How to be Debt Free and Attain Financial Freedom

Darren Hardy interviews Dave Ramsey

 

Dave Ramsey is a financial author, radio host, television personality, and motivational speaker. His show and writings strongly focus on encouraging people to get out of debt.

You can reach him at www.daveramsey.com

The information presented here is as heard and understood by me

 Dave and his wife started with nothing and by 26 he had a net worth of little over a million dollars. He was making around $250,000 with $4million in real estate. He had a lot of debt, borrowed too much and in course of two and a half years lost everything.

He then set out on a quest to find how money really works. He interviewed older rich people, people who kept money and he found the basis of money.

Personal Finance is 80% behavior and 20% knowledge. If you cannot control yourself you have issues.

Two things happen:

1. You have to learn to be purposeful with your money. You have to pay attention.
2. Maturity – Get mature. If the child within you is not mature then you waste money on momentary pleasure. Momentary pleasure is all that matters and you can sacrifice your financial future because of that.

Upside of Recession – As so many are emotionally damaged by recession including people at Wall Street, many people have learned a lesson. Buying stuff with money I don’t have to impress people I don’t like is a bad financial decision.

Approximately 49% of Americans have not even saved for One Month of Expenses.

You save out of two reasons:

1. Save out of Fear – Emergency fund for rainy day
2. Sense of “I want to prosper”

Most people think they have a safety net where they can run to, which is mostly myth.

Top Three traits of Wealthy People

1. Integrity – Fanatical level of integrity. You go to do the right thing every single time.
2. If you can’t see past Friday you will lose as you don’t have vision i.e. short planning window. To build future you have to sacrifice some of NOW!
3. People who build wealth think in 20-30 year intervals to create wealth.

Handling money is a learned technique. 80% of America’s millionaires are first generation rich i.e. they were not handed these monies, they did not have rich parents teaching them. They decided to change, they made a choice to engage in different behaviors. You need to put right people with you who will encourage you.

You need to FOCUS – Do one thing at a time. Stop doing anything with your money except paying minimum payments. Stop your 401(K) temporarily, Stop savings temporarily, Stop paying the extra on the debt temporarily and do only ONE thing a time and focus your energy only on that. Now you will progressively start to go through these steps as you are focusing your financial, emotional and spiritual energy on one thing, instead of doing 17 things at one time.

BABY STEPS

1. Get $1,000 Cash in bank – Starter Emergency Fund
2. Debt Free everything but the house by using DEBT SNOWBALLING – List all your debts from smallest to largest. Attack the little one (debt) with full vengeance and keep on going to next and next. Now when one is paid off you move to the next one and have more money to pay off rest – snowball effect. Dave’s students are able pay off the debts on an average of 18 months to 2 years. This is behavior modification.
3. Now when you are debt free and don’t have any debts except home payments you move back to your emergency fund and raise it to fully funded i.e. 3 to 6 months’ worth of expenses as a rainy day fund. If you have $5,000 to $25,000 sitting in your account only for emergencies – you are ready when the rainy day comes.
4. Now Put 15% into retirement
5. Start with Kids college fund
6. Scrape any money and pay off your home – most people working with Dave have paid off the house on average of 7 years.
7. Get really rich and give away some.

 

Per Dave, If you are not reading like crazy you are not growing. If you are not a reader you will not be a leader.