Dave Ramsey: Here’s the ‘Quickest, Right Way To Become a Millionaire’

David Ramsey
Dave Ramsey is a bestselling author and personal finance expert. He is best known as the host of The Ramsey Show - a popular radio show and podcast that has over 20 million weekly listeners. He has appeared on Good Morning America, CBS Mornings, Today, Fox News, CNN and more. Ramsey, also CEO of Ramsey Solutions, has been teaching people how to build wealth since 1992.
Recognized by GOBankingRates as one of the most influential money experts - and ranked number 1 among the most popular and well-known money experts - he shares here why everyone needs a budget, how to actually become a millionaire and how to create a game to plan the debt payoff you are owed to can hold up.
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What money moves should everyone make to build wealth?
The first thing is to have a written plan for your money - also known as a budget. If you want to build wealth, you have to plan. Next, get out of debt and stay debt free. Your most powerful wealth building tool is your income. And if you spend your whole life sending payments to Sallie Mae, banks, and credit card companies, you'll end up with less money to save and invest for your future.
Where I see many people make mistakes on their wealth-building journey is that they don't live on less than they make. Believe it or not, wealthy people don't spend all their money on stupid stuff! According to our National Study of Millionaires, the typical millionaire has never had a credit card balance in his or her life, spends $200 or less at restaurants each month, and still shops with coupons. The myth that most millionaires lead lavish lifestyles that include Ferraris in their garage every night and lobster dinners is just that - a myth.
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The quickest and right way to become a millionaire is to invest consistently over a long period of time. It's not shocking or flashy, but it works. Don't get distracted by market fluctuations, trending stocks, or get-rich-quick schemes.
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Once you're debt-free (other than your home) and have three to six months of emergency funds to spend, invest 15% of your gross income in retirement accounts like 401(k) and Roth IRAs. Do this for a few decades and you will live and give like no other.
What are some of the biggest obstacles to building wealth?
In my opinion, debt is the number one obstacle to building wealth. Most people drown in debt and end up working their entire lives just to watch everything they earn go right back out the door in the form of payments. Your income is your greatest wealth creation tool; and when it is consumed by debt, it is almost impossible to save for the future.
What advice would you give for building wealth and paying off debt?
Don't worry about the balance here. Get out of debt first and have an emergency fund of three to six months of saved expenses before you start investing for retirement. Think about it: If your money is tied up in debt payments, you can't build real wealth. And if you start investing before you build an emergency fund, you'll end up tapping into your investments when the unexpected happens -- potentially ruining your financial future in the process.
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What are the essential elements of a successful debt settlement plan?
The first step is to make sure you're living off a written, monthly budget. Give each dollar a name — and a task — before the month begins. This is the only way to know for sure how much money you have to work with.
Once this is done, start attacking your debt using the debt snowball method. List all your debts from smallest to largest, regardless of interest rate. Make minimum payments on all but the smallest debts - throw as much money on them as possible. Once that debt is gone, take your payment and apply it to the next smaller debt while continuing to make minimum payments on the rest. Repeat this method while plowing through debt. The more you pay out, the more your freed money grows - like a snowball rolling downhill.
While it may seem that paying off the debt with the highest interest rate makes the most mathematical sense first, you're far from seeing real results if you start with the largest debt. When this happens, most people lose steam and quit before they get close to the end. It's important to pay off your debts in a way that keeps you motivated until you've wiped them all out. Making quick profits in the beginning will ignite a fire in you and give you extra motivation to pay off your remaining debt.
Jaime Catmull contributed coverage for this article.
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This article originally appeared on GOBankingRates.com: Dave Ramsey: Here's the 'Quickest, Right Way To Become a Millionaire'

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