Dave Ramsey's 4 Tips To Never Go Broke
Studies vary, but it's reported that roughly 60% of Americans live paycheck to paycheck, which means they need their next paycheck to cover their monthly financial outflows.
If you don’t want to be one paycheck away from going broke, follow these tips from personal finance guru Dave Ramsey.
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Have a Written Plan (A Budget)
The first step to never going broke is having a budget. Ramsey believes that when you know where your money is going, it’s much easier to take control of it.
In the “How to Budget” guide on Ramsey’s website, he recommends making a monthly zero-based budget and telling that money where to go. This means you organize every expense and give each category a dollar amount, then subtract all your planned expenses from your income. That number should equal zero.
Get Out of Debt
Another tip Ramsey has for those who never want to go broke is to get out of debt first.
“Your most wealth-building tool is your income. And when you spend your whole freaking life giving your money to banks that fill up the skyline and have furniture nicer than yours, that makes you stupid,” he said on his show.
So if you’re currently drowning in debt, focus on paying it off first. You can use the debt snowball or debt avalanche methods to help you tackle it faster. The debt avalanche method prioritizes paying off high-interest debt first so you can save money on interest, whereas the debt snowball method focuses on paying off the smallest debts first.
Live on Less Than You Make
If you want to avoid constantly feeling broke, Ramsey said you need to stop spending every dollar that hits your bank account.
"If you spend everything you make, you're a fool," he said.
Instead of using every raise to upgrade your lifestyle or buy new clothes, put some of that extra money toward savings, investing or paying off debt. Having money left over each month gives you a buffer for unexpected expenses and makes it much easier to build wealth over time.
Save and Invest
“You know how rich people get rich? They save money,” Ramsey emphasized. “100% of the people who don’t save money don’t have any.”
In other words, if you want to build wealth, you need to get into the habit of setting money aside. That means saving for emergencies, contributing to retirement accounts and investing for the future. Most experts recommend having at least three months' worth of salary in your savings, and some suggest it should be as much as six months' worth.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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