Managing your money is a lifelong endeavor. From the moment you get your first job (or even earlier) until well after you’ve sailed into the sunset of retirement, you need to think about how to save and spend in ways that help you reach your goals in life. And sometimes, you may fear you’re falling short. Maybe you’re not saving enough. Debt might be weighing you down, or the prospect of long-term planning may feel overwhelming.
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Many people in your position turn to financial experts — especially the ones who’ve become famous for sharing their advice across the media. For those looking for plain-spoken tough love, Dave Ramsey, founder and CEO of Ramsey Solutions, is a popular choice.
Known for his radio show where he dispenses financial wisdom to people from all walks of life, Ramsey offers tried-and-true methods for overhauling your finances and realigning with your goals.
One of Ramsey’s claims to fame is his baby steps program — a series of seven tasks designed to help you achieve financial stability and eventually prepare for retirement. The first step is saving $1,000 for a starter emergency fund.
Once you’ve got that down, it’s time to focus on paying off all your debt, except for your mortgage, using the debt snowball method. With this approach, you prioritize paying your smallest debt first, throwing anything extra you can at it until it’s paid in full. Then move on to the next smallest debt, continuing the process until all non-mortgage debts are eliminated.
The next step involves saving three to six months’ worth of expenses in a fully funded emergency fund. In step four, you invest 15% of your household income for retirement. If you have kids, they’re the focus of step five, which involves saving for their college education. Your home is the centerpiece of step six, because you’re paying it off early. Finally, step seven encourages you to build wealth and to give where you can.
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Anyone who has ever listened to Ramsey’s show knows that one of his key messages is this: Live below your means. He’s clear about the perils of lifestyle creep, especially if you’ve earned a raise or find yourself bringing in more money. To avoid overspending, it’s crucial to set up a budget that is both realistic and challenges you to live frugally.
