Most of us are familiar with finance expert Dave Ramsey.
His advice on all things personal finance has transformed thousands of lives and helped people go from broke and in debt to financial freedom.
Here are Ramsey’s 5 best money saving tips everyone should consider following.
1. Save $1,000 for Emergencies
The very first piece of advice Dave Ramsey gives is to save $1,000 for an emergency fund.
Life is full of unexpected surprises, and having that financial cushion can make all the difference.
Whether it’s a sudden medical expense, a car repair, or job loss, having $1,000 set aside can help you weather the storm without going into debt.
It empowers you to handle emergencies with confidence, knowing that you have a financial safety net.
We can’t prevent emergencies, but we can prepare for them.
Look for ways to cut back spending and divert that money into a high-yield savings account.
Cancel unnecessary subscriptions. Pack your lunches. Follow a budget.
- Related: 10 Tips to Live on Next to Nothing (Start saving money fast!)
2. Use the Cash Envelope System
The envelope system is a game changer for your finances because it helps you control your spending and stay on budget.
And stay out of debt.
Divide your take-home pay into different spending categories like rent, utilities, groceries, entertainment, etc.
Then, label an envelope for each category and put the cash you’ve allocated for that expense into the respective envelope.
When you need to pay for something within a specific category, you simply take the money from that envelope.
The catch is that once an envelope is empty, you stop spending in that category until the next month when you replenish it.
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3. Pay Off Debt Using the Snowball Method
After you save $1,000 in your emergency fund, the next step is to tackle debt using the snowball method.
Dave Ramsey recommends this method because it helps change your mindset and behavior.
It’s also the fastest way to pay off your debt.
Here’s how it works: List out your debts smallest to largest. No need to worry about the interest rates with this strategy.
Pay as much as you can on your smallest debt while making minimum payments on all your other debts.
Once the smallest debt is paid off, throw as much money as you can at the next smallest debt.
Repeat until you are debt-free.
This method gives you a quick win that builds momentum and excitement as you knock out each balance.
When you see you can actually pay off debt, you’ll start to believe you can attain it – making the process easier and way more fun.
- Related: 8 Tips to Drastically Cut Expenses (and save $100’s)
4. Invest in a Roth IRA
Dave Ramsey is a big fan of the Roth IRA as a way to boost retirement savings and build wealth.
And it’s easy to see why.
With the Roth, you contribute with after-tax dollars.
As a trade off, you won’t have to pay taxes on the money earned or money withdrawn when you retire.
Even better, the Roth IRA has no required minimum distributions (RMDs). Because you aren’t forced to withdraw at a certain age, you can leave your money to grow longer.
A Roth IRA is a good choice for those with lower incomes, and unlike traditional workplace retirement accounts, you can choose your own investments.
- Related: How to Save Money on a Low Income (It’s easier than you might think!)
5. Keep Your Eye on the Prize
Dave Ramsey frequently shares this mantra: “If you will live like no one else, later you can live like no one else.”
In other words, if you sacrifice now like most people are unwilling to, later on, you’ll be able to live life to the fullest like most people won’t be able to.
This is the financial coach version of “Keep your eye on the prize.”
Know why you are making sacrifices today – so you can live a debt-free, financially-free life in the future.
- Related: 7 Money Habits to Copy From the Rich (You’ve got to try these money hacks)
You Can Do It!
These 5 money saving tips have changed people’s lives and made financial freedom achievable. And, they can change yours, too.
- Save for emergencies
- Budget with cash-filled envelopes
- Pay off debt using the snowball method
- Invest in your future
- Make sacrifices today for a better tomorrow
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