In the world of personal finance, Dave Ramsey has made a name for himself. This money guru has been telling us for years that the key to improving your financial situation is to pay off debt fast and live below your means. This article will outline nine Dave Ramsey budget tips that will help you to pay off your debt quick.
The plan that I am referring to is the budgeting plan presented in Dave’s book The Total Money Makeover.
It is in this book that Dave tells his readers about his past mistakes with money that led him and his family into bankruptcy and how he made the decision that he will never find his family financially and emotionally broke by mismanaging money again.
It is his story that helped to inspire our story. In turn, I hope that the tips and tricks that Rob and I learn while we are writing our story will help your story.
You may enjoy reading: Pay Off Debt Fast | 11 Things We Did to Pay Off $50,000 6 Months
9 Dave Ramsey Budget Tips that will Help You Pay Off Debt Fast and Get Your Finance in Order
From rags to riches and back again, Dave Ramsey developed a budgeting method that uses common sense to manage money responsibly.
Tip #1 | Successful budgets require teamwork
Remember, just because one of you is keeping the checkbook, this does not mean that this person makes all the financial decisions. – Total Money Makeover
I have heard about Dave Ramsey for years. Occasionally I would pick up an episode of his syndicated show on the radio and think, this fool has no clue about money!
I would listen for entertainment value as I would judge his message. At that time in my life, there was no way for me to comprehend the benefit of being debt free.
After all, why would someone want to be debt free? Hasn’t everyone heard of good debt?
It was not until Rob, and I hit a point in our lives that I knew we were losing our footing and we needed help that I allowed myself to open my mind to his message.
It took a terrifying moment in my life, the moment that our son moved out and I didn’t know what was next. Dave calls this the point of becoming sick and tired. Sick, and tired of being broke.
Granted, we were broke financially as we spent every penny we made. But our biggest issue was communicating with one another.
We had been parents for so long; we did not know how to be partners.
It was the fear of our son moving out that made us move, and it was the message in Dave’s plan that our success depended on us working together that made us both gravitate to his plan.
We were hell-bent on not only fixing our financial mess but fixing our relationship too.
If you’re married, agree on the budget with your spouse. This one sentence requires a stand-alone book to describe how, but the bottom line is this: if you aren’t working together, it is almost impossible to win. Once the budget is agreed on and is in writing, pinky-swear, and spit-shake that you will never do anything with money that is not on that paper. The paper is the boss of the money, and you are the boss of what goes on the paper, but you have to stick to the budget, or it’s just an elaborate theory. – The Total Money Makeover
Out of all of the get out of debt and manage your money wisely advice out there, communicating with your partner is one that people overlook. If you work this plan, your relationship will get better!
Why? Communication is the core of your success with money and with your partner!
Tip #2 | Be proactive with your money
With so much automation today, it is easy often easy to disengage. The day of sitting down, reconciling your checkbook, and paying your bills is a thing of the past.
- Our paychecks automatically deposit into our bank account
- We pay our bills with autopay
- We swipe (or dip) a piece of plastic when we make a purchase
- Amazon “Subscribe and Save” automatically delivers our “needs” to our front door every month
- Rather than being overdrawn on your account, your overdraft protection automatically covers your charges with your savings account or a line of credit
With all the conveniences it has become easy to allow everything to take care of itself. The thing that you must stop and ask yourself is everything taken care of or am I missing opportunities to build wealth?
One of the learning experiences Rob and I had when we decided to get our finances in order was all of the junk we were automatically paying for and not taking a moment to question if we needed it or not.
When we decided to pay off our $50,000 worth of consumer debt and get our finances on track, we found so much money that we were wasting. We were losing money because we were not paying attention to our money.
Find out how we found money by checking out:
You have to change your life. When you change your life, you will get out of debt, give, and invest at an unbelievable rate. – Total Money Makeover
Tip #3 | To heck with the Jones
Since I was a child, I have always heard the saying: Keeping up with the Joneses; nowadays, the Joneses are so outdated, and we are Keeping Up with the Kardashians to our detriment.
Through social media, we are in constant contact with visual bragging grounds such as Facebook and Instagram. With all the noise, it is hard to stay focused. Focused on you, your family, your future, your finances.
When practicing the Dave Ramsey budget plan, you will start questioning your motives with every purchase you make. For us, our goal is to only spend money on those things that create true happiness.
By following this way of thinking, our focus is now on experiences versus stuff. Our house is less cluttered as we live more of a minimalistic lifestyle and focus is on traveling to see friends and family more frequently.
It is on those trips that Rob and I appreciate our new spending plan. Our trips are stress-free as we have the money since we are managing our budget. Not only are our trips less stressful, but they are much more frequent as they are our priority and not all the little stuff we were buying before.
Download our free budget printables to help you organize your finances:
I don’t care how you say it, we all need to be accepted by our crowd and our families. This need for approval and respect drives us to do some really insane things. One of the paradoxically dumb things we do is to destroy our finances by buying garbage we can’t afford to try to make ourselves appear wealthy to others. – The Total Money Makeover
Tip #4 | Prepare with sinking funds
Sinking fund; what the heck is that?
A sinking fund is a mini savings account that is on a mission. A sinking fund is your way of preparing for known expenses that are not on a recurring every month. By using a sinking fund, you take your seasonal costs and distributing them throughout the year.
You do this by including a twelfth of the monthly expense in your monthly budget. A few examples of a sinking fund expense is:
- Gifts: This is a great place to save up for Christmas and birthdays
- Taxes: Property taxes and vehicle registration
- Vacation: Vacation is a healthy part of life – plan for it!
- Auto: This can be for a car replacement or possibly car repair
When setting up your budget, think long and hard about those things that have come up in the past and created financial stress, and set up separate savings accounts that you use to prepare for the expense going forward.
The easiest way to budget: The Easiest Way to Budget Your Money | 8 Bank Accounts
Tip #5 | Plan for your future
Finding motivation for planning for your future can sometimes be a bit challenging. It is one of those things that none of us want to think about. When your young it feels like you will never be old and that you have plenty of time to save.
It is that fear of missing out (FOMO) that drives us. The idea that since we only live once, we want to live for today that makes it hard to prepare for the future.
As an empty nester, you quickly find that time has moved quicker than you ever thought it would. You realize that the next big stage of your life is retirement and the worry that you did not prepare starts sinking in.
The Dave Ramsey plan not only teaches you to settle you past by paying off your debt, but it also encourages planning for your future by contributing to your 401k, IRA, or Roth IRA.
Earl Nightingale, motivational legend, said that most people spend more time picking out a suit of clothes than planning their careers or even their retirements. What if your life depended on how you managed your 401k or whether you started your Roth IRA today? Actually, it does – because the quality of your life at retirement depends on your becoming an expert in money management today. – The Total Money Makeover
Tip #6 | Live below your means
Living below your means is your key to end the paycheck to paycheck cycle when you live below your means by not incurring any more debt and start building your savings and investment accounts, the stress that you have been carrying lifts from your life.
The results of a survey of 1,000 Americans age 18+ performed for Varco Money found:
- 85 percent sometimes feel stressed about money
- 30 percent felt stressed out about money constantly
- 69 percent report withdrawing money from their savings to make it to the next payday at least ones in the past two years
- 55 percent of millennials have had to use some of their savings in the past few months
- 46 percent do not have any savings set aside for unexpected expenses
Overspending that doesn’t feel like overspending because things are going well is still overspending. Using debt to invest in real estate or the stock market and the hope of a quick return will cause you to go broke the minute the market turns. – The Total Money Makeover
Tip #7 | Be fearless
When Rob and I decided the time had come that we needed to get our finances in order, it was pretty scary. Not only did we have to face our spending habits, but we also had to face each other.
We had to learn how to communicate about money. For us, talking about money was something that we always sucked at doing.
When we found the Dave Ramsey YouTube channel, we found the inspiration that we needed to help us through many of the hard times in our debt free journey. It was from watching the debt free scream segments that the realization hit us that we can overcome our crappy communication about money.
The crazy thing that we found when working this program is that not only our communication about money improved but our communication about everything else started falling in line.
It takes a lot of will, discipline, courage and help to slay the debt monster. But it can be done. Imagine how much you could put toward retirement if you just didn’t have a stinking car payment! This is how the wealthy really build their wealth. – The Truth About Debt
Tip #8 | Envelope system
Dave Ramsey is a big advocate of the envelope system to help retrain the way you view money. The envelope system requires you to use cash to pay for your shopping experiences so that you:
- Have the emotional side effects of spending your cold hard cash
- Learn to live below your means by knowing that once the money is gone, it’s gone!
If you tend to overspend on groceries, you would take your budget limit for out in cash and keep it in your groceries envelope. Now you have a hard stop limit set. Once the money is gone, it’s gone. You will have to wait until your next paycheck to fund it again.
When Rob and I first started budgeting, we found that we had money “leftover” at the end of the month. Since the money was “leftover” we added it to our debt snowball. Now that our debt is paid off, we take any remaining money and deposit it to our savings.
Cash enables you to say no to yourself. When the food envelope is getting low on cash, we eat leftovers instead of ordering pizza again. – The Total Money Makeover
Tip #9 | Include your friends and family
Could you imagine a world where we were not afraid of speaking about money? Our grade schools included curriculum that would teach our youth about personal finance.
Unfortunately, we are not there yet. It is up to you to share with those you love about the financial freedom journey you are on. By including others on your financial freedom journey, you will find:
- Understanding: Proactively explain to those around you, so they understand the change in your spending by knowing why you are on this journey.
- Accountability: By sharing your goals with those closest to you to help you, you build a network of interest that allows you to stay on the path you set. To encourage you when you need encouragement.
- Encouragement: When you are at a low spot it is hard to believe that you could encourage others. You never know, your story could be the courage for someone else or the story that prevents someone you love from making the same decisions.
Change is painful. Few people have the courage to seek out change. Most people won’t change until the pain of where they are exceeds the pain of change. – The Total Money Makeover