Expert in Private Finance To retire comfortably is a goal that Dave Ramsey has long advocated for everyone, regardless of income. He says that your lifestyle and financial planning are more important than how much money you make.
According to Dave Ramsey, retirement should be spent traveling to see grandchildren, experiencing new cultures, and hosting happy family gatherings in a house you’ve paid off. Having a six-figure income isn’t necessary, but living a deliberate, meaningful life is.
Well-known for his no-nonsense approach to earning money, Ramsey recently turned to X (previously Twitter) to lay out the five basic actions that, in his opinion, can help anyone become wealthy. First, let’s examine these measures:
1. Craft a Written Budget
Dave Ramsey’s numero uno piece of advice is to create a budget. According to findings from “The National Study of Millionaires,” a comprehensive survey conducted by Ramsey’s team, a staggering 93% of millionaires adhere to a budget. This study also unearthed the fact that 79% of millionaires didn’t inherit their wealth, and a third of them never earned six figures during their careers.
Ramsey emphasizes that a budget serves as the bedrock of any wealth-building plan. He advocates for a zero-based budget, where every dollar of income has a designated purpose, ensuring that your income minus expenses equals zero. This method provides clear financial direction.
2. Eradicate Debt
Ramsey’s stance on debt is unequivocal: if you’re in debt, saving and investing should not be your priorities. He asserts that your income is your most potent wealth-building tool, and excessive loan payments hinder your ability to save and invest for the future.
3. Live Below Your Means
Contrary to the stereotype of lavish millionaire lifestyles, Ramsey’s survey revealed that 94% of millionaires live frugally, spending less than they earn. The typical millionaire avoids credit card debt, keeps restaurant expenses under $200 monthly, and is savvy about using coupons. Living within your means ensures you have the resources to build wealth instead of squandering them on frivolous expenses.
Related: The Warren Buffett Way: 10 Must-Know Rules for Wealth Preservation
4. Save and Invest
“The National Study of Millionaires” highlights that three out of four millionaires attribute their success to regular, consistent investing over an extended period. Prominent investors like Warren Buffett and Benjamin Graham also advocate for the “buy-and-hold” strategy, which involves retaining investments for the long term to navigate market fluctuations.
Dave Ramsey recommends allocating 15% of your gross income to retirement accounts, such as a 401(k) or Roth IRA, once you’ve settled your debts and established an emergency fund.
5. Embrace Generosity
In Ramsey’s vision of financial peace, generosity plays a pivotal role. He points to research indicating that acts of giving lead to increased happiness, contentment, and an improved quality of life. Ramsey believes that when you incorporate generosity into your life, it transforms not only those around you but also yourself.
In conclusion, Dave Ramsey five steps offer a clear roadmap to financial success, regardless of your current income level. By crafting a budget, eliminating debt, living modestly, saving and investing wisely, and embracing generosity, you can embark on a journey toward financial security and the retirement of your dreams.