Dave Ramsey on the 5 Basics of Personal Finance
by Kindle Editors on 03/30/2011Dave Ramsey offers financial advice as the host of a nationally syndicated radio program, The Dave Ramsey Show,which is heard by 4.5 million listeners each week. He’s also the author of three New York Times best-sellers, including the newly revised The Total Money Makeover.
Money’s fun—if you've got some. But the problem is a lot of people aren’t having fun. About 70 percent of Americans are living paycheck to paycheck. That means if you count 10 houses on your street, seven of those families have too much month left at the end of the money. They're broke—and stressed out. For over 20 years, I've listened to their stories and tried to help families walk through a plan I call The Total Money Makeover.The heart of the plan is behavior change. I learned a long time ago that if I can take control of the guy in the mirror, I can be skinny and rich. Managing money just takes some simple discipline in a few key areas. Here are five quick tips that will solve most people's money problems for good:1. Get out of debt.
The average American household has a whopping $91,000 in debt. That's like crawling out of bed every morning with a boat anchor around your neck. It's almost impossible to get any financial traction, not to mention build any real wealth, if every dollar you earn has someone else's name on it! Cut up the credit cards, stop borrowing money, and get out of debt—fast!2. Act your wage.
In his fabulous study of millionaires, The Millionaire Next Door, Thomas Stanley concluded, "Being frugal is the cornerstone of wealth-building. ... Most [millionaires] are hardworking, thrifty and not at all glamorous." Translation: Millionaires don't care if you're impressed by what car they drive. Future millionaires don’t, either.3. Get on a budget.
John Maxwell says, "A budget is telling your money where to go instead of wondering where it went." Just write out the month's expected income minus planned expenses on paper, on purpose, before the month begins—and then stick to the plan. Put whatever you want on the paper. Hey, it's your money! I don’t care what you do with it; I just want you to do it on purpose!4. Save and invest.
We save money for three things: an emergency fund (3–6 months of expenses set aside for emergencies), purchases and wealth building. Once you're out of debt and have a full emergency fund, there's no reason why you can't put 15 percent of your income into retirement.5. Give money away.
If all the money comes in and none of the money goes out, you get stopped up. And over time, anything that gets stopped up begins to stink! I think Golda Meir said it best: "You can’t shake hands with a clenched fist." Sure, the clenched fist holds on to your dollars, but it's also the international sign of anger. But an open hand? Even a dog understands that.Personal finance isn't rocket science. These five things are incredibly simple to understand; they're just hard to actually do. It takes some time and sacrifice, and your friends will probably give you a hard time if you start chopping up credit cards and declaring war on debt. But there's something else I figured out a while back: If your broke friends are making fun of your financial plan, you’re probably right on track!--Dave Ramsey
Dave Ramsey offers financial advice as the host of a nationally syndicated radio program, The Dave Ramsey Show,which is heard by 4.5 million listeners each week. He’s also the author of three New York Times best-sellers, including the newly revised The Total Money Makeover.
The heart of the plan is behavior change. I learned a long time ago that if I can take control of the guy in the mirror, I can be skinny and rich. Managing money just takes some simple discipline in a few key areas. Here are five quick tips that will solve most people's money problems for good:
1. Get out of debt.
The average American household has a whopping $91,000 in debt. That's like crawling out of bed every morning with a boat anchor around your neck. It's almost impossible to get any financial traction, not to mention build any real wealth, if every dollar you earn has someone else's name on it! Cut up the credit cards, stop borrowing money, and get out of debt—fast!
The average American household has a whopping $91,000 in debt. That's like crawling out of bed every morning with a boat anchor around your neck. It's almost impossible to get any financial traction, not to mention build any real wealth, if every dollar you earn has someone else's name on it! Cut up the credit cards, stop borrowing money, and get out of debt—fast!
2. Act your wage.
In his fabulous study of millionaires, The Millionaire Next Door, Thomas Stanley concluded, "Being frugal is the cornerstone of wealth-building. ... Most [millionaires] are hardworking, thrifty and not at all glamorous." Translation: Millionaires don't care if you're impressed by what car they drive. Future millionaires don’t, either.
In his fabulous study of millionaires, The Millionaire Next Door, Thomas Stanley concluded, "Being frugal is the cornerstone of wealth-building. ... Most [millionaires] are hardworking, thrifty and not at all glamorous." Translation: Millionaires don't care if you're impressed by what car they drive. Future millionaires don’t, either.
3. Get on a budget.
John Maxwell says, "A budget is telling your money where to go instead of wondering where it went." Just write out the month's expected income minus planned expenses on paper, on purpose, before the month begins—and then stick to the plan. Put whatever you want on the paper. Hey, it's your money! I don’t care what you do with it; I just want you to do it on purpose!
John Maxwell says, "A budget is telling your money where to go instead of wondering where it went." Just write out the month's expected income minus planned expenses on paper, on purpose, before the month begins—and then stick to the plan. Put whatever you want on the paper. Hey, it's your money! I don’t care what you do with it; I just want you to do it on purpose!
4. Save and invest.
We save money for three things: an emergency fund (3–6 months of expenses set aside for emergencies), purchases and wealth building. Once you're out of debt and have a full emergency fund, there's no reason why you can't put 15 percent of your income into retirement.
We save money for three things: an emergency fund (3–6 months of expenses set aside for emergencies), purchases and wealth building. Once you're out of debt and have a full emergency fund, there's no reason why you can't put 15 percent of your income into retirement.
5. Give money away.
If all the money comes in and none of the money goes out, you get stopped up. And over time, anything that gets stopped up begins to stink! I think Golda Meir said it best: "You can’t shake hands with a clenched fist." Sure, the clenched fist holds on to your dollars, but it's also the international sign of anger. But an open hand? Even a dog understands that.
If all the money comes in and none of the money goes out, you get stopped up. And over time, anything that gets stopped up begins to stink! I think Golda Meir said it best: "You can’t shake hands with a clenched fist." Sure, the clenched fist holds on to your dollars, but it's also the international sign of anger. But an open hand? Even a dog understands that.
Personal finance isn't rocket science. These five things are incredibly simple to understand; they're just hard to actually do. It takes some time and sacrifice, and your friends will probably give you a hard time if you start chopping up credit cards and declaring war on debt. But there's something else I figured out a while back: If your broke friends are making fun of your financial plan, you’re probably right on track!
--Dave Ramsey
Kindle Post: Dave Ramsey on the 5 Basics of Personal Finance
