Dave Ramsey: Here’s the ‘quickest and most appropriate way to become a millionaire’

© Dave Ramsey

Dave Ramsey is a bestselling author and personal finance expert. He is known as the host of “The Ramsey Show” – a popular radio show and podcast that has over 20 million listeners a week. He has appeared on “Good Morning America”, “CBS Mornings”, “Today”, Fox News, CNN and more. Also CEO of Ramsey Solutions, Ramsey has been teaching people how to create wealth since 1992.

Recognized by GOBankingRates as one of Money’s Most Influential – and tied for first place among the most popular and well-known financial experts – here, he explains why everyone needs a budget, how to become a millionaire, and how to come up with a debt-paying game plan that you can stick to.

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What money moves should each person make to build wealth?

The first thing is to have a written plan for your money, ie a budget. If you want to build wealth, you have to plan for it. Next, get out of debt and avoid getting into debt. Your most powerful wealth building tool is your income. And when you spend your whole life sending payments to Sallie Mae, banks and credit card companies, you end up with less money to save and invest for your future.

Where I see a lot of people failing on their path to wealth building is that they don’t live on less than they earn. Believe it or not, rich people don’t spend all their money on stupid stuff! According to our National Millionaire Study, the typical millionaire has never carried a credit card balance in their entire life, spends $200 or less at restaurants each month, and continues to shop with coupons. The myth that most millionaires live lavish lifestyles that include Ferraris in their garages and lobster dinners every night is just that – a myth.

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The fastest and most effective way to become a millionaire is to invest regularly over a long period of time. It’s not shocking or flashy, but it works. Don’t get distracted by market fluctuations, trendy stocks, or get-rich-quick schemes.

Once you are debt-free (except for your home) and have an emergency fund of three to six months worth of expenses, invest 15% of your gross income in retirement accounts like a 401(k). (k) and a Roth IRA. Do this for a few decades, and you can live and give like no one else.

What are the main obstacles to wealth creation?

In my mind, the biggest obstacle to wealth creation is debt. Most people are drowning in debt and end up working their whole lives just to see what they earn come back in the form of payments. Your income is your best tool for creating wealth; and, when he’s racked with debt, it’s almost impossible to save for the future.

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What advice would you give to reconcile wealth building and debt repayment?

Don’t worry about the balance here. Start by getting out of debt and saving an emergency fund for three to six months of expenses before you start investing for your retirement. Think about it: when your money is tied up in paying off your debts, you can’t create real wealth. And, if you start investing before you build an emergency fund, you’ll end up dipping into your investments when the unexpected happens — and potentially ruining your financial future in the process.

What are the essential elements of a successful plan to pay off debt?

The first step is to make sure you are living with a written monthly budget. Give each dollar a name — and a job to do — before the month starts. It’s the only way to know for sure how much money you have to work with.

Once that’s in place, start tackling your debt using the debt snowball method. List all of your debts, from smallest to largest, regardless of the interest rate. Make minimum payments on all but the smallest debts, spending as much money on them as possible. Once that debt is gone, take its payment and apply it to the next smaller debt while continuing to make minimum payments on the rest. Repeat this method as you work your way through your debts. The more you repay, the more your released money grows – like a snowball rolling down a slope.

While it may seem that paying off the debt with the highest interest rate makes the most mathematical sense, if you start with the highest debt, you won’t see real results for a long time. When this happens, most people run out of steam and give up before they’re close to finishing. It’s important to pay your debts in a way that keeps you motivated until you’ve cleared them all. Getting quick wins early on will ignite a fire beneath you and give you extra motivation to pay off your remaining debts.

Jaime Catmull contributed reporting for this article.

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About the Author

Gabrielle joined GOBankingRates in 2017 and brings with her a decade of experience in the journalism industry. Prior to joining the team, she was a staff writer-reporter for People Magazine and People.com. His work has also appeared on E! Online, Us Weekly, Patch, Sweety High, and Discover Los Angeles, and she’s been featured on “Good Morning America” ​​as a celebrity news expert.

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