Simple Dave Ramsey Tips You Need to Manage Your Money
Chances are if you’ve been in the world of personal finance for any time at all, you’ve heard of Dave Ramsey.
Dave has made a career of offering easy to follow no nonsense advice to get your financial life on track.
Whether you are looking to dig yourself out of debt, learn how to make a budget, or start saving more money– he offers tons of great tips.
Let’s check some of those out!
Before we jump into Dave Ramsey money tips, I think it’s important to revisit his Baby Steps as it’s a great starting point to see how and why he prioritizes money the way he does. If you are interested in a more in depth look into these baby steps, check out his site.
- Baby Step 1: $1,000 to start an Emergency Fund. If you want to get serious about being financially free, you need to start by getting rid of your debt.
The first step in that direction is creating an environment to make that happen. Start by setting up an Emergency Fund. This will allow you to stay on track in the event an Emergency does happen– it won’t completely derail you.
- Baby Step 2: Pay off all debt using the Debt Snowball. There are generally two schools of thought on how to payoff debt. The Debt Snowball method and the Debt Avalanche method.
The Debt Avalanche method has you pay minimum balances of all your debt and contributing any extra to the balance with the highest interest. Each time you payoff a debt, you take the amount of that payment and roll it into the next debt payment until you have paid off all your debt.
The Debt Snowball method has you pay off the minimum balances of all your debt and contribute any extra to the smallest balance. Each time you payoff a debt, you take the amount of that payment and roll it into the next debt payment until you have paid off all your debt.
Dave recommends the Snowball method as there are quicker wins to help promote momentum in your debt payoff journey.
- Baby Step 3: 3 to 6 months of expenses in savings. Now that you’ve paid off your other debt, it’s time to buff up your Emergency Savings.
- Baby Step 4: Invest 15% of household income into Roth IRAs and pre-tax retirement. Start putting money away for retirement.
- Baby Step 5: College funding for children. Have kids? Want to start putting away money for their schooling? Here is where you get to do that!
- Baby Step 6: Pay off home early. Your home should be the last bit of debt you have holding you back from total financial freedom.
- Baby Step 7:Build wealth and give! At this point you should have more money in your budget now that you are debt free. Put that money to work for you with investments or start giving like no other.
Now that we know the Dave steps to take, let’s take a look at tips and tricks to help us manage our money.
1.Make a change. Chances are there is a very specific reason you are reading this article. You are looking to pay down debt, increase your savings or make changes with how you treat your money.
Whatever brings you here, the bottom line is the only way to get where you want to go is going to mean a change from what you are currently doing to what is going to get you there. Whether that’s drastically cutting spending, being a more diligent budgeter or some combination in between– you need to recognize the areas that need changing and make the adjustment.
2. You are in charge of your money. Money is a tool. How it gets used is up to you. The best first step is deciding where your money is going before it finds itself in places you didn’t mean for it to go.
Or as my momma always told me, You need to be knowin’ where your money is goin’!
3. You and Your Family are on the Same Team. Budget together! You and your spouse and even your kids (age dependent) are all depending on this budget. Why not get everyone on the same page?! Have monthly budgeting meetings. Talk about your goals or things you want to plan and save for.
My girls love sitting down with me to meal plan and cut coupons. It’s something we started with them last year, but I’ve noticed a difference in their awareness about how money gets spent and what they ask for.
We talk about price comparison, unit per price, where we shop and why– not just because they are living on the same budget I am, but because one day they are going to grow up and move out and I want them to know how to do this for themselves!
4. Don’t Be Afraid of Your Budget. I understand that it can be hard or even sometimes scary to know exactly what your finances look like. Looking at your total debt owed can be downright depressing!
BUT! It’s never going to get any better without a plan. So bite the bullet, get in there and start putting your money plan together!
If you are a Dave follower, you know he promotes the Zero Based Budget— or giving every dollar a job. More on that below.
If you aren’t sure where to start, start with your most important categories first. Dave calls these the Four Walls:
- Shelter and Utilities
- Basic Clothing
Next, don’t forget about saving! After you’ve set aside funds for your savings and basic needs, use what’s left for the rest of your budget. When you plan your budget this way, it keeps you from running out of money before you even start saving.
5. Budget a month ahead. Life happens at 100mph. More than likely no two months will be identical. Take a look ahead to get your financial plan on track. This is particularly important when you have holidays or celebrations like birthdays, Thanksgiving, Christmas, etc.
6. Give yourself a budget buffer. As meticulous as you want to be with your budget, something always crops up that you weren’t expecting. Consider making “Misc.” a line item in your budget and give yourself a little padding. Make sure to keep track of these little expenses to see if they become something that routinely pop ups and needs its own line in the budget.
7. Make decisions with a goal in mind. Are you content with working until your are 65? Do you want to buy a house? Go on vacation? Get a boat?
Time is one of our most precious commodities, so stop wasting yours! There is no time like the present to start getting yourself on the path to where you want to go.
You want to go on your dream vacation? That’s not going to happen without money and without a plan, that money isn’t just going to jump into your bank account.
Saving money for a boat? It will never be cheaper to buy a boat than it is today. So why not go ahead and get started!
Make it happen!
8. Looking a Year Ahead (or Being Goal Minded part 2). This is really part two of my point above, but it warrants it’s own point. We keep ourselves on track with Google Calendar.
My whole life is on this calendar: School events, appointments, reminders, check-ups, movies that are coming out that we want to see, special events, concerts, etc. It’s all there.
Another way we use this calendar is to help us backwards plan our year for budgeting purposes.
I know that at the start of the school year, every year, I have to pay swim team dues. So I spend the rest of the year dropping money into a Sinking Fund so I’m not left to pay the whole thing out of one months budget.
Our dues are $200 for the school year and I pay that in August. So for this year, we have paid our dues and starting in September, I’ve started putting money away for next year’s dues.
I don’t know about you, but $16/month sounds a whole lot easier than coming up with $200 all of the sudden.
You can literally do this with anything you want to include in your budget. The only way this works though is if you start looking ahead so you can be ready!
9. Balance Your Checking Account(s)! I hope this is obvious, but in case it isn’t. You need to be checking in with your money regularly. What has cleared your account? What else do you have pending? Are there any unexpected surprises? Are you staying on track?
Budgeting isn’t really set it and forget it. You need to track your expenses and what’s happening with your money.
10. Follow the steps. It is easy to become overwhelmed with what to do next when you look at your whole financial picture, but one of the best benefits to Dave’s Baby Steps, is the ability to just focus in on one thing at a time. As long as you are consistent you’ll get there!
11. Emergencies are going to happen. It is not a question of “if”, but of “when”. So don’t forget to include this when you are setting up your budget.
12. Sinking Funds. Holy cow! I love sinking funds SO MUCH! These are the answer to so many budgeting questions that crop up.
I already touched on this earlier in planning your year ahead, but Sinking Funds are absolutely my not-so-secret weapon to keep my budget on track and fending off unexpected expenses. If you want a more in depth look at sinking funds, check out my post. It also includes a list of common sinking fund categories.
13. Get Urgent with Debt. One of Dave’s most popular phrases is to get “gazelle intense” when it comes to paying down your debt. Sell things from around your house, pick up a second job, work the over time– do whatever you have to do to get out of debt as quickly as possible!
14. Crap happens. But there is no reason to sit and dabble in it. If you find yourself in a pickle do your best to work through it and not repeat it. Did you buy too much car? Sell the sucker!! Don’t let the thought of admitting a mistake prevent you from fixing it. Upside down in it? Do the math and see what’s the best solution.
Shoppers remorse? Return it and then find a way to eliminate the behaviour that got you into spontaneous purchases. If this is a problem area for you, check out my post about how to stop spending money.
15. “Live like no one else, so you can live like no one else.” If you’ve listened or read anything from Dave at all, I’m sure this phrase is familiar. According to an article I read recently, roughly 157 million Americans are in credit card debt. That is a ton people, ya’ll.
Whether you are comfortable with having a credit card in your life or not, paying interest is just throwing money out the window. There is nothing wrong with living within your means or aggressively saving for your future financial goals. Yes, it can be hard to say no to things like going out to eat or going on vacations, but don’t you think your future is worth it?
I don’t know about you, but hustling for a few years to live the life I want sounds like a pretty great trade off!
16. Embrace Cash Budgeting. I read an interesting article about the difference in purchases people made when paying cash versus paying with a credit/debit card. If you are looking for the Cliff’s Notes version– people spent less and made healthier choices when they were paying cash.
So before you wrinkle your nose up at the prospect of a cash-budget, maybe give it a try. Especially if you have an overspending problem.
17. Being frugal, doesn’t have to mean you live like paupers. Living life on a budget doesn’t mean you are living like a pauper. Living on a budget simply means you are making a plan for your money and then following the plan.
If your financial plans allows you to SAVE money for a nice vacation or car– then guess what?! You can afford a nice car or vacation. My parents use to prioritize one vacation a year for our family. My mom drove a crazy old wood-panel Windstar van and we shopped at Pic-n-Save (a discount store) for our clothes– but what she made up for in saving that way she funnelled into our vacation fund.
Many people have the idea that budgeting equals deprivation– but it doesn’t have to. You are in charge of your budget. You get to decide where it goes.
18. Car payments aren’t mandatory. Just because you can get a car loan, doesn’t mean you should get a car loan. As I am sure many of you know, cars depreciate in value. As time goes on, your car is worth less and less every year. I know for most people having a car is necessary to get to work or school, but consider what else you could be doing with that money that will make a difference to your future.
One of the ways we manage buying cars in our family is to set up a sinking fund for a new car. We research what kind of car we want to buy then check out about how much money something like that will cost and then backwards plan for our next car.
Example: I know that to get a good condition SUV I can plan on spending $6K-$7K in our area. So, we know that we’ll probably need another car in about 5 years or so based on family needs and the state of our current car. So we take $7,000/5years = $1400 and then divided by 12 months is about $117 per month.
You know what I didn’t include, but could? The money I’ll get from selling my current car! If I can make about $2500 off my current car (its an older sedan), I only have to cash flow about $4,500. Over 5 years, that’s $900/year or $75/month.
Totally do-able. And I got to skip the money wasted on auto loan interest. Winning!
19. Pay Off Your Mortgage Early. Owning your own home can be awesome. However, that’s no reason to waste more money on interest than you have to.
20. Limit What You Have in Your Budget. The fewer things you need to pay out to in the month, the more money you free up to pay off debt or increase your savings.
Do you really need cable? If you just have to have something, Netflix is totally affordable! What about other subscription services like Pandora or Apple Music? Could you cut those out and listen to YouTube?
There are usually more opportunities to save in our budget than we first think. Dig in and see where you can save!
21. Get Hustlin’. Saving money can be great, but you know what can speed up your debt payoff process? A side hustle! Walk a dog, pick up babysitting, start taking surveys, become a virtual assistant and more!
Budgets don’t have to be complicated! Now that you know why a budget is important, let’s jump into this quick budget guide!
Step One: Write down your total monthly income.
This is your total after tax income. Whatever money that you have coming in every month write it all down.
Step two: List all your expenses.
Any money that gets paid out needs to be written down. Start with your priorities (like your rent/mortgage, food, gas, etc.) and go from there.
Step three: Make Income minus expenses equal zero.
Zero-based budgeting is the Dave Ramsey promoted budgeting method. With this method you are giving every dollar a job and leaving nothing on the table. You are accounting for eery single cent!
Step Four: Track your expenses throughout the month.
One of the most important steps after setting a budget is tracking it through to the end of the month. How will you know if you are overspending if you have no idea how much you spent.
Another one of Dave’s budgeting tips is to utilize the Envelope Method, the method of paying cash from a budget category envelope for your monthly expenses. I love this to help track spending since the envelope makes it super easy for you to keep all your receipts as well as a running tally of what you are spending by category!
If you want a more in-depth look at the Envelope method and budgeting using the Zero Based budget, check out the links above.
If you are looking for budgeting templates check out my free resource library!
Are you looking for ways to save money so you have more money to knock out debt? Check out these Dave-worthy tips to save you money, today!
1.Buying New to You Clothes. Check out consignment stores, thrift stores, Ebay, hold clothing swaps, or check out one of my favorite sites, thredUP.
2. Cut costs on food. Food is typically one area of a budget where many people tend to overspend. Eating out and overspending on groceries can really add up.
Check out these tips to get started saving money on your grocery bill, today!
3. Cutting the Cord. There are so many great streaming options now, you can still keep up with your favorite shows without the expensive price tag.
4. Visit the library or Check Out Kindle Unlimited. Need some frugal entertainment?! How about free books from the library or unlimited books every month for $9.99??
5. Plan your grocery trips: Make a list and stick to it! Use a calculator while you browse the aisles to make sure you’re sticking to your budget. Do impulse items always end up in your cart? Try ordering your groceries online and then picking them up curbside at the store. Oh, and don’t shop on an empty stomach!
6. Buy generic. I love generic items! Staple food products like flour, sugar, corn starch, pepper and others are regulated and in many cases, the same manufacturers produce the generic products and the brand name. So why would you want to pay more?
7. The 30-day rule of saying “No”. The premise of this is to help you limit impulse purchases. Simply put, you find something that you want, like new shoes, a handbag, etc. Instead of buying it right away, you give yourself 30-days to think it over.
8. Keep Your Current Cell Phone. Don’t fall prey to the next new thing. If you absolutely need a new phone, consider buying used or an older model.
9. Unsubscribe. Chances are that you too have subscribed to your favorite stores to scoop up an extra discount on your first order and then failed to unsubscribe. If you went to all the trouble to subscribe for a discount, changes are you are a great candidate to be a repeat shopper. So guess what?! They are going to send you emails to try to entice you to buy more stuff!
Are you always going to need it? Nope. Are you going to be able to say no to Yoga pants for $7. I don’t know– it’s so hard!
Do yourself a favor and end the temptation!
10. Shop your pantry. One of the easiest ways to cut back your grocery budget is to shop with what you already have on hand. If you are looking to get creative, you can fill in the gaps searching for recipes with what you already have.
If you are looking for more ways to save, check out my list of 125 practical and easy ways to save money.
I would love to hear how these money tips have worked for you! Please drop a comment below.