Dave Ramsey Says This Is Your ‘Most Important Wealth-Building Tool’ – The Motley Fool
Do you know where your money goes each month?
- Dave Ramsey says your income is the best way to build wealth, as long as it’s not tied up in debt payments.
- High-interest debt can prove expensive over time and eat into your disposable income.
- Increasing the gap between what you earn and what you spend frees up cash for other financial goals.
When you think about getting rich, you might imagine winning the lottery or inheriting a fortune from a long lost relative. On a more practical level, you might hope for a pay raise or lucky break in the stock market. But bestselling author Dave Ramsey says most people already have their most important wealth building tool at their fingertips — their incomes.
Ramsey goes on to explain that if you spend a lot of your income servicing debt, you’ll struggle to get rich. In a recent tweet, the personal finance guru said: “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.”
Ramsey’s guide to building wealth
Dave Ramsey has built a brand around his straight-talking money management advice, particularly the importance of becoming debt free. If you’re carrying debt, particularly credit card debt, it will eat into your disposable income. Not only will you have to make monthly payments, you’ll also likely be paying interest on that money. Interest payments can add up and severely hamper your ability to become financially independent.
Being debt free is only part of the picture. Ramsey argues the way to build wealth is to live below your means, avoid debt, and invest consistently. If you spend less than you earn and use the difference to buy assets that will generate income such as buying stocks, over time you can become wealthy.
Here are some of the findings from Ramsey Solutions’ survey of 10,000 millionaires:
- 94% said they live on less than they earn.
- 75% have never carried a credit card balance.
- 75% said they built wealth through regular, consistent investing.
The good news is that many millionaires didn’t earn ridiculous salaries or inherit big bucks. The route they followed is one that many of us could emulate. The bad news? It could involve some lifestyle changes, particularly if you carry debt.