Dave Ramsey Says This Is Your Most Important Wealth-Building … – The Motley Fool
This is one of Dave Ramsey’s best pieces of advice.
- Dave Ramsey has said several times that the most important wealth-building tool is your income.
- He advises getting rid of debt to free up your income for investing.
- This is sound advice, but he doesn’t mention increasing your income, which is also important.
Dave Ramsey is a popular source of financial guidance, and he recently shared advice about building wealth through his Twitter account. According to Ramsey, “Your income is your most important wealth building tool. As long as your money is tied up in monthly debt payments, you can’t build wealth.” Some of Ramsey’s tips are controversial, but this one is worth listening to.
Dave Ramsey wants you to make the most of your income
Ramsey is notoriously anti-debt. He recommends avoiding all types of debt except for mortgage debt, since it’s hard for most people to pay for a home in full upfront. Other than that, he believes in a debt-free approach, meaning no auto loans, credit cards, or buy now, pay later plans. If you can’t buy it in cash, don’t buy it.
His reasoning is that monthly debt payments tie up your income and keep you from building wealth. If you’re spending $600 per month on a car payment, $150 on credit cards, and $250 on a loan, that’s $1,000 per month of income gone. On the other hand, if you’re debt free and not spending every last dollar on bills, you can start investing your money.
Bonus Offer: Score up to $600 when you open this brokerage account
Discover: Best online stock brokers for beginners
This is good advice overall, although Ramsey takes it to an extreme. For example, he recommends that people don’t use credit cards at all. Savvy consumers earn rewards using their credit cards and avoid interest by paying the full balance every month. The key is paying in full so you don’t end up with credit card debt. If you can do that, then it’s not worth missing out just because of Ramsey’s belief that credit cards are bad.
While Ramsey goes too far with some of his tips, he’s right about the benefits of being debt free. Personal finance is far less stressful when you don’t have any debts, and this also frees up money you can use to build …….