Dave Ramsey, radio host and personal finance author, frequently talks about some of the basics related to money management.
One of the first things he thinks people who are serious about finances should do is create an emergency fund to cover unexpected expenses.
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The next step Ramsey advises is to get out of debt completely, except in the case of a home mortgage, if the person has one. A mortgage differs from other debts because it is secured by the value of the home.
Debts to pay off first include cars, credit cards and student loans, Ramsey advises. And he suggests paying them off one by one using what he calls the debt snowball method.
“Put them in order by balance, from lowest to highest, regardless of the interest rate.” he wrote on his website, Ramsey Solutions. “Pay minimum payments on everything but the small one. Attack it with a vengeance. Once it’s gone, take that payment and divert it to the second smallest debt, making minimum payments on the rest.”
Once this is achieved, Ramsey advises investing 15% of a person’s household income in retirement.
Your next recommendations are to save for college funds and pay off the house early. Then, Ramsey says, a person is in a position to generate wealth and give.
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The trick is to stay motivated
In order to successfully follow these steps, it’s important, Ramsey says, to stay motivated and on budget.
“Sometimes the thrill of having fun right now or the short-term thrill of impulsive spending can cause us to lose sight of our priorities,” he wrote. “And sometimes life gets so busy that we lose focus on how to stay on budget.”
“As a result, our budget, an important key to financial peace, takes a backseat. It happens to everyone. So first, show yourself some grace,” he added.
Ramsey believes that while budgeting can be exhausting, it is worth it in the end.
“You can’t take charge of your money without a budget,” he wrote. “Why? Because when you make a budget, you tell every dollar what to do. Every dollar. That’s taking control!”
“So maybe you don’t get up early when it’s time to create a new budget because you just can’t wait to get started,” he added. “That’s okay. You don’t have to get excited about the budgeting process, as long as you’re excited about what the budget does for you, today and in the long term.”
Ramsey offers some advice
Because it’s hard to stay motivated to stick to a budget, Ramsey put together some suggestions on his website.
One of those tips is the mental exercise of making goals visual.
“Hang pictures around the house that represent your financial goals,” Ramsey wrote. “Pay off that car? Put a picture of it on your refrigerator to remind yourself why you’re cooking at home instead of ordering that pizza. You’re setting your budget and living within it so you can make great things happen. So , make sure “I’m sure you’re reminding yourself of those important things every day.”
Ramsey also encourages people to celebrate wins, both big and small.
“If you are motivated by rewards, don’t feel bad,” he wrote. “First, that’s natural. Second, use it to keep your money motivated. When you reach a goal, even a small one, celebrate! After budgeting three months in a row, pay off debt or cut back on extra expenses for 30 days, enjoy a financial reward.
The best-selling author also has a few words to say about the use of social media.
“Let’s be honest, your budget is more important than your Instagram account,” Ramsey wrote. “Yes, we said it! It’s much more important to track and stay on top of expenses than it is to see what a near-stranger is having for dinner. Of course, it’s okay to jump on social media, but make sure it’s not about calling your attention more than your economic objectives.
Ramsey also adds a banking tip to help people stay true to their budget.
“Whenever possible, put your goals on autopilot,” he wrote. “Set up automatic money transfers that send money directly to your retirement accounts, mortgage company, or lenders.”
“If you never see the money in the first place, you’re less likely to lose it and more likely to be pleasantly surprised with your progress along the way,” Ramsey added.
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