Personal Finance : The Dave Ramsey way

When I was planing to write about the series on personal finance, I was searching What is really personal finance is, which in fact easy but tricky question. Hardly there is any difficult thing in personal finance, which someone need to explain. But when I see so many broken peoples, I realize that it is not easy but difficult thing. There are some very visionary people making it simple to understand general public. Dave Ramsey is one out of it. Today I am going to talk about him as not many people are aware about his work outside of US.

Here I am going to write about Dave Ramsey, His tweets, his work, His Tips and if i found other things

Personal finance in simple word.

though WordPress is not permitted to show quote re-tweet, but this is very important tweet.

Every dollar is app which makes it easy to make your Monthly plan or budget. Frankly speaking, not writing down plan is very important reason why someone broke. though I am not using Every dollar app but it looks like its very famous.

Yes. I saw it many times even with me also. Which is why I think many of our problems are still alive on many fronts of life.

I am completely agree with this.

But Dave Ramsey is not famous for it. He is famous for his Baby steps

Personal finance in small piece. I am going to explain it step by step

  1. $1000 in an Emergency Fund : Though I wrote whole Post on it but still i am agree that if you remove your Luxury expenditure then $1000 is not small amount for taking care of emergencies. Even you can handle some medical emergencies in their starting point. By paying them from emergency funds you don’t need to worry for searching debt or medical insurance. So Yes its right.
  2. Pay off debt using debt snowball : What is debt snowball? In simple word, If you are Supposed to pay to more than one Creditors, Payoff smallest one first. Its most effective way to payoff debt. Why from smallest? say you have one debt which is maybe repaid in full or above 50% by your saving or salary, then their is no need to pay interest on such debt. so that will help you to repay others. The reason it is useful is when you realize now you have one less account to repay, it give relief. Personal finance is not always math, its the way you think.
  3. 3-6 Months expenses in saving. : Though I made it one factor, Dave, Being expert, Make them as Two different things. Which is acceptable. Completely agree with him.
  4. 15% into tax Favored ( Tax advantage in Indian terminology) : On his Website he explained it as invest 15% of your income for retirement. Yes. That is important thing. and I think I written about it. Generally Its not advisable to take big risk about retirement, when you are telling some naive people. there is another view is that take big risk till you build wealth than invest that amount in Tax saving funds. They maybe govt or Pseudo govt or anything else. Most of the time its Fixed Income Funds or Maybe another asset class also. Dave Ramsey made it great by starting to teach you importance of retirement planing.
  5. College Funding : Till this step, you paid off all debt and now planning for retirement. Now there is one more thing is important and that is keeping fund for your children and their College. As college education is both, expensive and important, Dave make it excellent move by keeping it in mind that though some people may leave their home around 16-17 but not all. Great thing. There are some different types of special account in US which are helping them to achieve this. But in India its better to start investing in Index fund or ask to your financial advisor.
  6. Pay of home debt. : Some may say that weather is it important or you supposed o ignore it. Cost of fund is important. say your interest rate is 9% which is attractive in India. But in US even 3.5% maybe high rate. so you need to talk with your financial advisor.
  7. Give part of your wealth as charity.

So Who is Dave Ramsey?

David L. “Dave” Ramsey is an American businessman, author, radio host, television personality, and motivational speaker. He was a 1982 graduate of the College of Business Administration at University of Tennessee, Knoxville with a degree in Finance and Real Estate. Ramsey’s syndicated radio program, The Dave Ramsey Show, is heard on more than 500 radio stations throughout the United States and Canada, in podcast format, on IHeartRadio, the Dave Ramsey Show iOS application, live on YouTube, as well as live audio and video on DaveRamsey.com. He has written numerous books including five New York Times bestsellers. His books and broadcasts advocate a fiscally disciplined approach to personal and household finances, including the strict management of debt, and often feature a Christian perspective that reflects Ramsey’s religious beliefs. Ramsey was named the 2009 Marconi Award winner for Network/Syndicated Personality of the Year and was inducted into the National Radio Hall of Fame in 2015.  Ramsey has been featured on many media outlets including The Oprah Winfrey Show, 60 Minutes, and The Early Show. He recorded a pilot and six unaired episodes of The Dave Ramsey Project for CBS. He was the host of the television program The Dave Ramsey Show, which aired on the Fox Business Network until June 2010.

How it all started

At the age of 26, through his brokerage firm Ramsey Investments, Inc., he built a rental real estate portfolio worth more than $4 million and became one of Tennessee’s youngest brokers to be admitted to the Graduate Realtors Institute. Ramsey’s success soon came to an end as the Tax Reform Act of 1986 began to have a negative impact on the real estate business. One of Ramsey’s largest creditors was sold to a larger bank, which began to take a harder look at Ramsey’s borrowing habits. The bank demanded he pay $1.2 million worth of short-term notes within 90 days, forcing him to file for bankruptcy relief. Sixty days later another bank demanded nearly $800,000.

After recovering financially, Ramsey began counseling couples at his local church. Soon after offering private counseling services, Ramsey began attending every workshop and seminar on consumer financial problems that he could find. He developed a simple set of lessons and materials based partially on his own experience and on works and teachings by Larry Burkett, Ron Blue and Art Williams of A.L. Williams company now called Primerica.

Today, Ramsey’s company, The Lampo Group, Inc., headquartered in Brentwood, Tennessee, oversees six divisions geared toward financial education. ( Wikipedia)

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About Ashutosh Tilak

Tracking Indian Capital Market since 2010. Finance Student, On this blog I am writing about finance and Investing. You can contact me analystashu@gmail.com or @androidashu & @InsideFinanc on twitter