Dave Ramsey, the popular personal finance expert, believes that two simple questions could be a game-changer for anyone hoping to build wealth: “How much does it cost?” and “How much is the down payment?”
Ramsey says those with a healthy financial mindset tend to ask the first question, while others struggling financially often ask the second. He argues that this subtle difference is more important than many realize.
Ramsey’s point hits home, given some eye-opening statistics on American debt and spending habits. According to a recent study by Debt.com, roughly 80% of U.S. workers live paycheck to paycheck, with nearly a quarter unable to save anything month-to-month.
In addition, about 37% of Americans would be unable to cover $400 in emergency expenses. These numbers show the impact of taking on too many high monthly payments without thinking through the long-term consequences, as Ramsey cautions.
As personal debt levels soar, Ramsey’s advice on credit cards resonates with many. Experian research shows that one in three Americans has maxed out their credit cards and the average American carries about $104,215 in total debt across mortgages, credit cards and other loans.
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Credit card debt alone has hit record highs, reaching over $1 trillion in the third quarter of 2024. Debt.com also found that 45% of Americans have relied on credit cards for everyday expenses due to inflation, with many unable to pay off their balances fully.
The rise in debt is not just a concern for households but also a boon for credit card companies. Visa and Mastercard stocks have seen considerable gains, with Visa nearing its 52-week high. These companies are thriving partly due to Americans’ increasing dependence on credit.
Ramsey’s advice, while straightforward, has its critics. They argue that worrying about the total cost is not always possible. Many people are just trying to make ends meet. For lower-income families, prioritizing immediate cash flow may sometimes be the only option, despite Ramsey’s call to “think bigger” financially.
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Ramsey suggests a few practical steps for those determined to break free from debt: creating a weekly budget and being strict about need versus want. A small emergency fund, he adds, can be invaluable in avoiding debt during unexpected expenses.
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