It’s not unusual to hear about someone building wealth based on advice from a well-known financial expert. Many investors have experienced success in the stock market when they have listened to Warren Buffett’s pearls of wisdom, and homeowners have found themselves quickly building equity after following Barbara Corcoran’s real estate tips about the benefits of buying a home now instead of waiting on the sidelines.
What about a financial expert like Dave Ramsey? Over the years, Ramsey has shared a lot of thoughtful money advice with listeners of “The Ramsey Show” and readers of his website, Ramsey Solutions. One of his signatures are the 7 Baby Steps, a money management plan that empowers everyday Americans to take control of their finances.
Ramsey’s 7 Baby Steps have even enabled some Americans to reach millionaire status. GOBankingRates spoke to two self-made millionaires who each shared the Ramsey rules that made them rich.
Prioritize Saving Money in an Emergency Fund
Emergency funds are mentioned a couple of times in Ramsey’s 7 Baby Steps. The first step is saving $1,000 for a starter emergency fund. In Step 3, once all debt has been paid off, individuals are encouraged to save three to six months’ worth of expenses.
Self-made millionaire Jeff Mains is the founder at Champion Leadership Group. When Mains reflects on his journey as a business owner, he said Ramsey’s financial principles have been a guiding light in helping make early personal and professional business decisions.
Having an emergency fund, particularly a fully funded one, is a cornerstone for Mains’ financial strategies in his personal life and with his business. He told GOBankingRates this fund acts as a safety net. He can take calculated risks necessary for business growth without worrying these risks could jeopardize the company’s financial health.
Scott Lieberman, self-made millionaire and founder of Touchdown Money, is in agreement with Mains about the third Baby Step having a positive impact on his financial health. Not only does a fully funded emergency fund provide Lieberman with peace of mind, but it also helps him actively grow his wealth.
“I have more than six months’ worth of savings in high-yield savings accounts,” Lieberman said. “I can access the money at any time. But while the money sits there, it’s earning interest.”
Avoid Debt
The second Baby Step encourages individuals to pay off all debt with the exception of their homes.
When possible, Ramsey recommends using the debt snowball method to do it. Individuals start by paying off debt with the smallest balance first and then “snowball” their way up to the debt with the highest balance. From a psychological standpoint, debt snowball delivers quick wins that build confidence toward paying off debt in full.
Over the years, Ramsey has emphasized the importance of not getting into debt. This advice resonated with Mains as he ran his business.
“The principle of aggressively paying down debt when possible informed my approach to financial management,” said Mains. “It helped maintain a lean operation and ensured we could effectively reinvest profits.”
Stop Comparing Yourself to Others
While this piece of advice isn’t a Baby Step, it is a part of the Ramsey system that Lieberman does not feel is talked about enough.
Through the years, Ramsey has said many times that you should not compare your financial journey with others. The trouble with making and believing in comparisons like these is that they ultimately work to keep you broke. You see what your friends have, or what other people have via social media, and think you need to keep up with them.
In doing so, many people find themselves buying things they don’t need. This keeps them from prioritizing investing in their financial future. It can even cause them to backslide financially and get back into debt all over again. As helpful as the 7 Baby Steps are for getting out of a financial jam, it’s not exactly recommended you go through the process again once you’re out from under it.
Instead of comparing, the better approach is to take a cue from Ramsey and start winning financially. Doing so will quite literally set you free.
“An important key is mindset because this is the emotional aspect of money,” Lieberman said. “Because I’m not spending to gain status over others or to fit in with what I see on social media, I’m free to save that money on what I really care about: freedom, family and food.”
More From GOBankingRates