Dave Ramsey Tips
In this article I am going to discuss some of my favorite Dave Ramsey tips. Learn 21 simple Dave Ramsey tips that will help you to spend less money, save more money, and invest your money wisely!
Dave Ramsey has become a huge influencer in the personal finance realm, and he deserves to be. He has helped millions of people to be able to fix their family finances by starting to budget, working their way out of debt, building an emergency fund, saving for retirement, helping to pay for their children’s college educations, paying off their mortgage, giving generously, starting to build wealth, and more!
You may not agree with everything that he teaches, but I hope you agree that he has had a huge positive impact on families and individuals to help them improve their finances and start to win with money!
Read on to learn a little more about Dave Ramsey and to learn about 21 Dave Ramsey tips that can help you too to turn your personal finances around and get out of debt, start to save, and ultimately achieve your own financial freedom!
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A Little about Dave Ramsey
Before sharing the crucial Dave Ramsey tips we have learned (and lived!) over the last 10 years, I want to share a little bit about him for those who may not have heard of him or who don’t know very much about him.
Dave Ramsey’s Story
Dave Ramsey’s parents sold real estate, and so he grew up in the real estate world himself and got his real estate license at 18. He bought and sold real estate during college and was able to build up a $4 million portfolio by the time he was 26. It was a portfolio built on a lot of financed property. Then times got tough financially, the bank called his loans due, and he couldn’t pay them back and crashed and burned. He declared bankruptcy, and he lost everything.
Over the years that followed he clawed his way back to financial solvency, and he was able to pay back all of his debt. But he was never the same again.
On a Crusade to Change a Culture
After going broke and losing everything to the banks, Dave Ramsey swore he would never go into debt again—and he never has. In a society where they tell you that you have to have debt, you must have debt to buy a car, to buy a house, to rent an apartment, to rent a car, to get a cell phone—he says no. No, you don’t.
And he now has hundreds of thousands of people who have also sworn off debt to one degree or another (my husband and I are proudly among that group!) in favor of a better way to manage their money.
What We Have Learned from Dave Ramsey
I like to tease that I was a Dave Ramsey advocate long before I ever heard of Dave Ramsey. 🙂 And that is because my husband and I had started to follow many of the personal finance principles that he teaches before ever learning about him. That isn’t really too surprising, though, given the fact that Dave himself says that he teaches God’s and grandma’s ways of handling money.
Even though the financial principles Dave Ramsey teaches may be common sense, that hasn’t kept me from making some pretty stupid decisions with money, though! I have had to learn some pretty hard financial lessons along the way! Fortunately, after making some really dumb financial moves and having a lot of debt and being pretty freaked out about it, I was motivated to learn about money and turn my situation around.
And the clincher for me was learning about the power of compound interest! When I realized how money could grow exponentially over time, I was hooked on personal finance, and I have been an avid studier of it ever since!
So when I learned from a coworker about Dave Ramsey, I Googled him (of course!) and was thrilled that he taught the kinds of financial principles my husband and I had already started to live. He just taught them in a very clear, step-by-step, easy to follow way. And following his 7 baby steps has helped us to completely turn our finances around!
We have been able to save up a good-sized emergency fund, pay off over $260,000 in debt, become mortgage debt free (woo hoo!), and save a good chunk of money for retirement in the 10 or more years that we have now known about Dave Ramsey and been following his principles.
Dave Ramsey’s Baby Steps
What Dave Ramsey does, in my opinion better than any other personal finance expert—and I have read all of the big ones and many of the ones few people have ever heard about!—is to break down the huge and often overwhelming topic of personal finance into simple steps and principles that anyone can follow. Perhaps the thing that Dave Ramsey teaches that is the most powerful is his 7 baby steps:
1. Save up a $1,000 baby emergency fund.
2. Pay off all consumer (nonmortgage) debt.
3. Save up a three- to six-month emergency fund.
4. Start investing 15% of your income toward retirement.
5. Help pay for your children’s college educations.
6. Pay off the mortgage to become completely debt free!
7. Give generously and continue to build wealth to live an awesome life and leave a financial legacy.
So here are 21 crucial Dave Ramsey tips related to the baby steps and the other important personal finance principles that he teaches.
21 Awesome Dave Ramsey Tips to Help You Save More Money!
Below I share 21 simple Dave Ramsey tips that will help you get out of debt, save more money, invest wisely, and ultimately build wealth and achieve financial freedom!
The way to be able to build financial security and eventually build wealth is to have money to save and invest after you pay all of your expenses. That’s just a simple fact.
And for most people to be able to manage their money so that they have enough left over to save and invest, they need to follow a spending plan or budget.
Dave Ramsey recommends having, and I agree, a simple zero-based budget where you account for every dollar you will earn in a given month as income and you spend those dollars intentionally on paper down to zero dollars left before the month begins.
Even though that may seem counterintuitive and like living on the edge, what it does is make sure that there isn’t money that is unaccounted for in your checking account. That is important because money that is unaccounted for inevitably gets frittered away, like pollen in the wind.
As Dave Ramsey often says, budgeting is telling your money where to go instead of wondering where it went. Think of your budget as the tool that is going to help you reach your awesome financial goals: goals like being able to get out of debt, being able to build an emergency fund, being able to retire someday, being able to one day live in the Bahamas or Thailand or travel the world or buy a lake house or give tons of money away and serve tirelessly or do whatever else you have planned and worked and saved for. 🙂
And you can sign up to receive my free spending tracker and simple starter budget forms below!
When you first start budgeting, I would recommend that you begin as Dave Ramsey says: on paper, on purpose. After a few months, once you get the hang of budgeting and it really starts to work for you, go ahead and switch to a digital system if you want to.
Or if you really can’t stand paper and you prefer to do everything electronically, you can build a budget in Excel or use a program such as You Need a Budget (YNAB.com). It’s a great, user-friendly budgeting tool with a lot of awesome features.
Check out these related articles:
Complete Beginner’s Guide to Budgeting
17 Must-Know Tips to Rock Your First Budget!
Budgeting Fail? Try This Simple Alternative to Budgeting
13 Surefire Steps to Help You Stick to Your Budget
9 Must-Know Tips to Help You Finally Start Saving!
2. Be on the same page with your spouse.
Another of the most important Dave Ramsey tips is to be on the same page with your spouse about money.
If you are married, you need to agree with your spouse about the most important elements of money if you want to have a happy marriage and succeed in personal finance. If one of you loves to overspend and doesn’t see anything wrong with wracking up tons of credit card debt and never saving for retirement and the other hates debt and wants to save for a nice, comfortable retirement—well, that’s a problem.
If you don’t see eye to eye on money, even if one of you tries hard to do smart things with your money, the other one will either intentionally or inadvertently sabotage your efforts.
You can learn the simple steps for how to get on the same page with your spouse about money here.
3. Make taking care of your family your top financial priority.
When you are working to get your finances under control and get out of debt, you will likely feel pulled in many different directions. You may even have credit card companies calling and harassing you. You may not be able to pay all of your bills. An important Dave Ramsey tip is that you should take care of your family first by making sure they have enough to eat, a roof over their heads with running water and utilities, clothing to wear, and basic transportation. He calls these crucial expenses the “four walls.” When you create your monthly budget, make sure you list these items first and that they get paid for first. That way, no matter what else happens, you know your family will be OK. The cable might not get paid this month, the credit cards might not get paid this month, and that’s OK. You can go back and clean those up later if you have to once you have your finances in order.
Even if you are getting letters and phone calls and feel pressure to pay your bills with money you don’t have, take care of the basic necessities for your family instead.
4. Live on beans and rice so you can clean up your financial mess.
In general, Dave believes that you should be able to save up for and buy and own nice things. But when you are deeply in debt, he teaches listeners and readers to do a “scorched earth” type of lifestyle where you cut expenses wherever you can in order to get out of debt and then save up a full emergency fund as soon as possible. This is the power of focus. With focus, you can accomplish amazing things, and you can accomplish them quickly.
5. Save $1,000 in your baby emergency fund.
The first of Dave’s financial baby steps is to save up $1,000 in a baby emergency fund. The reason is that statistically, most financial problems that a family faces can be covered with $1,000 or less. You can cover the most frequent car repairs, home repairs, medical co-pays, and other minor emergencies with $1,000. Saving up this $1,000 is awesome because it is the first buffer, the first protection, between you and financial crisis.
6. Snowball your debt.
Another of the most well-known Dave Ramsey tips is to do a debt snowball.
While you are working to build up your baby emergency fund, pay minimum payments on all of your bills.
But once you have your $1,000, list your debts from smallest to largest, and put all of the extra money you can scrape together each month toward paying off that smallest debt. Then, once you have paid off that smallest debt, work aggressively to pay off the second smallest debt. And then work to pay off the third smallest debt once you have the second smallest debt paid off.
The reason that Dave recommends paying off your debts from smallest to largest is that as you pay off small debts you gain momentum and motivation to continue to work toward becoming totally debt free.
Though mathematically you will save some money on interest by paying off your highest-interest debts first, Dave points out regularly that money problems aren’t usually about the math. They are about behavior. The debt snowball method is the method we used to pay off our debt, and in general it is what I would recommend others do, as well. Learn about the difference between the debt snowball and the debt avalanche methods and which might be best for your situation here.
7. Commit to being debt free.
Another of the best Dave Ramsey tips is to not just work to become debt free but to then stay debt free, with the exception of a modest mortgage if you choose to go into debt for a home.
So once you get all of your credit card debt, car loans, student loans, medical debt, and so on paid off, then don’t go getting back into debt. One of the things that makes Dave’s message so powerful is that he is black and white; he believes and teaches and practices going all in when it comes to getting debt out of your life. Because of the stress and the pain and the hard times that he went through losing everything and then working to pay back all of his debts after he went bankrupt, he swore off debt for good.
And so have we. 🙂 There is just something powerful about drawing a line in the sand and deciding not to cross it for anything. So even though it would be kind of nice to buy a newer, nicer, larger home for our growing family, we are going to stay in our house instead for the next five to eight years and then buy our next house with cash when we are ready to do so.
You may think that is weird for various reasons, and in our society, it definitely is. But that’s OK. Being weird in a society where unfortunately the majority of people are deeply in debt and living paycheck to paycheck is a good thing.
Even if you don’t want to buy your houses with cash, I do hope you will commit to staying out of all other kinds of debt. It is just a more peaceful and more free and just a better and overall happier way to live, in my opinion.
You can find the simple steps for how to get out of debt here.
8. Choose to use cash.
To help you keep from overspending and going into debt, Dave is also a big advocate of using cash and of using a cash envelope system, particularly for areas where you might be more prone to overspend or impulse spend.
The budget categories where you might be tempted to impulse buy or overspend typically include food, clothes, entertainment, eating out, and personal spending (fun money/blow money). But you can of course use the envelope system for any area where you personally are tempted to overspend.
9. Forget about the Joneses!
Another powerful Dave Ramsey tip is to forget about the Joneses! If you want to be rich instead of just look rich, you need to leave the Joneses in the (financial) dust. Dave often says things like stop worrying about what your broke neighbors think, and I agree. They aren’t going to be there to take care of you in retirement or to help pay for you kids’ college educations, so don’t let their influence keep you from planning (and achieving) your own awesome financial goals.
10. Buy used cars.
According to Dave, only millionaires should buy used cars because of the huge depreciation that occurs as soon as you drive the new car off the lot and for the first few years after that. Unless you have a million dollar net worth, you really can’t afford to be losing that much money.
11. Side hustle and find other ways to earn more money to get out of debt.
Dave is a big fan of earning extra money to reach financial goals and especially doing side hustles when working to get out of debt as quickly as possible. And so am I. 🙂 When we were working to pay off more than $60,000 in debt, you better believe that I was working overtime and doing as much freelance work as I could get and donating plasma to help us get that debt paid off. We also rented out a couple of rooms in our home to my siblings, and my husband was working part-time while going to school.
Fortunately, there are tons of ways that you can make extra money these days! And for many of them, you can do them from the comfort of your own home with just a computer and internet connection.
Some of my favorite ways to make more money are these:
- Work overtime. If you have the opportunity to do so, working overtime is a great way to help you to save money quickly.
- Ask for a raise or promotion. If it’s been a few years since you received a significant raise and you’ve been an exceptional employee at work, make a list of your contributions and your accomplishments, and schedule a meeting with your boss to request a raise or a promotion. Focus on ways that you’ve earned the company money or saved them money. If you learn that a raise or promotion isn’t going to happen right away, ask what specific steps you can take in the next year or two to make it a reality. Read this article for more information on how to seek a raise or promotion.
- Do freelance work. If you work in a field that lends itself to doing freelance work, take advantage of that opportunity to earn extra income to help you save money fast! I have been doing freelance writing and editing since before I graduated from college with my English degree and editing minor, and doing freelance work has not only helped me gain experience in other areas besides what I do for my full-time job but has also at times (when I wanted to give the time to it) brought in significant additional income.
Do you love to read? Do you think you would be interested in doing freelance proofreading as a work-from-home job or side hustle? Then check out this proofreading course by my friend Caitlyn from Proofread Anywhere.
- Do coaching or consulting. Similarly, if you have job experience or a skill that lends itself to coaching or consulting, put that skill to use! Popular areas for consulting include human resource (HR) consultant, public relations (PR) consultant, marketing consultant, business management consultant, and accounting consultant. Popular areas for coaching include financial coaching, job coaching, personal fitness coaching, and leadership coaching. Look for opportunities on indeed.com or your favorite job website.
- Get a (second) job. If one spouse is available to get a second job in the evenings or on Saturday, for example, then this is another great potential way to earn additional income. And if you are a one-income family, or if one of you works only part-time, you might want to consider reentering the workforce or going full-time temporarily in order to save money more quickly.
- Start a side hustle. If you would rather earn money without working another regular job, there are a lot of things you can do to earn a little extra income with a side hustle. Some ideas include starting your own small business where you turn a hobby into a money-maker, being a virtual assistant, or driving for Uber or Lyft. Learn how to start a side hustle and find out about many side hustles that you can explore.
- Start a money-making blog. The potential for significant income is one of the reasons that I started this blog. If you love helping people and enjoy writing, being a blogger might be a great fit for you. In addition to great income potential (check out these amazing income reports of bloggers who make $10,000 to $100,000 or more per month!), there are many other benefits of being a blogger, such as being able to be your own boss and work on your own schedule. Learn how to start a blog for less than $5 a month.
- Earn passive income. Some options for earning passive income are to create a product you have someone sell, write a book, create a money-making podcast or vlog, develop an online course, or participate in affiliate marketing. Read this article to learn more ideas for earning passive income.
- Use rebate apps like Ibotta and Ebates. With rebate services such as Ebates and Ibotta, you can earn money by shopping for things and at places where you would shop anyway. With Ebates, you generally buy items through their website to save up to 40 percent on purchases. It is primarily an online service. Ibotta, on the other hand, is an app you use primarily after you make purchases at brick-and-mortar stores. Because of this, you can actually sign up for and use both apps to save on purchases. Sign up for a free Ebates account here, and sign up for a free Ibotta account here. You can literally sign up for both in just seconds and let the savings start stacking up.
- Sell stuff on eBay or Amazon. If you have a good eye for a bargain, you can buy items at thrift stores or garage sales and sell them for a profit on eBay, Amazon, Craigslist, or your local online classifieds.
- Sell your clothes to consignment shops. If you’re like most people, you probably have more clothes than you need. So use them to bring in some quick cash!
- Have a garage sale. Declutter and earn money, all at the same time! Double win!
Check out this article to learn more about increasing your income!
12. Save 3 to 6 months’ worth of expenses in an emergency fund.
Dave talks the importance of having an old-fashioned rainy day fund and that when you do, a muscle you never even knew you had is able to relax. Financial peace is a good deal. It’s awful to be worried and stressed about money all the time or much of the time. And one of the best ways to have financial peace, besides getting unburied from a pile of debt, is to build a significant emergency fund. When you have 3 to 6 months’ worth of expenses in the bank, you can take care of most financial setbacks fairly easily. And that is just an awesome place to be.
Personally, I like the extra security of having a 6-month emergency fund, and that is what we have. As Dave Ramsey would say, that is a good amount of Murphy repellent. And I like it that way. 🙂
13. Set up sinking funds.
Even though I had been studying personal finance for quite a while before I was introduced to Dave Ramsey, I think it was from him that I first learned about the importance of sinking funds.
A sinking fund is an amount of money that you put away, such as a certain amount every month, to save toward the cost of replacing something or replenishing an account. So, you might have a sinking fund for car repairs, house repairs, and appliance repairs and replacement. You should have a sinking fund for replacing your vehicles, as well. Learn more about how to set up and use sinking funds and what sinking funds I think it is important for virtually every family to have.
14. Protect your family and your possessions.
Dave also regularly talks about the importance of having adequate insurance to protect yourself and your family against different types of loss. So, for example, he talks about the importance of life insurance, disability insurance, auto insurance, homeowners and renters insurance, medical insurance, and even identity theft protection. When shopping for insurance, as when you are shopping for virtually anything, compare prices and features to make sure you are getting the right amount of coverage and type of coverage that is best suited for your family and that you are getting it for the best price. You can check out Zander Insurance, USAA, Amica Mutual, and your local insurance agencies and brokers.
15. Invest for an awesome retirement.
Most (maybe all?) financial experts that I know of recommend investing some amount of money for retirement. That amount generally varies from 10 to 15%. Dave recommends investing 15% to help ensure that you have a comfortable retirement. He recommends investing in Roth 401(k)s if you have them available to you and Roth IRAs because then the money is tax free in retirement, which means you will have 10 to 35% more money available to you. He also recommends being adequately diversified and investing equally in four types of stock mutual funds: small cap, mid cap, large cap, and international funds. He recommends not investing in bonds because traditionally they have underperformed stocks, and he recommends not investing in single stocks because of the increased risk that investing in single stocks represents.
If you are new to investing, you can learn how to start investing for retirement here.
16. Don’t invest in anything you don’t understand.
This is another important Dave Ramsey tip that can potentially save you from losing tons of money. There are many get-rich-quick schemes out there, but one way to protect yourself from getting ripped off and losing all of your money is to not invest in them if you do not understand how they work. Dave doesn’t do any fancy kind of investing; he invests in two simple things: paid-for real estate and good growth stock mutual funds in the four categories mentioned above. He says if you can’t explain it, you shouldn’t be investing in it. Sage advice to not lose your shirt.
Want to learn more about basic investing? Join the free 5-day Invest Your Money challenge! Sign up below!
17. Help pay for your children’s college educations.
Dave is a big proponent of helping to pay for your kids’ college educations if you can. He doesn’t give specific amounts for this guideline because the cost of universities and colleges varies so much, but he recommends that you help guide your child to choose a college that they can afford. And he recommends that you continue to parent and to counsel with your adult children to help them to make choices that they will not regret later in life. And he is OK with a bit of tough love when it is needed.
In other words, if your kids aren’t living the way you know they should, if they are wasting money or wasting time or doing other irresponsible things that will not bring good results in their lives, then you don’t have to help fund that lifestyle—and in fact, you shouldn’t. As a parent, I truly appreciate that he teaches that parents can—and need to!—parent.
18. Become mortgage debt free!
This is another of my own favorite Dave Ramsey tips! We bought a modest home that we could afford, and I think largely because of Dave Ramsey’s influence, we paid it off as quickly as we could. In fact, I think we were a little more gazelle intense about that then he would say you need to be, but once we started on a sound financial path and a debt-free journey, we just wanted debt out of our lives! And so we paid off our home in about six years. And now we are saving up to buy a little bit newer, nicer, larger home with cash in five to eight years. I never want to have debt again, and so I am willing to sacrifice, if you want to call it a sacrifice, and live in a small and less expensive home to be able to buy our next home with cash. #debtfreeforlife
That acronym is so powerful to me. I used to have it as my signature on my cell phone, in fact. Live like no one else. Live like no one else now—go against the norm; become debt free, live within your means, save for a rainy day, invest a good amount for retirement, maybe even sacrifice a little—so that later you can live and give like no one else.
If you follow what Dave Ramsey teaches, I 100% believe that you will be able to build financial security and eventually be able to build wealth in order to have some money to enjoy so that you can spend worry free and guilt free.
20. Change your financial family tree.
This is another very powerful bit of advice. In Dave’s own family, he has said that his intent is to leave a financial legacy in his family—one of wealth but more importantly a mind-set—of never having debt again. He wants to be the last Ramsey in his direct line to ever have debt. Is it a bit of a crazy ambition? For sure. But it’s an amazing and inspiring goal.
Even if you can’t realistically have that goal for your own family and descendants of never having debt again, you definitely can leave an awesome financial legacy by what you teach your children and eventually grandchildren. You can teach them to work hard, to be diligent, to live within their means, to save, to give. Those lessons are priceless.
21. Give generously.
Once you are able to right your own financial ship, and especially once you are able to accumulate some wealth, Dave recommends giving generously to causes that you care about to help those in need.
22. Know that leaders are readers.
Another of my favorite Dave Ramsey tips (I graduated with a degree in English and work full-time as an editor, so of course!) is that leaders are readers. He has said on his show that the average American never reads a nonfiction book after graduating from college. I don’t know where that statistic comes from, but if it is true, then that’s really sad. There are so many important things to learn in life when adulting! 🙂 There are things to learn about personal finance (of course!), marriage, parenting, business, leadership, gardening, self-reliance, emergency preparedness, history, faith and religion, and so much more!
23. Don’t borrow money, but also don’t lend money.
As Polonius says in Shakespeare’s Hamlet, “Neither a borrower nor a lender be.” Very, very good advice. If you can avoid borrowing money, any money at all, that is an amazing feat that will yield huge returns, as I mention above.
But equally important is to not lend money. One of the stupidest (stupidest! so stupid!) things we have done with our money is to lend it to family. And we did it when we knew better! And we got burned (badly), just like Dave says you will. So follow this advice, and don’t lend money to friends or family.
I know there can be a lot of pressure (that we feel from others, or that we just pile on ourselves) to help others out, and we think that by lending them money we’re helping them out. But we’re not. The person’s money problems don’t go away, and by lending money, we’re just enabling bad money choices because by bailing someone out you are helping them to avoid dealing with the problem of what made them be in a position to feel like they needed to borrow money in the first place.
Lending money changes the dynamics in a relationship. It is a very good way to lose both your friend and your money. And as Dave Ramsey says, Thanksgiving dinner just doesn’t taste the same when you are eating it across the table from your creditor. Not good!
24. Know that there’s a great place to go when you’re broke.
Dave also teaches that there is a great place to go when you’re broke—to work! As I mention just above, don’t ask to borrow money. Just don’t. It’s a recipe for disaster. Instead, if you need money, get a second job or start a side hustle or work overtime, as I mention earlier.
25. Remember that the tortoise always wins.
There are other Dave Ramsey words of wisdom that I could share here, but for now I’ll end with this one: The tortoise always wins. Dave Ramsey tells on his show a story of how after he became a millionaire, he wanted to continue learning how to be better with his money, and so he started to ask to meet with billionaires to learn from them. And one of the billionaires sat him down and told him to get ready to hear some very important advice (I’m paraphrasing here from my memory), and that all-important advice was this: I read The Tortoise and the Hare every year, and guess what? The tortoise wins every time I read the book.
Don’t try to get rich quick. Don’t try to cut corners with your finances. It’s an excellent way to get burned. Just be diligent and dedicated and disciplined and deliberate over time, and you will build wealth. It will happen. In a world with so many wonderful opportunities, as long as you keep your eyes open and are always learning and growing and manage your money well by following the tips above, it can’t not happen.
These 25 Dave Ramsey tips have helped us to win with our money over the last 10 years or more, and if you follow them, they will help you save more and invest more money, as well! It’s fun for me to think about what our financial lives will look like down the road, after we have followed these tips for 25, 35, or 45 years! I hope you have fun thinking about it, too!
What are your favorite Dave Ramsey tips? How has he helped you to change your money habits and change your life? I would love to hear your experiences with following the Baby Steps or living what he teaches. Leave a comment below and share your thoughts!
Invitation to Share
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