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Dave Says Archives for 2021-01

Don't Embrace the Wrong Things

 

Dear Dave,

 

Your plan has been a lifesaver for us. Why do you think some people are unwilling to listen to good advice, and make changes in their finances?

 

Tammi

 

 

Dear Tammi,

 

Thank you so much for all the kind words. I’m really proud of you two for putting in the effort and hard work that goes along changing your financial behaviors and gaining control of your money.

 

I think there are several reasons why some folks resist making changes in their lives, even when those changes would make things a whole lot better and easier for them. One of those things is often denial.

 

My dad used to tell me 90 percent of solving a problem is realizing and admitting a problem exists. I’m convinced that one of the major factors keeping people from winning with money is they don’t realize they even have a problem. If you are apathetic because you think things like debt and living paycheck-to-paycheck are okay or just the way things are, you’ll be unwilling—or even afraid—to make the big changes necessary to achieve big results. Debt is so ingrained into our culture that most Americans can’t envision a car without a payment, or college without student loans. We’ve been sold on the idea of debt so aggressively that most folks don’t believe life without a pile of payments is possible. 

 

Also, change is painful. Most people won’t change until the pain of where they are exceeds the pain of change. No matter who you are, where you’re at right now financially is, in large part, a sum total of the decisions you’ve made to this point. If you don’t like where you are, you have to acknowledge the fact that things need to change—you need to change.

 

Finally, there’s an element of ignorance involved. Don’t get me wrong, I don’t mean being dumb or stupid. What I’m talking about is a simple lack of good, solid information. Anyone can learn things, if they’ll just admit they don’t have all the answers and set their minds to studying and educating themselves. If you’re not careful, what you don’t know about money will make you broke and keep you broke!

 

 

 

* Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Dave Ramsey Show, heard by more than 16 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.


Do Some of All Three, and Enjoy the Ride

 

Dear Dave,

 

I was talking to a friend the other day, and I couldn’t remember what you said about the three good uses for money and why each is important. Would you go over them again?

 

Albert

 

 

Dear Albert,

 

I’ve been doing this for a lot of years, and after all that time studying finance and teaching people about money, I can still find only three good uses for money—spending, saving, and giving. You should be doing all three while you’re working your way out of debt and towards wealth, and after you become wealthy. 

 

The kid in us likes the spending part of this equation, because it’s so much fun. The problem with most people is they can’t really afford the fun they have. You should have some fun no matter where you are on the financial scale, but it should be inexpensive fun in the beginning. Then, the fun can get bigger, better, and more frequent once you’re out of debt and building wealth.

 

The grown-up part of us likes investing and saving, because that’s what can prepare you for retirement and make you wealthy. After a while, though, investing can feel a little bit like Monopoly. You can be up, or you can be down. Sometimes the market fluctuates, but a mature investor will ride out the waves and stay in for the long-term. If you have quality investments with long track records of success, they will come back up. Start investing 15% of your income for retirement once you’ve paid off all debt except for your home and you have three to six months of expenses saved for an emergency fund.

 

The most mature part of you will meet the kid inside when you give. Giving is the most fun you’ll ever have with money. Every financially, mentally, and spiritually healthy person I’ve ever met has been turned on by giving. I’ve met and talked with thousands of millionaires in my career, and one thing all the healthy ones have in common is a love of giving.

 

Someone who never has fun with money misses the point. Someone who never saves or invests money will never have any. And someone who never gives is holding on too tight. Do some of each, and enjoy the ride!

 

—Dave

 

 

* Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Dave Ramsey Show, heard by more than 16 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.


First, Define Long Term

Dear Dave,

 

What is your advice when it comes to investing a one-time, lump sum of $4,000 for a long period of time? I recently received an inheritance from an uncle who passed away, and I want to make the money work for me. I’m 33 and my home is paid for, plus I have no debt and an emergency fund of six months of expenses. I am also maxing out my 401(k) at work. Thank you for your advice.

 

Pat

 

Dear Pat,

 

I’m sorry to hear about your uncle, but I’m sure he was proud of the responsible young man you’ve become. You’ve made some very mature decisions where your finances are concerned, and as a result you’re at a great spot in life.

 

When it comes to investing, I consider a “long period of time” to be 10 years or more. If this is the case with you, I’d suggest a good mutual fund with a solid track record of between 15 and 20 years.

 

I know some folks like to take chances and play single stocks on a one-time investment like this, but I don’t think that’s a good idea. Single stocks just don’t consistently generate the kinds of returns a good mutual fund will over time.

 

— Dave

 

 

* Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Dave Ramsey Show, heard by more than 16 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.


There Are Other Ways

Dear Dave,

 

I really don’t have any established credit, because I’ve never taken out a loan or had a credit card. What will happen when I’m ready to get a mortgage loan and buy a home?

 

Jillian

 

Dear Jillian,

 

There are basically two ways to be in a position to get a home loan. One is to have credit at lots of places and a huge FICO score. This is kind of dumb when you really think about it, but it will get you a mortgage loan almost instantly.

 

When you have no credit, a lender has to do what’s called a manual underwriting. It’s something lots of banks did back in the day, when they actually used common sense when it came to making loans.

 

Fortunately, a few places will still work with you in this manner. They take a look at your work history to see if you have a stable job and a good income. They want proof you pay your bills on time, too. This can be as simple as showing them several utility bills, rent statements, and other receipts. They’re basically looking for a long history of proof that you honor your financial commitments.

 

Remember, buying a house with cash is always the best way to own a home. But I don’t beat people up over having a mortgage, as long as it’s on a 15-year, fixed rate note. Do your very best to save up for a down payment of at least 20 percent, too. That way, you’ll avoid the added expense of PMI (private mortgage insurance).

 

Great question, Jillian!

 

— Dave

 

 

* Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Dave Ramsey Show, heard by more than 16 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

 


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