With many families still facing a holiday hangover of thousands of dollars of credit card bills, the Don’t Waste Your Money team turned to a man who has helped millions of Americans get out from under credit card debt: money man Dave Ramsey.
The man is a superstar to millions
of people who are suffering from debt.
Nashville-based Ramsey has gone from
bankrupt salesman to financial guru in 20 years, with a media empire that
includes 500 radio stations and millions of book sales.
Ramsey, with his daughter Rachel at
his side, now preaches what he learned in those dark days.
'Taking Baby Steps'
"The biggest thing about
getting out of debt is really getting angry about it," Ramsey said.
"You've got to get ticked off about living your life in such a way you're
going to retire broke and that you work too hard to be this broke."
Ramoud Lewis is the type of person
Ramsey wants to help. He was thousands of dollars in debt and too embarrassed
to even try to get help.
"It was like the worst five
years of my life," Lewis said. "I really didn't want to sit down in
front of anyone."
Ramsey said his plan can help. He
shared tips, or "baby steps" as he calls them, for getting out of
debt.
Stop Spending
Tip No. 1 is the most painful: Stop
shopping and sell what you don't need.
"You gotta' sell stuff, you
gotta' get in attack mode. You gotta' sell so much stuff the kids think they're
next," Ramsey said.
Cut Up The Cards
Tip two: Cut up the credit cards.
"Most people struggle with
credit cards," Ramsey said. "Very few people handle them well, so I
just don't suggest them."
He said a debit card, or plain old
cash, will make you think twice about every purchase.
"When you start spending real
cash, you feel it," he said. "If you carry Uncle Benjamin Franklin
around for a while, he becomes part of the family and when you put him out for
adoption, it hurts."
No Big Loans
Tip three: Skip the big car loan.
Ramsey's advice: only buy as much car as you can comfortably afford, with a
very small payment, or ideally no monthly payment at all.
"I'd ride a bicycle before I
have a car payment," Ramsey said. "The average car payment in America
is $478 a month over 84 months. If you invested that from age 30 to age
70 instead of paying a car payment, you'd have 5.6 million dollars."
Set Up Emergency Fund
Tip four: Stash away some cash for
emergencies.
Ramsey said "the most important
baby step is to save $1,000 as your starter emergency fund, to get
started." When you can expand it, without going hungry, he says try
to build it up.
That way you won't be financially
devastated by a trip the emergency room for a cut or kid's broken arm.
Pay Off Cards
Tip five: Then pay off those credit
cards, starting with the one with the smallest amount of money on it.
That way you will see immediate progress: you pay off the card with
$2,000 on it, then shut it down or tuck it away for good.
If you have two cards with roughly
the same amount of money on them (one with $4,500 and one with $5,000), then
pay off the one with the highest interest rate first.
Attack that department store card
with 26% interest before you pay down the Visa card that comes with just an 8 %
interest rate.
Once you pay off your cards come
tips 6, 7, and 8:
College, Mortgage, Charity
Save for the kids college, try to
pay off your mortgage in 15 years, and give some to charity.
Many of Ramsey's 8,000,000 followers
may not get that far, but his advice gives them a path.
Have Hope
And more importantly, the final tip
he shares, is to have hope that things will get better.
"When people have lost their
hope they've lost their energy. When they think the only light at the end of
the tunnel is an oncoming train, they don't believe."
By helping restore hope, he helps
people like Ramoud Lewis and millions like him get back on track.
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