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Dave Ramsey is a well-known financial guru that many may have heard of in the financial management world. He’s known for his popular course “Financial Peace University” which teaches students all about how to take control of their money.
Within his course, Dave teaches specific financial strategies that he calls “baby steps” to help his students along in their journey to financial freedom. Dave is especially known for his anti-debt mentality and for helping so many people pay off their debt and save money for their future.
If you’re looking for help with your finances, read through and apply these Dave Ramsey money tips that will help you destroy debt.
Dave Ramsey Money tips for destroying debt
Have an emergency fund
The first step that Dave Ramsey promotes in his financial course is to save for an emergency fund. This step is taken even before he recommends paying off debt, and for good reason. By creating an emergency fund, you will be more likely to avoid future types of debt. This step also gets you in the habit of becoming a better saver.
An emergency fund isn’t intended to be your 3-6 months’ worth of savings that you can and should work towards building in the future. This fund is meant to curb credit card debt on emergency items that pop up when you least expect them.
Stop buying new cars
Cars: we love to hate them but also hate to love them.
A car is very important for us to get from point A to point B in our lives. And while the new cars might come with flashy perks, they also lose far more of their value within the first 12 months of owning them than a used car.
A new car will lose around 20% of its value in the first 12 months. Do yourself a favor and buy a used car to save money and stay out of major debt. It’s worth it.
Don’t justify frivolous purchases
Spending a little here and there might not seem like a lot in the moment, but “little purchases” over time really do add up. Don’t justify frivolous purchases that are impulsive or satisfy an immediate craving. No amount of justification will pay off frivolous debt that isn’t necessary.
If you have a phone that works, don’t buy a new phone. If you have a car that works, keep your car. Simple is better.
Pay cash when possible
There’s something in behavioral economics called the “pain of paying.” Humans are against spending money because it feels painful. When you use a debit or credit card, the pain might not be felt right away, but it will eventually. Since there is a delay in the pain of paying, we don’t always understand what we’re doing in the moment.
Solution? Pay with cash where possible.
You’ll feel the pain of paying as soon as you hand over the money for whatever it is you’re buying. Cash users are far more familiar with how much items cost versus those who pay using a card. Carrying cash is also more inconvenient and requires more of your attention to the details. Next time you go to the grocery store or even a restaurant with friends, try to carry cash with you to make your purchases.
Don’t be afraid to “Trim your Budget”
While it’s easy to justify many of our purchases, it doesn’t mean that we should. There are expenses that we need to call out as unnecessary. Don’t be afraid to really take a hard look at your budget and trim it where there are parts that are not essential.
We can trim items such as eating out, car washes, salons, new clothes, subscriptions, gym memberships, daily coffees, etc.
While we don’t want to cut out all of the “fun” in our lives, we should trim our budget to save money and pay off debt where we can. If we keep any and all of the extras in our budget, we won’t have any leftover cash to pay off debt and might even keep racking up more of it.
Focus on the “Four Walls”
While cutting items out of your budget, know where your priorities are as far as necessities go. One of the most crucial Dave Ramsey money tips is to, “Protect your house first.” Even if you can’t pay all of your bills, make sure that your “four walls” are covered: food, utilities, shelter and transportation. These are essential priorities for your budget.
Start with the four walls to create and refine your budget, and you’ll quickly be reminded of your priorities.
Increase your income
Sometimes you just might not make enough income to budget the amount necessary to pay off debt. You might have even attempted to trim off the extra and make all of the necessary adjustments to curb your spending, but to no avail.
If this is the case, consider finding a way to increase your income. Get a part-time job. Start a side hustle. Find a way to make extra income so you can work on saving and paying off debt. Even if you have a full-time job, there are several side hustles you can start to supplement your salary.
Stop Eating out all the time
One of the biggest budget drains is eating out and spending excessive amounts on food and drinks. I always say that eating out is an expensive hobby. While most of us enjoy it, we often can’t afford it.
Try and limit eating out to once a week or every other week. Setup a meal plan for the week ahead and stick with it. There are amazing programs out there that offer meal planning ideas and recipes, check out great programs like the $5 meal plan or MyFreezEasy.
Don’t try to tackle your biggest debts first
Strategy matters. The way that you pay off debt can either help or harm you. There are some people who can pay off debt without any extra encouragement or noticeable progress. Contrary to that, there are others (like myself) that need to see small wins along the way.
The debt snowball method gives you these small wins. You work to pay off your smallest debt first. Once you’ve paid that off, you work to pay off the second smallest debt and so forth. This is awesome because you see progress made which motivates you along the way.
Budget!
A crucial step to paying off debt is creating a budget for your finances. Make sure that you take the leading role in this area of your life and tell your money exactly where it needs to go.
A budget helps you understand your priorities and financial goals along the way. While we easily get caught up in the day to day spending, it’s important to have accountability and a plan to keep us on track.
Don’t go to a fancy college
Don’t buy into the misconception that you have to go to college and that it must be at a well-known and prestigious college. It just isn’t true. College prepares you for a job and your future but it isn’t always the next right step for everyone. Determine if it’s right for you first before making this step.
If you determine that college is a good investment, look for an affordable college route. Start the first two years at a community college and then transfer to a university. Or, find a more affordable university rather than going after prestige.
College is very expensive. Be careful and intentional about the amount of debt that you take on for it upfront. Most students don’t realize the amount of debt that they are taking on from the get-go.
Plan your grocery trips
Have a grocery list before you go to the store! Most of us shop with our stomachs, even if we don’t admit it. If you already have a list, you’ll likely stick with it rather than shopping haphazardly.
Another important tip is to avoid brand names. You don’t really need the brand name item over the generic. The generic is often just as good and has the same ingredients.
These small changes might feel inconsequential but they do add up over time. The more you save on everyday purchases, the more you can save and pay off debt over time.
Find like-minded friends
The people you surround yourself with will impact your finances. They will, I promise. If they’re the kind of friends who aren’t good with money and they always want to go out and eat or do things that cost money, chances are that you’ll end up doing the same.
I’m not saying to ditch your friends if their financial habits or goals differ from yours, but be aware of the people that you surround yourself with. If you know that certain friends run through money fast, set up boundaries with them. Stay in and invite them over instead.
Find people that do prioritize their finances. Listen to podcasts about your finances, take Dave Ramsey’s Financial Peace course to learn how to handle your finances but also to help you meet others with similar goals.
Don’t take on any new debt
It’s easy to grab your credit card and use it to pay for pretty much everything. The problem is, we find it hard to grasp the concept of cash out the door when we use cards. Think about it: how do you see a $20 bill being used up versus paying with a card?
I hate to say this, but, no one has ever gotten rich off of credit card rewards. The initial sign up rewards give you the most points you’ll ever receive. But these credit card companies want you to purchase more on your cards while enticing you with rewards. Sadly, many of us continue to use the cards hoping for rewards even when we don’t pay off our balances.
If you use a credit card on purchases and pay off your balance every month, great. Use it for the points. But if not, it’s probably best to stay away from credit cards altogether.
Stop keeping up with the Joneses
We see others buying things and that makes us believe we need to buy those things as well. Typically, these are items that we don’t need and also items that are out of our budget.
Trying to keep up with the Jones’ never works out for you financially. I know it’s challenging, but it’s important to “act your wage.” Don’t buy things you don’t need or because you want to impress others.
Keeping up with the Jones’ leads to more and more debt. Living simply and finding contentment in what you have leads to far more happiness and a far healthier financial situation.
To sum up…
Debt is often unavoidable but that doesn’t mean we shouldn’t find a way to reduce our debt over time. While it can feel overwhelming or discouraging at times, there are intentional money tips and lifestyle changes that we can incorporate to accomplish this.
It will take self-discipline and perseverance along the way, but the journey is well worth it. You will reach the point where you can say, with pride and certainty, that you were able to pay off your debt. It will be a freeing moment!
I hope that some of these Dave Ramsey money tips were useful as you work through this journey to pay off debt. Let me know what your favorite tips were from this article or suggest one of your own!