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Have you ever wonder why it’s so easy to get in debt but difficult to get out and increase your income? If you’re searching for a way to get your finances in order then Dave Ramsey tips would be your starting point to getting out of debt!
A blueprint to financial freedom as already been created and many have used it to get out of debt, therefore, you don’t need to go searching.
Dave Ramsey is a financial guru who breaks down everything to getting financial freedom and answer our most asked financial questions.
To learn more about Dave Ramsey’s financial tips check out the Total Money Makeover and listen to his podcast.
10 Dave Ramsey Tips To Crush Your Debts
1. Zero Budget Using The Cash Envelope System
This method is used to prevent overspending and to help you to have ultimate control over your finances. A zero-based budget is budgeting your expected monthly income and expenses that it equals to $0.
What am I trying to say?
If you earn $2,500 this month, then you’ll ensure that any money spent, give or save will add up to $2,500. Henceforth, there will be no need to use your credit cards or overspend.
Pretty straightforward right?
The best way to ensure that your income minus expenses equal $0 is to use the envelope system.
The envelope system is basically creating envelopes for your different budget categories such as groceries, shopping, savings, utility, gas etc and then stuff the envelopes with cash.
So if you decide to spend $300 on groceries this month then place that exact amount in your grocery envelope.
Note: this money should not be used for any other purposes than grocery.
If you did your own personal budget and you still have remaining money then you’re not through with zero-based budgeting. Tell that money where to go!
2. Increase Your Income
I remember reading a comment on someone else blog posts on how to pay off your debt in XYZ time.
This person was basically saying that what the writer wrote is unrealistic and went on to say how she’s a stay-at-home mom, her husband works a 9-5 and they are in thousands of debt and her husband is not working enough money to pay off their debt blah blah….
Now, if you evaluate your financial lifestyle and know within yourself that you can not make two ends meet with your monthly salary then it’s time to make some adjustments.
That means to get a side hustle that you can do at home (a great way to earn an income as a stay at home mom), sell stuff in your home that you no longer need or ask your boss for a raise.
The thing I love about Dave Ramsey is that he encourages individuals to find other ways to bring in additional income to pay off their debt.
Never forget that an increase in your income is also a solution to paying off your debt! If you’re looking for ways to make an extra income from home then read this post.
3. Start An Emergency Fund
Dave Ramsey refers to this as rainy day funds. In other words, when disaster hits such as job loss or simply when your car starts to give problems, you’ll not be left stranded.
Dave Ramsey spoke much about this in his baby steps (specifically #3).
In addition, Dave Ramsey’s strategy is basically before you start paying off your debt is to save $1,000 as an emergency fund (baby step 1).
But why tho? Many times when an emergency comes up and you have no money saved, we tend to grab for our cards to deal with it. Then after trying your die-hard best to pay off your debt, you’re back in the same position.
This can become very discouraging.
A conventional saying goes like this, ‘prevention is better than cure‘.
Once you have paid off your debt then you’re ready for baby step 3, where the money you would have used to pay off your debt you’ll save it for 3 to 6 months which will cover your personal expenses as your emergency savings.
Related: Learn How To Do A Budget For Beginners 101
4. Never Loan Money to Close Friends or Relative
This may sound like the most selfish tip ever but this will save you from destroying great relationships. Dave Ramsey put it like this that the borrower is a servant to the lender.
It’s impossible to have a normal relationship with a friend or close family member after lending them money especially after they didn’t pay you back. Trust is broken and sometimes takes years to rebuild.
Never credit money you DON’T have to family or close friends. If you can’t give it freely then don’t lend it! Simply say, I don’t have any money to lend at this moment.
5. Payoff Your Debts Using the Snowball Method
The snowball method is paying off all your debt with the exception of your mortgage from smallest to largest.
When you have paid the smallest debt off first, you would use the money you were paying on that debt to pay off the next smallest debt.
Dave Ramsey simplifies it in 4 simple steps:
Step 1: List all your debts from smallest to largest regardless of the interest rate.
Step 2: Make the minimum payment on all your debt leaving out the smallest one.
Step 3: Pay as much as you can on the smallest debt. (To pay off this debt quickly, it highly depends on how much you deposit. This is where side hustles come in handy and
Step 4: Repeat until each debt is paid off.
6. Ditch the High Car payments & Buy a Cheaper Car
Basically, if you’re drowning in debt then it would be beneficial to get rid of your expensive vehicle to reduce the amount of debt that you have.
Dave Ramsey put it like this, “the total value of all your vehicles should not be more than half of your annual income”.
Many people believe that buying a car is an investment but this is not the case.
You don’t get returns on your money. Secondly, a car depreciates in that it goes down in value
So why would you spend a lot of money on something that is going down in value? Replace that $20,000 plus car with a $2,500 one until you’re able to get your finances in order.
7. Stop Eating Out
You shouldn’t be eating out especially if you’re in a lot of debt. Anything that causes you to accumulate more credit, then stay away from it.
To prevent eating out its best to prepare meals beforehand. Check out this post on how to meal prep.
If you hate to meal plan because it’s time-consuming then HelloFresh will send you fresh ingredients, step-by-step recipes along with nutritional info to help you make healthy delicious meals in record time. You have endless recipes to try!
You can always eat out but after you finish paying off your debt and getting your finances in order. If you feel discouraged and then think upon this quote by Dave Ramsey.
If you live like no one else LATER you can live like no one else.Dave Ramsey
Related: 9 Tricks To Eating Healthy On A Budget
8. Pay In Cash
If you have no self-control when it comes to spending then using cash would be best for you because no one wants to run out of money.
There’s a principle that goes like this if you can’t pay in cash then you can’t afford it.
Having cash in your hand helps you to spend much wisely because you know how much you have at hand. To better manage your money; use the envelope system.
If using cash seems impossible to you then try to do a cash-only challenge for 1 month.
You’ll see that it’s not that hard to do!
9. Cut Up Your Credit Cards
This is one of the most debatable tips by Dave Ramsey. The truth is that you will not always agree with someone.
But anyway, if you’re one of those people who doesn’t quite agree with this Dave Ramsey tip then maybe your main problem would be: you need a credit card to build your credit score so you can buy a house someday.
But, according to Dave Ramsey, the best way to become wealthy is to avoid debt. If it includes some kind of debt then try another route.
Some of your queries about how to live without credit cards are answered over on this post.
10. Cut The Cable
You can save tons of money by cutting your cable off for good. The amazing thing is that you can watch your favorite movies for free or cheaper on:
- YouTube (free)
- Pluto Tv (free)
- Amazon Prime Video ($8.25 monthly)
- Netflix (8.99 monthly)
- Hulu ($5.99 monthly)
Related Post: Best Hacks To Save and Make Money Smartly