Managing your money can feel overwhelming at times. Certain financial terms might make you feel like you’re sitting in front of Charlie Brown’s teacher, hearing that static drone. Hearing buzzwords about saving and investing could even compel you to tune it all out. Unfortunately, ignoring your finances could cost you greatly in the long run.
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Enter Dave Ramsey. He doesn’t have time for financial jargon. Instead, he delivers blunt, direct wisdom for anyone who wants to get their finances on track without earning a degree in economics. His first piece of advice? You must have a written game plan for your money — and if you don’t, you’ll lose out.
“Number one, you need to have a written plan, a budget,” he told podcast listeners. “You have to do a written game plan with money, or you’re going to lose.”
Now that you know Ramsey’s first step in not losing, what exactly do you need to do to win?
Get Out of Debt
Ramsey posed a simple but powerful question to his listeners: What would you have if you were debt-free? The answer, of course, is more of your own money.
“Your most powerful wealth-building tool is your income,” Ramsey explained. “And when you spend your whole life giving your money to banks — who fill up the skyline and have furniture nicer than yours — that makes you stupid.”
While this might sound harsh, it comes from a place of genuinely wanting his listeners to get out of debt. “I want you to win,” he added. “I want you to have a great life.”
Live on Less Than You Make
This might seem like common sense, but in an age of Instagram and influencers flaunting luxury lifestyles, it’s easy to lose perspective. Ramsey warns against trying to “keep up with the Joneses” and urges people to start living within their means.
“Live on less than you make,” he said. “If you spend everything you make, you’re a fool.”
Acknowledging that many people feel stuck due to stagnant wages, Ramsey challenged his audience to examine their personal financial habits. Essentially, if your wages are stagnant, it’s because you’ve allowed them to get that way.
Not making enough money? It might be time to explore new opportunities — whether that means pursuing a promotion, switching industries, or learning new skills to increase your income.
Save Money
“100% of the people who don’t save money don’t have any,” Ramsey said — and he’s not wrong. He emphasized that rich people get rich because they’re willing to save money.
However, saving money isn’t just about hoarding cash under a mattress or in a random savings account. It’s about finding ways to grow money — specifically, through investments. He cautioned against money market accounts that offer low returns and instead encouraged investing in mutual funds that outperform the S&P 500 index.
Don’t Overspend
Once you’ve followed Ramsey’s steps and started winning financially, you might be tempted to flex a little bit. Maybe splurge on a fancy new car. Ramsey urged listeners to resist that urge.
“Rich people don’t go spend a bunch of money,” he said.
If you want to hold on to the wealth you’ve accumulated, and keep growing it, it’s critical to stick to the plan. And that includes living within your means, even as your financial situation improves.
Dave Ramsey’s advice is clear: To win financially, you must start with a plan. Without a written budget, you’re destined to lose. However, if you learn to save, get out of debt, avoid overspending, and live within your means, you’ll be on the winning path long-term.
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This article originally appeared on GOBankingRates.com: Financial Guru Dave Ramsey Warns: Skip This Step, and You Will Lose
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