Dave Ramsey is a money-management expert, national radio personality and best-selling author.
1. They don’t bother. Most people go through life like Gomer Pyle on valium. The money comes in and the money goes out and only the names are changed to protect the innocent. You have to bother to sit down and do a budget! Put a name to every dollar that comes in — tell your money what to do instead of wondering where it went. But remember that it takes at least three months to really make your budget work. Over fund the food category the first month — I guarantee you spend more on food than you think you do.
2. They don’t prepare for emergencies. Murphy is going to visit. You know Murphy — if something is going to go wrong it will. Save three to six months of expenses for that rainy day. It’s going to rain you need an umbrella. Layoffs happen, cars break down, kids get sick — it won’t be as big a deal if you have the money in the bank. If you put the emergency on your credit card you end up paying for it months or years to come. An emergency fund gives you the peace to know that you can handle whatever comes along.
3. They use credit cards. Cut up the credit cards – plastic surgery. Everyone says they pay off their credit cards each month but no one really does. A Dunn and Bradstreet study showed people spend 12 percent more on average using a credit card than if they were using cash. It hurts more when you have to lay out cash.
4. They think debt is a way of life. People tell themselves that they need to get debt so they can get more debt because debt is how we get stuff. Yes, you will need to “build your credit” by borrowing and repaying debt in a timely fashion if you want to live a life of credit cards, student loans and car payments. Not me. Debt is not a tool; it is a method to make banks wealthy, not you.
5. They don’t plan for retirement. We live in the land of plenty, and that has lulled a large percentage of Americans to sleep thinking everything will be “OK.” Unless you’re willing to eat Alpo when you’re 65 you need to realize things won’t be OK unless you make them that way. Your destiny and your dignity are up to you. You are in charge of your retirement. You need to start saving NOW!
Related: Getting Your Finances Organized