These Are Dave Ramsey's 3 Best Pieces of Advice

by Christy Bieber | Updated July 23, 2021 - First published on July 14, 2021

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You can't go wrong following these tips.

Dave Ramsey is a very popular financial personality. But, like most people, he's given some good advice and some bad advice.

While I recently discussed four things Dave Ramsey is dead wrong about, it's also worth taking a look at some of his best financial tips that virtually everyone should follow.

1. Save an emergency fund

Dave Ramsey suggests saving an emergency fund. This can help protect against life's surprises so you don't end up in credit card debt -- or worse.

Specifically, Ramsey recommends that you save a mini emergency fund of $1,000 even before you begin trying to pay extra on your debt. Then, once you've completed a debt payoff plan and are debt free except for your mortgage, he advises saving up enough money to cover three to six months of living expenses.

This is great advice because the reality is that emergencies are an inevitable fact of life. Almost no one gets through the year without some kind of surprise expense, whether it's a car or home repair, medical bills, or a host of other issues.

And many people experience more serious emergencies at some point over the course of their life, such as a job loss that could interfere with paying the bills.

If you aren't prepared for these surprises, you could end up facing a serious financial crisis that may be difficult to recover from. Possible consequences of emergencies you're not equipped to handle could include:

  • Having to scramble to borrow money
  • Racking up charges on your credit cards
  • Late payments
  • Repossessions and foreclosures

An emergency fund can help you avoid these disasters.

2. Invest 15% of income for retirement

Dave Ramsey also recommends investing 15% of your income in order to build wealth for retirement.

While many advisors recommend saving 10%, Ramsey's advice is right on the money because 10% isn't really enough in most cases. Most experts project future investment returns will be a little lower than historic ones and most people are living longer. That means that if you're only saving 10% of your income, there's a much greater chance of running out of money.

By setting aside 15% of your earnings, you can build a generous nest egg that will help support you late in life when you can't earn a paycheck anymore.

Having plenty of money saved can ensure you're prepared if you're forced to retire earlier than expected, if you live a long time, if you develop expensive health issues, or if Social Security doesn't provide as much income as you were expecting.

3. Live on a budget

Dave's last piece of great advice is to live on a "zero-based" budget. That is a budgeting method where you account for every dollar that you earn so you know exactly where each one is going.

Living on a budget allows you to make sure that your money is actually going to the things you value most. Without one, it's too easy to spend money without thinking about it, only to realize you don't have enough left to cover all your bills or invest for your future.

By budgeting, you plan in advance where your money will be spent and how much will be saved. You can ensure you're accomplishing goals, and that you're being purposeful about your spending so your hard-earned dollars get the very most value possible.

These three pieces of advice from Dave Ramsey should help improve your personal finances. If you aren't already following them, give them a try.

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