Dave Ramsey: 5 Ways To Become a Millionaire Fast
The thought of becoming a millionaire “fast” appeals to nearly everyone, but it’s actually a rarity. While some speculators may get lucky and hit it big, more often than not those trying to get rich quickly fail — sometimes losing everything. But this doesn’t mean that becoming a millionaire is a Herculean task.
In fact, many personal finance pundits, including Dave Ramsey, offer a path to becoming a millionaire that — while requiring diligence — doesn’t involve any extraordinary effort or taking on undue risk. While each person’s definition of “fast” may vary, following Ramsey’s tips can put you on the path to becoming a millionaire well before the traditional retirement age. Here are some of the most important.
Also here are money traps Ramsey warns about.
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Get Out of Debt
Dave Ramsey isn’t the only financial expert who emphasizes what a killer debt is to your long-term financial goals. Rather than setting money aside for savings or investments, when you have debt, it essentially just goes down the drain. And with the high interest rates that credit cards charge, your debt can become a runaway problem in a very short period of time.
According to the Ramsey Solutions National Study of Millionaires, 9 out of 10 millionaires never took out a business loan, and 73% never carried a credit card balance in their entire life. According to Ramsey, every time you go into debt, you dig yourself into a deeper hole financially. Since your most powerful wealth-building tool is your income, according to Ramsey, you don’t want to be sending it to creditors instead of investing it for yourself.
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Build an Emergency Fund
The primary reason for having an emergency fund is that unexpected financial surprises can and do occur. If you don’t have an emergency fund to cover those expenses, you’ll have to take out a loan or go into credit card debt. Since debt is a huge step backward when it comes to becoming a millionaire, it’s a situation you want to avoid. According to Ramsey, the first thing you want to do is build an emergency fund with at least $1,000 in it. After that, you’ll want to build up an emergency fund covering three to six months of your expenses.
Make a Budget
You can’t understand where your money is going unless you track it. The best way to do this is with a detailed budget. While making a budget won’t by itself turn you into a millionaire, it’s the road map you can use to ensure that your expenses are covered, that you aren’t making unnecessary expenditures and that you are saving enough for your retirement goal.
Don’t believe it’s worthwhile? The Ramsey Solutions National Study of Millionaires reports that more than 9 out of 10 millionaires spend less than they make and stick to their budgets every month. Reviewing your budget regularly can also help you identify areas where you can trim unnecessary expenses, such as gym memberships you don’t use or magazine subscriptions giving you information you can readily find for free online.
Invest as Early as Possible
Although Ramsey emphasizes the importance of paying off debt and building up an emergency fund first, he stresses how investing as soon as possible after that is critical. This is due to the power of compounding returns. Adopting an example from Ramsey, if you invest $300 per month at an 11% annual return starting at age 37, you’ll have about $260,000 by age 57. But if you start at age 25, you’ll instead be a millionaire by age 57. In other words, investing the same amount of money but starting 12 years earlier can quadruple your retirement nest egg with little-to-no effort on your part.
Be Consistent, Not Speculative
If you’re just starting out in the investment world, it might seem like you’ll need to take speculative risks to ever reach millionaire status. But that couldn’t be farther from the truth. In fact, being too aggressive with your investments may actually result in significant losses. The simple but boring way to become a millionaire is to invest regularly and consistently over a long period of time.
The Ramsey study on millionaires revealed that not a single millionaire reported that single-stock investing was a big factor in their financial success. In fact, a whopping 75% said that they became millionaires through regular, consistent investing. According to Ramsey, this means that the stories you hear about people becoming millionaires overnight are the exception, rather than the rule.
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