what you need. For $5 a month, you can get a complete meal plan so you don’t have to guess what’s for dinner every night.
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13. Get on the same page as your spouse
As someone who was married to my financial opposite, I can tell you that following Dave Ramsey tips will simply not work if your spouse is not on board.
No matter what you try to do to save or pay off debt or set financial goals, you won’t make the progress you want to make if you’re trying to do it all alone.
So if you’re ready to commit to making a serious change financially, your spouse has to be in it with you. This is where good communication matters.
Talking about money isn’t always easy but the more you do it, the more natural it becomes. And it’s key to avoiding financial fights.
14. Be willing to make sacrifices
One thing you’ll hear Dave say repeatedly is that you should live like no one else so you can live like no one else.
And here’s what that means: You have to make sacrifices at the beginning of your financial journey so you can reap the benefits later.
That means doing things like taking staycations instead of vacations, giving up simple but frivolous pleasures and doing whatever it takes to pay off debt. And the more you cut out to reach your financial goals, the faster you can get there.
15. Increase your income to get out of debt
I can honestly say that it wasn’t until I started making more money with my freelance writing business that my financial situation really began to improve.
Making more money can help you achieve your financial goals if it means you have more money to pay toward debt or save and invest. It’s one of the best Dave Ramsey tips for making progress financially.
My absolute favorite way to make money for moms is starting a side hustle. There are just so many ways to make money and do it from home these days that it’s insane to let those opportunities pass you by.
Some of the best ways to make money as a busy mom include:
- Taking surveys with Swagbucks and SurveyJunkie
- Earning cash back when you shop online with Rakuten
- Getting paid to lose weight with HealthyWage (Yes, please!)
- Starting a virtual assistant business
- Getting paid to write
- Getting paid to proofread
- Becoming an online teacher with Outschool (No experience needed!)
- Become a flea market flipper
Remember, every extra penny of income counts. So if you don’t have a side hustle yet, start brainstorming ideas for how you can make money.
And grab this free Side Hustle Starter Kit if you need some inspiration!
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16. Protect yourself and your family financially
Building wealth and paying down debt can help your family become financially secure.
But what happens if you or your spouse pass away?
It’s not something anyone really wants to think about. But it’s a necessary part of creating true financial freedom.
Having life insurance can help offer financial protection and peace of mind. It’s something Dave definitely recommends.
If you don’t have life insurance yet, it’s something to consider looking into. And remember, the younger and healthier you are, the cheaper it is to buy.
17. Stop trying to keep up with the Joneses
Because as Dave likes to say, “The Joneses are broke!”
I saved this for last because it’s one of my favorite Dave Ramsey tips of all. Comparisons can steal your joy and your money if you’re blowing money to try and keep up unrealistic appearances.
So bottom line? Don’t worry about what everyone else is doing with their money.
Stay focused on your family’s finances and goals. That’s the best way to get ahead financially.
Do you have any favorite Dave Ramsey tips for managing money?
Dave Ramsey’s money advice works because it’s so simple. There are no gimmicks or tricks or hoops you have to jump through.
Does getting out of debt and saving take hard work and commitment? Absolutely. But these tips can be such a game-changer if you’re willing to shift your money mindset.
Has Dave Ramsey’s advice helped you change your financial situation for the better? Head to the comments and tell me about, then I’d love for you to pin and share this post.
And before you go, download your free budgeting e-book to start mastering your money!