If you have been researching personal finance and debt payoff, then I’m pretty sure you’ve stumbled upon Dave Ramsey and his brilliant tips for financial freedom. People around the world have used these genius Dave Ramsey Tips to save money, make money, manage money and get out of debt!
Dave Ramsey is a radio show host, businessman and author who is famous for his knowledge in personal finance and money matters. He believes in being very disciplined when dealing with debt, household finances and money management. He holds a degree in Finance and Real Estate and his personal finance tips (and baby steps) have helped hundreds of thousands of people worldwide achieve financial freedom.
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Are you trying to figure out how to achieve financial freedom? Perhaps you’re way over your head in debt and you’re ready to make a change and get out of it. Well Dave has got you covered!
If you’re just starting out, you can give his book, The Total Money Makeover: A Proven Plan for Financial Fitness a try. This book outlines the 7 baby steps you need to take to become debt free and how to make a complete overhaul and change your financial life around.
Hundreds of thousands of people around the world have testified that these Dave Ramsey tips have gotten them out of debt and given them control over their finances. So if you have just started your journey to financial freedom, this is a pretty good place to start!
Why have Dave Ramsey’s tips been so successful in helping people achieve financial freedom? Well for starters, Dave Ramsey has separated the stages into baby steps so that it makes the whole process easier by tackling one step at a time.
He helps you with everything from saving money to making money to getting out of debt.
You’ve heard about the all famous baby steps and you know that it gets you to the stage of financial freedom and helps you take control of your money. You know that millions of people have learnt to better manage their money through these steps. But what exactly are the Dave Ramsey’s baby steps?
Baby Step #1
Save $1000 for a starter Emergency Fund
Baby Step #2
Use debt snowball to pay off all your debt (except your mortgage)
Baby Step #3
Save 3-6 months worth of expenses in an emergency fund.
Baby Step #4
Invest 15% of your income in retirement
Baby Step #5
Save a College Fund for your kids
Baby Step #6
Pay off your mortgage early
Baby Step #7
Build wealth and give
Taking your journey to financial freedom one step at a time will definitely make the entire process an easier one. The baby steps break it down into simpler, easy to manage tasks.
But because Dave really wants to help you get out of debt, manage your money better, take vacations that you can afford and really live your best and happiest life, he has gone a step further to create The Total Money Makeover Workbook which will help you apply and stay on track when completing the baby steps. This book is loaded with exercises and great guides. If you like to make lists, stay organized and have your sh*t together, I highly recommend getting this workbook!
Dave preaches the importance of having an emergency fund so much so that this is actually the first baby step on his list.
An emergency fund is really important because it provides a cushion as you enter into this journey of paying off debt and achieving financial freedom.
In the event of an emergency, whether it is car troubles, medical or otherwise, an emergency fund is something you can dip into without hindering your debt payoff process.
Your emergency fund should always be easily accessible and should of course be used for EMERGENCIES ONLY.
Dave Ramsey believes that you should make an attempt to pay off all debt (with the exception of your mortgage). There are many different methods that can be used when paying off debt. However, the easiest and best according to Dave Ramsey is the debt snowball method.
Debt snowball means tackling one debt at a time, from the smallest to the largest. You start off by paying all your extra money towards the smallest debt whilst still paying the minimum on all the others.
As you are finished with the first debt, you can then move on to the second, putting all your extra money towards this one whilst still paying the minimum on the others. You continue doing this until all your debt is paid off. And as each debt is finished, you now have even more money to put towards the other larger debts.
Dave Ramsey believes that people who are trying to achieve financial freedom should not own credit cards. This is especially for the person who lacks self control and who cannot stop spending.
You typically hear the saying ‘just charge it to my card.’ Do you know that charging it to your card means you are borrowing this money? Get in the habit of not making purchases unless you have the cash to pay up front. Or if you MUST keep your credit card, be sure to pay it back straight away to avoid high interest fees.
However, Dave would probably encourage you to cut them up and throw them out! BYE FELICIA!
A Zero Based Budget is one that requires you to budget and account for every single dollar you’re receiving each month. After you create your budget, your total income minus your total expenditure must be equal to zero!
Dave suggests using a zero based budget for better money management, debt payoff and financial freedom. In fact, this is the budgeting method that I use to smash all my financial goals each month. We have used this in the past to save $24 ooo in 7 months, to pay off debt and manage our finances along the way!
Because Dave encourages the use of cash instead of credit cards, the cash envelope system is a great method to use to master money management. The cash envelope system requires you to create a budget and use different envelopes to keep your money for groceries, rent, bills etc. separately. This way you can keep track of how you’re spending your money and it’s way easier to actually stick to your budget!
Earlier we spoke about creating a zero based budget. This means that every dollar in your budget will have already been assigned to a particular category.
Having a cash envelope system means running your entire home and budget on cash only. You can create weekly mini-budgets, withdraw your cash and keep them in envelopes in your purse for easy access.
The trick is to use money from assigned envelopes ONLY. If you’re at the grocery store, you’re only allowed to use from your Groceries envelope. If you only have $60 in your grocery envelope, you CANNOT let your bill go over this amount. And if your weekly grocery budget is $60, you’re not allowed to cross this for the week. Got it?
Buying a car is a big decision and Dave believes that you should think carefully when you’ve decided that you want a vehicle.
Firstly, he strongly advises against buying new vehicles. This is based on the fact that new cars drop in value – they lose 60% of their value in the first five years! He believes that this isn’t a very smart investment since the vehicle depreciates in value as soon at you drive out of the showroom/lot.
A brand new car depreciates in value by 18% in its first year. Hence, Dave suggests that you buy a 1 year old car whenever you’ve decided that you want a ‘new’ vehicle.
He thinks that leasing a car or going into debt to buy one are both bad ideas. So the best option is putting aside money each month and saving until you have the cash to go ahead and buy the car – no strings attached.
A car payment is usually around $500 per month. So once you decide that you want to buy a car, you can put this money aside each month and when you save enough you can purchase the vehicle without putting yourself in debt.
Dave believes in making smart purchases only. This means buying what you need and not what you want.
He states that the best way to avoid making a bad purchase is to wait overnight. When you see something you want and decide to sleep on it, many times you’ll find that you’ve changed your mind the next morning and you no longer want the item.
This delay technique was taught to Dave by his mother when he was just 13 years old and he has found it to work for many years after. This is definitely a super smart way to prevent impulse buying and to be smarter with your money!
P.S. On top of avoiding impulse buying, it’s also smart to save money where possible. I always use Ebates when making my purchases! Ebates gives me huge discounts or cash back on almost every online retailer there is! More money in MY pocket?
If you’re trying to become debt free and you no longer want to take things on credit, why do you need a credit score anyway? All a credit score does is say whether you’re good or bad (you want this to be good!) at paying back your debt.
Following Dave’s plan, you’re aiming at paying off student loans, credit cards, other loans and eventually your mortgage. At this point, your credit score will become ‘indeterminable.’ This is because you longer are in debt and you are using a cash-only system. This is ultimately where you want to be.
If you’re wondering if you can get a mortgage without a credit score, the answer is YES! You can use manual underwriting to obtain a mortgage/loan with no FICO score!
To get out of debt faster, pay bills and afford a decent life, increasing your income is your best bet! There are many ways you can increase your income. You can choose to side hustle, work from home, open a business, get a second job, work overtime hours etc. Increasing your income is a sure way to achieve financial freedom in a shorter amount of time!