I agree with Dave Ramsey on many things. We disagree (a parody article I wrote) on some things and that’s okay. Only dictators and despots require full agreement on everything.
Dave Ramsey has probably helped more people to embrace budgeting and getting out of debt than anyone.
Here are 13 ways in which I totally agree with Dave Ramsey.
I Agree With Dave Ramsey — Personal Finance is 80% Behavior
Personal finance is more than book learnin’.
If head knowledge created wealth Millennials would be rolling in the dough. Instead, far too many are steeped in student loan debt, unable to buy homes, and blaming everyone but themselves.
Jim Rohn famously said, “Success is nothing more than a few simple disciplines, practiced daily.”
Winning at wealth takes discipline and patience. Knowing what to do is not the same thing as actually doing it.
Investing a certain percentage of your wages for the future requires discipline and sacrifice.
Budgeting each month is not a super sexy activity but it is super important.
Budgeting Is Super Important
There is probably nothing as boring and challenging as completing that first budget. Budget time was an automatic argument in my home. We were simply doing them wrong.
Each dollar we earned was now an employee of our family business. Would these dollars get us closer to our financial hopes and dreams? That was up to us.
“Budgeting is telling your money where to go instead of asking where it went”
John Maxwell
Budgeting is a proactive strike against poverty. The budget is your tool. You are in the driver’s seat for spending your money.
You should never build a house without a blueprint. Weddings, even small ones, require a plan.
Your financial future deserves a plan. Put on your big boy and big girl clothes and do the necessary work to create a great financial future.
Income Is Our Greatest Wealth Building Tool
If you’re convinced that your employer only pays small salaries you are correct. Conversely, if you truly believe there is money on the table and make an effort to get more you are also correct.
It’s possible to dramatically increase your salary with the right plan and some elbow grease.
Dave is spot on with this statement. I’ve heard him say, “Your income is your greatest wealth-building tool” hundreds of times.
Passive income strategies are fun and can be sexy. Going to work every day can be tedious.
According to my friend Joe, success is boring (visit his podcast!)
Act Your Wage
This might be Dave’s most pithy maxim. I love this one!
Far too many families live paycheck to paycheck. No one forces us to purchase things that we cannot afford. Most budget deficits are self-inflicted.
Resist keeping up with the Jones family and act your wage.
The $1,000 Emergency Fund Is Actually Legit
More than half of all Americans are unable to cover a $1,ooo emergency (CNBC).
Dave gets mega pushback on this baby step. Why?
Financial experts universally state that $1,ooo is an insufficient emergency fund. There’s a slight problem with this logic. Most of us require $1,000 before we can get to 3-6 months of expenses.
I was talking to a guy recently about his financial plan.
“How’s your financial plan coming along, Jeff,” I asked.
“It’s awesome! I am working on my 2nd million! I gave up on the first long ago,” Jeff joked.
Getting $1,000 saved is a HUGE accomplishment for many families.
Celebrate this accomplishment!
I Agree With Dave Ramsey On Debt Snowballs
There are two primary debt demolition tools: The Debt Snowball and the Debt Avalanche.
The debt snowball method arranges debt from smallest to largest. Small debts are prioritized over large debts. Paying small debts builds momentum and confidence. This study from Northwestern University supports the debt snowball method.
The debt avalanche method prioritizes debts by interest rates. Debts with the highest interest rates are paid first. From a financial perspective (math) the avalanche method seems to make the most sense.
Finance nerds will argue the math weaknesses of the debt snowball.
If you’re unable to get behind the snowball then do the avalanche. Just stop arguing with people doing the snowball.
Mutual Funds Are Better Than Individual Stocks
Mutual funds create immediate diversity. Individual stocks are often more entertaining but can be a bit riskier.
Most of us don’t have the time or requisite intelligence to research individual stocks. By the time Jim Cramer is yapping about the next great stock, it’s probably too late.
Purchase mutual funds through your employer-sponsored plan. Open an IRA if there is no employer option.
If you want to tinker with individual stocks feel free. Just do it as a side hobby.
The brutal truth is that you’re probably not the next Warren Buffet.
I Agree With Dave Ramsey That Risk Is Required To Grow A Portfolio
Dave recommends a 100% stock portfolio. Few financial planners would recommend such a risky portfolio.
Ramsey recommends four categories of mutual funds: Growth & income (large cap), growth (mid-cap), aggressive growth (small-cap), and international. Dave recommends a 100% stock portfolio through mutual funds.
I agree with Dave that some risk is required.
Unfortunately, most families are playing catch-up with their retirement funding.
We can’t get more time. Our choices are reduced to making larger contributions or taking on more risk for more reward.
Not everyone has the same risk appetite as Dave, though.
Some risk is involved so proceed with caution.
Retirement Funds Come Before College Funds
This one should be simple. Future you will not be able to work forever. Our golden years are funded with investments, cash, social security, and some pensions.
You cannot borrow money for retirement.
College can be paid for in several different ways.
I Agree With Dave Ramsey — College Can Be Debt Free
Families get emotional when discussing college plans. Families often assume that loans are the only way to pay for college.
False!
I recommend tapping the brakes before taking on student loans.
There is more than one way to peel a tater.
I Agree With Dave Ramsey About Term Life Insurance
Keep your investments separate from your insurance.
Term life insurance is simple to obtain and often quite affordable.
Work policies are convenient but you also need adequate coverage outside of your employer.
Avoid cash value policies like gas-station sushi.
Get A Last Will & Testament
Government has the reverse Midas touch. Everything the state touches turns to crap. If you have dependents or stuff get a last will & testament ASAP.
Attorneys can create one for a few hundred bucks. If that’s too salty then go the DIY route with a company like Legal Zoom or Mama Bear Legal Forms.
It really is important.
I Agree With Dave Ramsey That Generosity Is Awesome
We practice and promote revolutionary generosity in our home. Generosity is often the difference between being the Colorado River or the Dead Sea.
Charity should always be a cheerful event. We should give regularly and joyfully. How much, is really up to you.
Charity begins at one cent.
I dare you to profit!