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“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.
When we think of millionaires, we think of big houses, new cars, and really nice clothes. Stanley found that most millionaires don’t have those things. 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.
These people have a negative net worth, but they really look good.
I’m always looking for a one- or two-year-old car, I’m always paying cash, and I’m always looking for a deal,
The way you eat an elephant is one bite at a time. Find something to do and do that with vigor until it is complete; then and only then do you move to the next step.
the 3 percent who had written goals achieved more financially than the other 97 percent combined!
The financial mentality I grew up with said, “If you want anything out of life, you’re going to have to get into debt for it!”
You need to have a plan, but you need to have some fun. You need to save, but you need to spend a little.
Most people use the excuse that you should have at least one credit card for emergencies. We have found a much better strategy. Plan ahead and build an emergency fund that can cover (with cash) whatever might come up.
The first major Baby Step to your Total Money Makeover is to begin the emergency fund. A small start is to save $1,000 in cash fast!
it is easy to become wealthy if you don’t have any payments.
After you list the debts smallest to largest, pay the minimum payment to stay current on all the debts except the smallest. Every dollar you can find from anywhere in your budget goes toward the smallest debt until it is paid.
That is Baby Step Two: Use the Debt Snowball to become debt-free except for your home.
“I will never borrow again.”
if you can’t be debt-free on it (not counting the home) in eighteen to twenty months, sell it.
If you use the emergency fund, return to Baby Step One until you have re-funded your beginner emergency fund; then move right back to your Debt Snowball, Baby Step Two.
Treat small-business debt like any other kind of debt.
larger second mortgages, business loans, and rental mortgages are the only things that aren’t paid off in Baby Step Two
The Debt Snowball is very possibly the most important step in your Total Money Makeover for two reasons. One, you free up your most powerful wealth-building tool, your income, during this step. Two, you take on the entire American culture by declaring war on debt.
When you reach this step, you have $1,000 cash and no debt except your home mortgage.
A fully funded emergency fund covers three to six months of expenses.
49 percent of Americans could cover less than one month’s expenses if they lost their income.
We haven’t touched our emergency fund in over fifteen years.
Saving for a down payment or cash purchase of a home should occur after becoming debt-free in Step Two and after finishing the emergency fund in Step Three.
simple maintenance will keep your money muscles maintained. Keep in mind that my muscleman friend never eats three plates of food at a sitting. He is still aware he can lose his fitness, but he can look good and feel good with a lot less effort,
Baby Step Four: Invest 15 Percent of Your Income in Retirement
Your Tool Is Mutual Funds
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.
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.
It is never too late to start. George Burns won his first Oscar at eighty. Golda Meir was prime minister of Israel at seventy-one. Michelangelo painted the back wall of the Sistine Chapel at sixty-six. Colonel Sanders never fried any chicken for money until he was sixty-five, and KFC (Kentucky Fried Chicken) is a household name worldwide. Albert Schweitzer was still performing surgery in Africa at eighty-nine. It is never too late to start.
“INVEST NOW!”
15 percent of success could be attributed to training and education, while 85 percent was attributed to attitude, perseverance, diligence, and vision. If we admit out loud that education is for knowledge, which is only part of the formula to success, then we don’t have to lose our minds in pursuit of the Holy Grail degree.
Knowledge, perseverance, integrity, and character will carry you a lot farther than a piece of paper with a particular school’s logo on it.
The first rule of college (whether for you or for your children) is: pay cash.
Student loans are a cancer. Once you have them, you can’t get rid of them.
We have spread the myth that you can’t be a student without a loan. Not true!
Baby Step Five: Save for College
at about the 18-mile mark (out of 26.2), runners begin to lock up. Some really nasty things start to happen to your muscles and your mind at that point. You’re almost through the race and nothing wants you to finish.
If you aren’t really careful, “The Good Enough” can become the enemy of “The Best.”
Baby Step Six: Pay Off Your Home Mortgage
if you invested what you pay in monthly payments, you’d be a debt-free millionaire before long.
The myth that I was taught in academia (I am not against higher learning, by the way, as long as we are learning the truth) is to use lower-interest debt to invest in higher-return investments.
fifteen-year mortgages always pay off
Thirty-year mortgages are for people who enjoy slavery so much they want to extend it for fifteen more years and pay thousands of dollars more for the privilege.
The best time to refinance is when you can save on interest. Use the calculators on my website at daveramsey.com/tools to determine whether you should refinance.
When asked about mortgages, I tell everyone never to take more than a fifteen-year fixed-rate loan, and never have a payment of over 25 percent of your take-home pay. That is the most you should ever borrow.
If you make $80,000 per year and don’t have any payments, you can become very wealthy very quickly.
Who cares what the broke people think?
Ask any eighty-year-old if five years of sacrifice is worth it to change your financial destiny for the rest of your life!
Paying cash for a home is possible, very possible. What’s hard to find is people willing to pay the price in sacrificed lifestyle.
