Ramsey’s answer may surprise you.
- While everyone has different tools for building wealth, one stands out above the rest.
- Dave Ramsey believes that your income is the key to increasing your wealth.
- Paying off debt quickly and starting to invest later is Ramsey’s recommended way to build wealth.
When it comes to building wealth, there are many methods you can try and tips you can implement. But, according to financial expert Dave Ramsey, you have one wealth-building tool that stands above the rest.
According to Ramsey, if you want to create wealth, there’s one tool you need to use effectively: your income.
“Your income is your greatest tool for building wealth,” Ramsey has said many times, including Ramsey solutions blog as well as Facebook.
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According to Ramsey, if you use your income wisely by investing 15% of it, you can build the financial security you deserve and even become a millionaire one day.
“There’s no secret trick or magic formula when it comes to investing — if you invest every month, it adds up,” Ramsey promises. “In fact, 80% of millionaires are regularly invested in employer-sponsored retirement plans. their 401(k). It might sound weird, but it works.”
So, if your income is your greatest wealth-building tool, how can you use it to become truly wealthy? For Ramsey, it’s simple: Pay off debt quickly so you don’t waste your most valuable resource, then use your money wisely.
“The best thing you can do for your financial future is get rid of your debt so you can free up your income and start building wealth faster,” Ramsey said.
Ramsey is so convinced that debt can keep you from using your income effectively that he recommends focusing on becoming debt-free before you save for retirement—even if that means delaying your investing efforts for a few years.
He recommends getting aggressive about paying off debt, putting all other money goals on hold except saving a $1,000 emergency fund before sending all your extra cash to creditors. If you follow Ramsey’s plan, you’ll only start investing at the recommended 15% once you’re debt-free (other than your mortgage).
Is Ramsey right?
Ramsey is right that your income is your greatest wealth building tool. How you use your hard-earned money will determine whether you will be rich or at least financially secure. After all, no matter how much money you make, if you overspend on vacations and frivolous purchases, you won’t have a large nest egg that will support you in later years and serve as an inheritance after you’re gone.
Ramsey better pay interest too usually this is not the best use of a valuable tool. However, there are some exceptions, such as low-interest debt (such as mortgages), because you can get better returns on safer investments than the return on investment (ROI) that comes with paying off your mortgage early.
You may not want to follow his advice to wait to invest — especially if it means losing your employer match on your 401(k). To really take advantage of this important wealth building tool, you should carefully plan what to do with your income, taking into account retirement tax benefits, any 401(k) matching funds, and the interest rate on your debt. , when you invest early you get the benefits of compound growth and a longer repayment period.
For many people, investing and paying down debt at the same time is the best use of your income. However, your individual situation will determine whether this is right for you, so take the time to make an informed choice. You’ll be better off for it because you’ll be making the most of your greatest wealth-building tool.
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