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by
Dave Ramsey
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January 22 - January 26, 2021
“A man with an experience is not at the mercy of a man with an opinion.”
“Even a turkey can fly in a tornado.” People were running around buying things they couldn’t afford with money they didn’t have to impress people they didn’t even like, and they were doing it in record numbers.
IF YOU WILL LIVE LIKE NO ONE ELSE, LATER YOU CAN LIVE LIKE NO ONE ELSE.
Savings without a mission is garbage. Your money needs to work for you, not lie around you.
The financial and banking industries, in particular, are very good at teaching us their way of handling money, which, of course, leads us to buy their products. If I see an ad again and again that tells me I will be cool and sharp-looking if I drive a certain car, I can fall under the illusion that with the purchase of that car, those good things will happen to me. We may not really believe that we will become a model just from purchasing a car, but notice that ugly people aren’t used in the TV spots to sell cars. We aren’t really falling for that lie—or are we? I’m just asking. After all, we
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Americans currently have around $900 billion in credit-card debt.
According to Proverbs 22:7: “The rich rule over the poor, and the borrower is slave to the lender” (NIV). I
The old joke is that if you loan your brother-in-law $100 and he never speaks to you again, was it worth the investment?
Shame and guilt had entered the scene with no provocation. We don’t control how debt affects relationships; debt does that independently of what we want. The borrower is slave to the lender, and you change the spiritual dynamic of relationships when you loan loved ones money. They are no longer a friend, uncle, or child; they are now your servant.
MYTH: Car payments are a way of life; you’ll always have one. TRUTH: Staying away from car payments by driving reliable used cars is what the average millionaire does; that is how he or she became a millionaire.
Taking on a car payment is one of the dumbest things people do to destroy their chances of building wealth. The car payment is most folks’ largest payment except for their home mortgage, so it steals more money from the income than virtually anything else.
Having been a millionaire and gone broke, I dug my way out by making a decision about looking good versus being good. Looking good is when your broke friends are impressed by what you drive, and being good is having more money than they have.
We live in a culture that quit asking, “How much?” and instead asks, “How much down, and how much a month?” If you look at only the monthly outlay, then you will always fleece, because it almost always costs less down and less a month, but in the long run, it is much more expensive.
MYTH: You can get a good deal on a new car at 0 percent interest. TRUTH: A new car loses 60 percent of its value in the first four years; that isn’t 0 percent.
A good used car that is less than three years old is as reliable or more reliable than a new car. A new $28,000 car will lose about $17,000 of value in the first four years you own it. That is almost $100 per week in lost value. To understand what I’m talking about, open your window on your way to work once a week and throw out a $100 bill.
The average millionaire drives a two-year-old car with no payments.
The FICO score is an “I Love Debt” score. According the FICO website, your FICO score is determined by: 35% Debt Payment History 30% Debt Levels 15% Length of Debt 10% New Debt 10% Type of Debt So if you quit borrowing money you will lose your FICO score. It is not a score that says you are winning with money or that you have a million dollars; it mathematically says you LOVE DEBT. Please don’t brag about your FICO score; that makes you look like you love playing kissy face with some bank. Dumb, dumb, dumb.
The lenders’ studies have found that we consumers are very loyal to the first bank that certifies our adulthood by issuing us plastic.
One of my pastors says that living right is not complicated; it may be difficult, but it is not complicated. Living right financially is the same way—it is not complicated; it may be difficult, but it is not complicated.
The truth is that gold is a lousy investment with a long track record of mediocrity. The average rates of return tracked as far back as Napoleon are around 2 percent gain per year. In recent history, gold has a fifty-year track record of around 4.4 percent, about the same as inflation and just above savings accounts.
MYTH: I can get rich quickly and easily if I join these groups, buy this DVD set, and work three hours a week. TRUTH: No one develops and makes a six-figure income on three hours a week.
It is really hard to sell books and DVDs that teach the necessity of lots of hard work, living on less than you make, getting out of debt, and living on a plan, but I’m trying—because it’s the only way that will work. Meanwhile, the sooner you understand that no one gets rich quick by using secret information, the better.
MYTH: I don’t have time to work on a budget, retirement plan, or estate plan. TRUTH: You don’t have time not to.
“A budget is people telling their money where to go instead of wondering where it went.”
You can tell if a credit-card collector is lying by looking to see if his lips are moving.
Haha
The proverb says, “A good man leaves an inheritance to his children’s children” (Prov. 13:22 NKJV).
Ignorance is not okay. “What you don’t know won’t hurt you” is a really stupid statement. What you don’t know will kill you. What you don’t know about money will make you broke and keep you broke.
The second hurdle in this chapter is Keeping Up with the Joneses. Peer pressure, cultural expectations, “reasonable standard of living”—I don’t care how you say it, we all need to be accepted by our crowd and our families. This need for approval and respect drives us to do some really insane things. One of the paradoxically dumb things we do is to destroy our finances by buying garbage we can’t afford to try to make ourselves appear wealthy to others.
He found the typical millionaire lives in a middle-class home, drives a two-year-old or older paid-for car, and buys blue jeans at Wal-Mart.
“We are scaling down” is a painful statement to make to friends or family. “We will have to pass on that trip or dinner because it is not in our budget” is virtually impossible for some people to say. Being real takes tremendous courage. We like approval, and we like respect, and to say otherwise is another form of denial. To wish for the admiration of others is normal. The problem is that this admiration can become a drug. Many of you are addicted to this drug, and the destruction to your wealth and financial well-being caused by your addiction is huge.
You must set up a budget, a written budget, every month. This is a book about a process that will enable you to win with your money, a process that others have completed successfully, and I assure you that virtually none of the thousands of winners I have seen did so without a written budget.
Zig Ziglar says, “If you aim at nothing, you will hit it every time.”
P. T. Barnum said, “Money is an excellent slave and a horrible master.”
According to Brian Tracy, a study of Harvard graduates found that after two years, the 3 percent who had written goals achieved more financially than the other 97 percent combined!
Larry Burkett used to say that if two people just alike get married, one of you is unnecessary. You and your spouse are different, so celebrate the differences and learn to work together
Baby Step One: Save $1,000 Cash as a Starter Emergency Fund
That is Baby Step Two: Use the Debt Snowball to become debt-free except for your home.
They had to blow up some of the timber to get the rest of the crop to market. That’s the sacrifice the situation required. Sometimes that is what you have to do with the stopped-up budget. You have to dynamite it. You have to get radical to get the money flowing again. One way to do that is to sell something. You could sell lots of little stuff at a garage sale, sell a seldom-used item on the Internet, or sell a precious item through the classifieds. Get gazelle-intense and sell so much stuff that the kids are afraid they are next.
Baby Step Three: Finish the Emergency Fund A fully funded emergency fund covers three to six months of expenses.
Understand, you don’t want to “invest” the emergency fund, just have it someplace safe and easy to get to.
Guys, let’s talk. God wired ladies better on this subject than He did us. Their nature causes them to gravitate toward the emergency fund. Somewhere down inside the typical lady is a “security gland,” and when financial stress enters the scene, that gland will spasm. This spasmodic gland will affect your wife in ways you can’t always predict. A spasmodic security gland can affect her emotions, her concentration, and even her love life.
Baby Step Four: Invest 15 Percent of Your Income in Retirement
Growth-stock mutual funds are what I recommend investing in for the long term. Growth-stock mutual funds are lousy short-term investments because they go up and down in value, but they are excellent long-term investments when leaving the money longer than five years.
Here’s a Reader’s Digest version of my approach. I select mutual funds that have had a good track record of winning for more than five years, preferably for more than ten years. I don’t look at their one-year or three-year track records because I think long term. I spread my retirement, investing evenly across four types of funds. Growth and Income funds get 25 percent of my investment. (They are sometimes called Large Cap or Blue Chip funds.) Growth funds get 25 percent of my investment. (They are sometimes called Mid Cap or Equity funds; an S&P Index fund would also qualify.) International
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calculate some of these actual numbers. You are secure and will leave a nice inheritance when you can live off of 8 percent of your nest egg per year. If you make 12 percent on your money average and inflation steals 4 percent, 8 percent is a dream number. If you make 12 percent and only pull out 8 percent, you grow your nest egg by 4 percent per year. That 4 percent keeps your nest egg, and therefore your income, ahead of inflation ’til death do you part. You get a cost-of-living raise from your nest egg every year. If you can live with dignity on $40,000, you need a nest egg of only
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some myths about college degrees. College degrees do not ensure jobs. College degrees certainly don’t ensure success. College degrees do not ensure wealth. College degrees only prove that someone has successfully passed a series of tests. We all know college-educated people who are broke and unemployed. They are very disillusioned because they thought they had bought a ticket and yet were denied a seat on the train to success.
True
Pedigree means less and less in our work culture today. How can you justify going into debt $75,000 for a degree when you could have gone to a state school and paid for it out of your pocket debt-free? You can’t. If you have the $75,000 extra cash or a free-ride scholarship and want to go to that private school debt-free, by all means, do it. Otherwise, reconsider.
The first rule of college (whether for you or for your children) is: pay cash. The second rule is: if you have the cash or the scholarship, go.
Baby Step Five: Save for College
College tuition goes up faster than regular inflation. Inflation of goods and services averages about 4 percent per year, while tuition inflation averages about 8 percent per year.
