These Are Dave Ramsey's 10 Best Pieces of Advice

Ramsey says you should live on a budget -- and that's not the only great advice he's given.

Most people are familiar with finance expert Dave Ramsey. He has given tons of advice on a wide variety of subjects ranging from homeownership to investing and beyond. Some of his advice is better than others, though. In fact, here are Ramsey's 10 best pieces of advice that everyone should consider following.

1. Save an emergency fund

One of Ramsey's most important suggestions relates to having an emergency fund. Specifically, he suggests you should have money set aside in a high-yield savings account to protect you against unexpected expenses.

"If you have consumer debt, I recommend saving a starter emergency fund of $1,000 first," the Ramsey Solutions blog reads. "Then, once you're out of debt, it's time to beef up that amount and save three to six months of expenses in a fully funded emergency fund."

With the Federal Reserve Board data showing that just 68% of adults had enough cash or savings to cover a $400 expense, this advice is essential. Emergencies can happen any time and without the money for them, it's very likely you could end up reaching for the credit cards and worsening your long-term financial situation.

To save up your emergency fund, calculate how much you want to save, then open a high-yield savings account and start transferring the money over ASAP.

2. Live on a budget

Ramsey believes it is extremely important to live on a budget.

"A budget is a plan for how you're going to spend your money. It puts you in charge and in control of every dollar that you earn or spend," Ramsey explained.

To get started with your budget, Ramsey says to begin by listing your income and expenses, then figure out how much money you have left over after subtracting for essential items. He also advises tracking your spending to see if you're sticking to your plans and making adjustments as needed.

If this type of budget doesn't appeal to you, there are plenty of other budgeting options out there. It's important to find a system that works for you. This advice ensures you actually spend your money in the ways you value most while also accomplishing things that build your financial security.

3. Invest 15% of your income for retirement

Ramsey recommends investing 15% of your income for retirement. He believes this is crucial because your savings rate has the biggest impact on whether you end up having a secure retirement.

"The big takeaway is this: No matter how much or how little you make, investing 15% of your income will put you on track for a secure retirement," the Ramsey Solutions blog states.

This advice is crucial to follow because Social Security only replaces about 40% of pre-retirement income. You need more than that, and having a sufficient amount of savings is key.

4. Invest in a 401(k) and a Roth IRA for retirement

Ramsey has a great suggestion for what you should do with that retirement money. He believes you should first max out your workplace 401(k) and then contribute to a Roth IRA.

A 401(k) is a company plan offered by some employers -- many of whom provide matching contributions. If your company offers this option, talk with HR to find out exactly what the rules are for maxing out your match. For example, if your company matches 50% of contributions up to 6% of your salary, you'd need to invest 6% of your salary to get the full match. Sign up to do that ASAP by filling out the required paperwork with HR to avoid leaving money on the table.

Once you've exhausted your match, Ramsey suggests opening a Roth IRA with a brokerage firm. A Roth IRA doesn't allow for tax deductible contributions in the year you invest, unlike a 401(k) or traditional IRA.

But, as Ramsey explains, you benefit from tax-free withdrawals, so you'll have more money as a senior when you need it. Since tax rates are currently near historic lows and may go up in the future, many people will benefit from this deferred tax break.

5. Keep your housing costs to 25% of your income or less

Ramsey has some great home-buying advice as well. Specifically, he suggests keeping your total housing costs to 25% of take-home income or less.

This advice is crucial because if you commit to housing payments that are too big, this can prevent you from doing anything else you need to with your money. You also face a huge risk of becoming unable to make payments if anything causes your income to drop.

To follow this advice, figure out how much you bring home after taxes by taking a look at your pay stubs. Then, set your housing budget at 25% of this amount including mortgage principal and interest, property taxes, insurance, PMI if required, and HOA fees.

6. Don't buy a house without a down payment

Ramsey has some more smart advice for would-be homeowners. He advises against buying a house without a down payment. Ideally, he suggests putting 20% down if you can, because this allows you to avoid private mortgage insurance lenders mandate you buy on low down payment loans. If you can't manage that because you're a first-time buyer, he suggests making a minimum down payment of 5%.

This advice is important because without a good-size down payment, your loan will cost more, you'll have less choice of which lenders to borrow from, and you could end up owing more than you could sell your home for and becoming trapped in the house.

7. Get renters insurance if you rent

Ramsey also has some advice for renters. Specifically, Ramsey says that anyone who owns anything should make sure they have renters insurance when renting a property.

"Renters insurance is a type of property insurance that pays to replace your things if they're damaged, vandalized or stolen while you're renting," Ramsey explained. "It protects you from dealing with the financial fallout of unexpected catastrophes like fires, electrical surges, sewer backups and explosions. Without renters insurance, you could end up dipping into your savings to replace everything you lost. Not good."

Renters insurance also protects your assets in case you're sued if someone is hurt visiting your property. This advice is critical because you could lose everything if your apartment is destroyed or if someone sues you and wins a case against you.

8. Choose the cheapest home in the best neighborhood

Ramsey also advised that home buyers "buy the least expensive home in the best neighborhood you can afford." As he explains, "That gives your home's value room to grow in the future. Buyers who are shopping in a $200,000 neighborhood won't be looking for a $300,000 home."

This is age-old advice about prioritizing location. You don't want a house that's been over-improved for the neighborhood as buyers won't want to pay that premium in the future.

9. Steer clear of store credit cards

Most of Ramsey's advice about credit cards isn't great. He suggests avoiding cards entirely, which you shouldn't do because you'll lose the chance to earn rewards and build your credit score with them.

But he's spot on about one type of credit card: store cards. As he explains, these have higher interest rates, they encourage you to spend more money, and their rewards programs are not very good. While it may seem enticing to sign up for one, there are better options out there.

10. Buy a term life insurance policy

Finally, Ramsey advises purchasing a term life insurance policy if anyone depends on you -- and avoiding a whole life insurance policy. This is great advice as well.

A term life policy provides crucial protection for loved ones in case of your untimely death. But it's much cheaper than a whole life policy, which includes an investment component and which offers lifetime coverage most people don't need because eventually they no longer have dependents.

Ramsey suggests getting a policy with a death benefit of 10 to 12 times your annual income, which can be a good rough estimate for how much coverage you need. You should get a policy in place while you're as young and healthy as possible so you don't leave your loved ones facing financial disaster if tragedy strikes.

By following these 10 pieces of Ramsey advice, you can make smart choices about your finances when it comes to insurance, credit cards, and home-buying. These decisions can help set you up for a more secure future.