In researching personal finance and debt freedom tips, the Dave Ramsey tips you find are definitely ones to pay attention to. And researching the best hacks and advice is exactly what you should do when you start on your financial freedom journey.
If it’s already been done, there’s no need to reinvent the wheel!
Who is Dave Ramsey?
Dave Ramsey may be an outspoken financial guru, but his advice and teachings are solid.
With financial advice on everything from emergency funds, side hustles, and destroying debt, you’re bound to find the answer to just about any financial question by listening to his podcast or reading his book Total Money Makeover.
Dave Ramsey Baby Steps
The main tenet of Dave Ramsey’s “get-out-of-debt” financial advice is to follow his baby steps. Basically what he’s done is taken exactly what it takes to become debt free and achieve financial freedom, and broken it down into more bite-sized pieces to work on. It is, after all, much easier to take big tasks in smaller chunks than wondering what to work on next.
His baby steps are:
- Save a $1,000 emergency fund. Let’s face it, life happens. The last thing you want to do when trying to get out of debt is to get into more debt, so this should help you avoid that scenario, most of the time.
- Pay off ALL of your debts (except your mortgage). In this step, the longest and hardest step for sure, you’re going to put EVERY PENNY you have towards what you owe other people, and get them off your back. He prefers the debt snowball method, although any method is fine so long as you are always making the most progress possible.
- Save 3-6 months worth of expenses in an emergency fund. Now that you’re bad-debt-free (more on that later), you’re sort of still in the “I owe money” mentality. Here you’ll capitalize on that by stashing away enough money to be able to pay all of your monthly bills in full, for 3-6 months, should some large crisis occur, such as the loss of a job or a medical event.
- Invest 15% of your income to retirement. You’ve paid off your debts and you’re feeling nice and secure in case of catastrophe. Now it’s time to make sure that your retirement won’t become a catastrophe in itself!
- Save for your kids’ college fund. Assuming you’re the type of parent that plans to help your child cover college tuition costs, after your finances are in order and your retirement looks bright, you’ll start setting aside money for them.
- Pay off your home early. With your financial picture clicking along nicely, you’ll get that last lingering debt off your shoulders – your mortgage. Just like you did with baby step 2, you’ll push any extra cash towards your monthly mortgage payment.
- Build wealth and give wealth. This step is the one for you – now you’re ready and able to live how you want! You can donate money to charities, build up a nice inheritance for your children and/or grandchildren, and be more generous in many aspects of your life!
15 Best Dave Ramsey Money Tips
The baby steps listed above cover the basics of his concepts, but not everyone has the time necessary to consume all the material Dave has. Below we’ve summed up the top 15 hacks and tips Dave Ramsey wants everyone to know to get their finances in order and start living their dream life.
1. Create a Zero Budget with the Envelope System
Have you heard about this one? The concept is that if you ran your budget and paid your bills entirely on a cash system, you’d set aside the money for each line item of your budget in its very own envelope. As a zero budget, you’d have every penny of expected income each month assigned to an envelope in your system.
When you only touch a set, smaller amount of money per bill, you’re way less likely to overspend on anyone budget item.
This can definitely be done just as well with a non-cash system, it just requires a little more diligence and discipline on your part.
Take a look at our simple budget templates for ideas on how to structure your envelope system. If you’re looking for a step-by-step tutorial on how to start a budget, you’ll want to check out our guide on how to budget to see all the different methods.
2. Stop Buying New Cars
Or, honestly, don’t buy any cars for as long as you can, new or otherwise.
His concept is this: as soon as you drive off the lot, your “investment” depreciates (i.e. loses value). If the average brand new car depreciates in value by 18% in its first year alone, it clearly makes far more sense to try to buy a 1-year old car for 18% off the sticker price instead!
The best way to avoid falling for this common pitfall is this: when you decide you WANT a new car (but you don’t, in fact, NEED one), find the car you want (at the best deal you can find), then figure out what the monthly payment would be. Out of your monthly budget, assuming it’s within your budget to do so, set that amount of cash aside in a cookie jar until you’ve saved up the cash value of that car.
It’s a long game, but the satisfaction of not accruing any more debt, plus owning the car outright when you drive off the lot, is incomparable.
3. Build Credit With “Good Credit” Not “Bad Credit” If You Have No Other Option
If you’ve listened to any of Dave Ramsey’s podcast, you’ll know that he segregates credit into “good credit” and “bad credit.”
In general, a mortgage can be “good credit” if done correctly, and just about everything else is “bad credit.”
Dave Ramsey’s tips on buying a home suggest it’s “good credit” because it’s substantial collateral with a great interest rate in comparison. When you pay a car loan, you end up with a depreciating asset.
When you pay a mortgage, you end up with something that (with care and updates over time), theoretically appreciates in value.
Wondering where college fits in? Dave Ramsey’s tips for college costs is to pay cash for your education! Either working while in school to pay the cost, or having generous parents help you pay, but he recommends avoiding student loans if at all possible.
Try to remember it like this: if you can make your money work for you and grow, it’s good debt. If you’ll lose money in the long run, it’s bad debt.
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4. Keep Your Current Cell Phone
In today’s culture, this is probably one of the hardest concepts to wrap your head around.
If you asked Dave Ramsey for tips for cell phones, he’d probably tell you that so long as it still makes a call and maybe can send a text, it still works and doesn’t need replacement.
Have you ever thought about that when doing the typical 2-year upgrade on your phone? Why are you paying someone a ridiculously high full price for a phone that does EXACTLY the same thing your last phone did?
Instead of buying a brand new phone just because it’s 2 years old, keep your phone until it literally doesn’t work anymore. At that point, buy a phone that’s 1-2 models old or used/refurbished instead of wasting money on the latest, new models.
5. Pay Off Your Credit Card Balances Each Month (or don’t have cards at all)
A lot of people fall for the corporate trap that to be “affluent” you need to “charge it to your card.” Typically, the only people who truly benefit from this are the credit card companies.
Sure, you might earn some rewards but how much money do you need to spend to earn a 1% reward that’s worth something? When you get $1 for every $100 spent, it might be a better idea to just pay cash and not run the risk of accruing a 12-30% interest charge.
If you can’t seem to break the cycle of getting charged interest on your cards, here Dave Ramsey’s best advice is his famed “plastic surgery” — cut up the cards and say good riddance.
6. Pay Cash Whenever Possible
We’ve already talked about good debt/bad debt, credit cards, and cars. Every single time you pay with any method besides cold, hard cash, you run the high risk of paying over and above the actual price due to the “I.O.U.” fee, also called interest.
You might argue that “same as cash” financing is a good idea, because it’s no interest. Perfect, right?
Wrong. Next time you use a 0% financing offer with a credit card, run the math. You’ll find that your statement minimum payment does not equal the actual monthly minimum required to pay off the balance in full by the end of the promotional period.
7. You Don’t Actually Need a Credit Score
A lot of people like to tell you that you need a credit score or else you won’t qualify for a loan.
I’ll ask you to see number 6, and realize that if you always pay cash, you’ll never NEED a loan, so who cares!
And despite what the mortgage companies and realtors tell you, you do NOT need a credit score to be approved for a mortgage.
The mortgage companies make interest on your use of their financial products, and many realtors get small commissions for referring clients to companies and banks they have a relationship with.
As Dave Ramsey so accurately says, the only way to get a credit score is to borrow money, so your score goes up, so you can borrow more money. It’s an eye-opener worded like that!
8. Have an Emergency Fund
Paying cash for everything and avoiding as many sources of interest charges as possible sounds like you’ll be good to go, right?
Well, misery loves company and problems are bound to come up sometimes.
Where to put an emergency fund, you ask? When you build your small, fluid, $1000 emergency fund as part of following Dave Ramsey’s advice, you’ll want that to be cash or an easily-accessed savings account. This will cover things like smaller car repairs or furnace repairs.
As you make it through Dave Ramsey’s baby steps, you’ll eventually build a much bigger emergency fund, to cover 3-6 months of expenses should some seriously bad luck hit. This should also be a fairly fluid account.
9. Minimize Your Budget Line Items
The fewer things you need to give up your money to each month, theoretically the less money you’ll be spending each month.
Chances are good you’d do just fine without that magazine subscription, the weekly dinner out, or that third streaming service.
Turn it into a fun game, to see just how many things you can truly remove from your budget and then see how big you can grow your debt snowball.
Try using a company like Trim, they will automatically negotiate lower monthly bills for you.
10. Increase Your Income
While better-managing your money and shrinking your expenses are both huge in terms of getting your finances in order, sometimes that still isn’t quite enough to see much difference.
Whether it’s selling off your dust-collecting junk from your attic or finding a way to make a little extra cash on the side, increasing your income is a great way to quickly see your budget stretch farther.
The easier and less time-consuming the side hustle is, the better. If you can make money while you watch tv, well that’s the dream, right? (You can learn more about earning money while watching Netflix, here).
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11. Go For Free Stuff Whenever Possible
Most Dave Ramsey tips include advice to get you to spend less, with a preference being on taking advantage of free stuff whenever possible.
There’s no shame in accepting (or asking for) unwanted, old furniture from family or friends.
There’s no shame in checking the free section of craigslist regularly for something that needs just a little TLC to be functional again.
And when you have the chance to use a coupon on an already good deal, do so, so you don’t pass up what’s basically “free cash back!”
Using a cash back app like Ibotta is perfect for this! Simply take a picture of your receipt and get paid to shop!
12. Avoid Brand Names
There’s no hard and fast rule that says that brand names are superior to “off-brands” or generics. Sure there might be a few exceptions, but in general, you’ll save a lot of money not paying for a name.
You’ll also save valuable time by not needing to shop around for a sale price since generics are typically consistent prices all year long.
13. Unsubscribe From Emails With Discount Offers
If you’ve signed up for newsletters from stores or brands, you’re definitely receiving “subscriber-only discounts.”
Those discounts, though, offer the big temptation to spend money. Why?
Those companies understand the psychology of consumers, that most shoppers will spend money purely to “not miss out on the deal” before they even realize that they didn’t need to buy any of it in the first place.
When you truly NEED something from that site, sign up for their emails then and unsubscribe after you’ve used the coupon.
14. Eat Less
I know, this sounds more like diet advice than financial advice, but it’s benefits are huge.
The fewer calories you consume, the less weight you could gain, which minimizes weight-related health risks.
Having less food per meal means less food in the house, which obviously makes your grocery trips smaller, faster, and cheaper.
Even if you start working on this advice by simply putting less cheese sauce in your mac and cheese, you’ll quickly see your grocery budget thank you!
Also by meal planning your weekly meals, you can save so much each week.
$5 meal planning, will help you save money and time by getting meal plans sent directly to your email.
15. Save, Save, Save.
With a whole plan of “baby steps to follow,” the common theme with all of them is to SAVE your money. Spend less, put the rest away, is the basis of all the Dave Ramsey tips you’ll find.
In a nutshell, start by saving money on the expenses you can’t get away from — don’t buy what you don’t need, buy less of what you do need (if possible), and always make sure you’re getting the best deal so you’re not spending more money than needed on any one thing.
It’s called being frugal and being frugal = FREEDOM!
Move on to saving your money for retirement, big future purchases (to avoid interest charges), or big life events.
The more money you save, the more money you have.
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As you can see from this list, there are a TON of ways to better make your money work for you — the thing Dave Ramsey advises the most. Any of these tips can be as small or as involved of an effort as you want them to be.
Just remember that the more effort you put into your financial journey, the better the results that will come out.
Do you have any other non-traditional money hacks to share, that have made a big impact on your finances? We’d love to hear them!
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