You have officially found the ultimate list of Dave Ramsey tips. From getting out of debt to investing, I’ve created a comprehensive list of the best Dave Ramsey money tips.
These are actual tips from Dave Ramsey himself, derived from years of listening to his podcast, watching his video, and reading his books.
To make things a bit easier, I’ve broken up these tips into categories based on their topic. So you’ll get the best Dave Ramsey tips for budget, saving, life insurance, investing, and buying a home. These are the most common things that Dave talks and writes about.
If you’re new to Dave, then you probably aren’t sure why these tips even matter. So I’ll start with a little bit of background before you jump into the tips.
If you’re already familiar with Dave and understand the value of these tips, you can skip ahead to the tips section.
Dave Ramsey Tips
Who is Dave Ramsey
Dave Ramsey is a personal finance expert best known for his 7 Baby Steps–a method that teaches families how to get out of debt.
His book, The Total Money Makeover has helped millions of people methodically work their way out of debt, including myself.
Using Dave’s method for paying off debt, I was able to pay off over $78,000 in student loan debt in less than three years. His work in helping families gain financial freedom can’t go uncredited.
He offers tried and true financial advice on the Dave Ramsey podcast and through many of his other books. He was able to work his way out of debt and losing everything and now he teaches others how to do the same.
My story alone should be enough to read and apply these Dave Ramsey tips.
Dave Ramsey Tips for Paying off Debt
Dave is best known for his tips and methodology for paying off debt, so I’ll start this list with his tips on debt.
Use the debt snowball to pay off debt
While there are many approaches to paying off debt, Dave recommends using the debt snowball method. With this method, you will pay off your smallest debt first and work your way up to the largest debt.
The reason that Dave recommends the debt snowball over other methods, like the debt avalanche, is that it gives you momentum. Once you pay off your smallest debt and taste victory, you’ll have the motivation and tailwind to start paying off more.
Sometimes it less about math and more about psychology.
Undebt.it is a free website that you can use to track your debt payoff progress and even compare other methods.
Sell everything except the kids
The whole idea of selling everything is to quickly increase your cash to put toward your debt. Ulimately, your goal is to have as big a shovel as possible to dig your way out of debt.
So finding things around the house to sell at a garage sale or online is a quick way to make some extra cash. Dave also doesn’t shy away from telling people to get a second job or to work more hours temporarily.
The overall idea is to increase you income to pay off your debt fast.
Eat beans and rice
This is Dave’s way of saying, “Stop eating out.” In order to free up cash to pay off debt, you’ll need to cut back on expenses. So that would mean eating out become a luxury and not a necessity.
Eating out is typically one of the most common expenses that can be eliminated to free up cash. Don’t stop here though. Find other expenses that you can cut back on to free up cash.
Get on a budget
Dave’s number one tip for paying off debt is to get on a budget. Getting on a budget will allow you to see exactly where you money is going.
When you create a budget, you look at your total income and allocate your funds to cover your expenses.
You will want to create a budget that will account for your necessities but also paying off your debt.
Dave Ramsey Tips for Budgeting
Get on a zero-based budget
As Dave would put it, “Give every dollar a name.” This simply means that you need to allocate where every cent of your income is going within your budget. The budget that allows you to do this is the zero-based budget.
This budgeting method accounts for all of your income such that your budget balance is zero.
It doesn’t mean that all of your money is spent. Instead, it means that all of your income is allocated to something–whether a bill, savings, or other items.
Use cash & cash envelopes
When is comes to spending, Dave recommends using cash.
The reason? Well, you can’t go over your budget if you don’t have cash. No money, no spending.
He recommends taking cash out for your budgeting categories and putting that cash into envelopes. So when you go to the grocery store, you’ll only use the cash that’s in the grocery envelope.
Now, even if you’re like me and you don’t like carrying cash you can still leverage this concept.
The app, Qube Money, allows you to create digital cash envelopes that are connected to your debit card.
So instead of pulling out a wad of cash at the store, you’ll simply open up your grocery “qube”, pay for your cart, and close it back up. Your balance is what you’ll have left, just like it were cash.
Track your expenses
You can’ stay within your budget if you aren’t tracking your expenses. Dave’s tip is to track your expenses throughout the month, which is exactly what our parents and grandparents did when balancing their checkbook.
To help you do this, Dave created his own app called the Every Dollar app. This app allows you to input your budget and track your expenses.
Tracking your expenses is important so that you know if you’re within your budget or not.
Stay within Dave’s recommended budget percentages
If you’re new to budgeting, Dave provides a guide for budget percentages. This will give you an idea of how much of your income you should allocate to each budget category.
Here’s Dave’d budget percentage breakdown.
Dave Ramsey Money Saving Tips
Save $1000 for emergencies
When you begin paying off debt, Dave’s tip is to save $1000 for emergencies. This is just a starter amount to hold you over until you pay off your debt.
Now, for many people this may not seem like enough to mitigate risk. For example, if you lose your job, $1,000 may not be enough to cover rent in many cities.
So although this is Dave’s tip, you can modify it to meet your needs. In general, you need enough money saved so that you can still survive an emergency.
Save 3-6 months of expenses
After paying off debt, Dave’s next money saving tip is to save 3 to 6 month of expenses. This is what he calls a fully funded emergency fund.
The idea is that if you were to lose your job, you would still have enough money in savings to cover your necessities for up to six months.
A great way to help reach this saving goal is to participate in savings challenges. These make saving money fun and competitive.
Save for your child’s college
You want to end the cycle of debt. Saving for your child’s college will allow them to go to school debt-free and not have to get student loans.
This is step 5 in his baby steps. It’s best to start this process when your kids are young. Begin by opening a savings account for them as a baby and consistently putting money in the account. You can also open a 529 or ESA investment account.
Dave Ramsey Life Insurance Tips
Get term life insurance
Dave’s number one tip for life insurance is to purchase term life insurance. He specifically recommends that your coverage amount is 10-12 times your income so that our income can be easily replaces in the event of your untimely death.
According to Dave, term life insurance is the simplest and often cheapest form of life insurance that you can purchase. The point is to issue funds to your beneficiaries if you die during the policy’s term.
Dave Ramsey Investing Tips
Invest in mutual funds
In Dave’s word, you should invest in “good growth stock mutual funds.”
A mutual fund is a type of investment that is comprised of stocks, bonds, and other types of securities. Money from investors is pooled together to purchase these securities, giving you a percentage of ownership.
Mutual funds provide portfolio diversification without the risk of individual stocks.
Check out this article to learn more about investing.
Invest 15% of your income into a Roth IRA
After following Dave’s tips for paying off debt and funding your emergency fund, one of his next tips is to invest 15% of your income into a Roth IRA.
So what’s the significance of 15%? Well, if you invest 15% of a $50,000 income starting at age 30 and the market returns at least 10%, you should retire as a multimillionaire.
Here’s exactly what Dave has to say:
A Roth IRA allows you to pay taxes on your contributions upfront and avoid taxes later own. This is helpful in the case where taxes increase over time. You won’t have to worry about paying at a higher rate later own.
Dave Ramsey Tips for Buying a Home
Get a 15-year fixed mortgage
When it comes to buying a home, Dave suggests only getting a 15-year fixed mortgage. You’ll save tens of thousand of dollar by going with a 15-year mortgage over a 30 year.
The example that Dave gives is if you have a 30-year, $175,000 mortgage at 4% interest, you’ll pay $68,000 more over the life of the mortgage.
You want to get a fixed interest rate because you can maintain your low rate over the life of your mortgage and it won’t change. On the contrary, adjustable rate mortgages (ARM) can exponentially increase after a set amount of year, costing you more.
Don’t exceed 25% of your income
Based on Dave’s budget percentages, your mortgage payment shouldn’t exceed 25% of your income. Anything more will tie up a significant amount of your income and can put you at financial risk.
Use manual underwriting
If you’re following Dave Ramsey’s tips to get out of debt, then you credit score will inevitably drop. That’s because credit relies on having debt. This means that it may be difficult to get a traditional mortgage for your home.
In this instance, Dave recommends doing manual underwriting when you buy a home.
This process manually takes information about your payment history to determine your creditworthiness. This is contrary to the automatic process that leverages your FICO score to determine your creditworthiness.
You can learn more about manual underwriting here.
Pay off your mortgage
Ultimate, the goal is to become completely debt free. Step 6 of Dave’s baby steps if to pay off your mortgage early.
If you’ve already paid off your other debt, then this will be easier than you think. You’ll have the extra income to put toward extra mortgage payments.
Dave Ramsey Tips for Car Buying
Pay cash for a used car
As with everything, Dave doesn’t recommend getting into debt. Buying a car is no different. His recommendation is to save up and purchase a used car in cash.
Dave is vehemently against leasing a car. In fact, he calls leases “fleeces.” Ultimately, the amount that you put into leasing a car can be saved up to buy a car that you will own.
Here’s Dave’s take on leasing:
Dave Ramsey Tips for College
Pay cash for college
Ultimately, Dave doesn’t want anyone to get into debt to pay for college. His recommendation is to pay for college cash. This sounds almost impossible, but here are his other tips to make it happen:
- Go to a community college first – They cost less, so you can cash flow your courses while staying at home
- Live at home – If you’re going to a community college, you can stay at home to avoid astronomical housing fees
- Work while in school – You’ll have to work to cover the cost of tuition. So find a job as your work your way through school
- Apply for grants and scholarships – There is free money out there, but you have to do the work to get it
At the end of the day, it’s less about the name of the school you attend and more about your network and skill.
Summary of Dave Ramsey Tips
There you have it! These are 21 of the best Dave Ramsey tips to help you manage your money. Even if you implement some of these tips into your finances, you’ll be much better off. Remember, these are just tips. Use the principles and apply them to your own finances in a way that works.