I started listening to Dave Ramsey in 1992 on my local 99.7 FM radio station in Nashville, Tennessee when he first started in radio as the cohost of The Money Game with Roy Matlock. We are both from Antioch, TN and grew up in the same area, he is twelve years older than me with a birthday within three days of my own. We are in different generations but we are both old.
Our paths crossed very early when I started my own quest for financial freedom with my goal to become a millionaire. I called in to his show in the early 1990s. I never thought about him becoming a national syndicated radio host and New York Times best selling author. We both come from humble beginnings.
I read a copy of the first edition of his self-published book Financial Peace in 1992. It was life changing in opening my eyes to the importance of managing my personal finances so that I had peace of mind, no stress, and could build capital. I have read almost all of his other books and they are some of the best for learning how to achieve personal financial peace. He is the guy I recommend for learning from and mastering your personal finances.
Mastering personal finances is the first step before being able to build capital for an investment portfolio, trading account, acquiring real estate, or starting a business. He is a great teacher for showing people the path out of debt. I don’t agree with his buy and hold investing approach or the demonizing of credit cards but I agree with his personal finance steps.
Here are the only five rules you need that will not only get and keep your personal finances in order according to Dave Ramsey but will create a level of wealth almost 100% of the time.
1. Use a budget in your personal finances.
Income is not the same as wealth. The income you save and invest is what creates wealth. The majority of millionaires have self control over their spending. They have either written budgets or simply spend less than they earn naturally. Dave Ramsey says to spend your monthly income on paper before the month even begins, and then follow that plan. That is the first key to getting your personal finances under control. All businesses have budgets and you should too. It enlightens you to where the money is going and enforces discipline through awareness.
2. Get out of debt.
Consumer debt will consume your income and destroy your ability to save and invest. Dave Ramsey is 100% against debt outside of a 15-year mortgage on a house that you can afford. Dave Ramsey teaches to never spend more than 25% of your monthly after tax take-home pay on monthly mortgage payments.[1]
The average monthly car payment for new cars is $677. The average monthly car payment for used cars is $515. 38.22% of consumers financed new vehicles in the second quarter of 2022. 61.78% of consumers financed used vehicles in the second quarter of 2022.[2]
Car payments make you the bank’s and car companies’ cash flowing asset. Too many people think they have no choice but to buy a new car and finance it. It’s smarter to buy used cars and let someone else take the depreciation, keep your car after it is paid off for as long as possible, or buy a car you can afford with cash eventually. These seem like radical ideas but the majority of the cars I have owned for the past 30 years had no car payments and that allowed me to save all the money and build capital for three decades.
Ramsey teaches credit cards are the first debt that should be paid off and the easiest way to do this is start with the smallest one to the largest to get momentum. Then cut them up and close the account after they are paid in full. Unchecked credit card debt can grow out of control, avoid becoming trapped.
3. Only be in high quality relationships.
“You are the average of the five people you spend the most time with.” – Jim Rohn:
There is a huge correlation between money and who you spend time with. Most millionaires are married to the same person their whole life based on research. Their spouse also shared their financial goals and were also frugal and intelligent with their spending habits.
We tend to pick up habits from our friends and family, going where they go, spending money like they spend, reading the same books or not reading at all but watching television instead like they do.
“The studies have shown that over a a 10-year period of time that your income will be approximately between 10% to 20% of the average of your 10 closest friends income.” – Dave Ramsey [3]
“Five years from today, you will be the same person that you are today, except for the books you read and the people you meet.”- Charlie “Tremendous” Jones
4. You must save and invest.
“In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.” Proverbs 21:20
The first step in saving money is to have enough for an emergency fund to pay for unexpected expenses and avoid new debt. The first baby step is just saving up $1,000 for a buffer and then grow it to 3 to 6 months to have living expenses between jobs.
Savings can also be used for big future purchases in place of debt and things like your children’s college fund, buying a car, or home improvements.
Investing is what you do so you can participate in corporate profits by owning stocks and bonds. Investing can be the path to financial independence and having the capital to retire one day when you can no longer work.
The key is consistent, automatic, disciplined saving and investing. Everyone knows what they need to do but few do it. Be the person that builds savings and investments for your own future.
5. Cheerful generosity.
Generous people are happy and helpful people with the spirit of giving. Giving good tips, giving to charity, and giving to those in need can be the most fulfilling spending many people do.
Generous giving tells your subconscious you have plenty of money and it can create a prosperous psychology that helps open up your creative imagination to earning more.
Generosity is a wealthy habit.
I show readers how to get rich with the right money habits in my book The Working Dead.
