Dave Ramsey says it’s an “essential part of managing your money”
Have you checked this essential task off your to-do list?
- Managing your money can be tricky, but Dave Ramsey has some tips to make it easier.
- He believes having an emergency fund is an essential part of money management.
- Even if you’re paying off debt, it’s a good idea to save a small emergency fund of $1,000 so you can manage expenses without going into further debt.
If you want to be successful at managing your money, Dave Ramsey said there’s one thing you absolutely must have. Ramsey is a trusted financial expert with a radio show and millions of subscribers, and while not all of his advice is perfect, he gets it right about this must-have.
So what does he think is so important for people to do?
Dave Ramsey says it’s essential
If you want to improve your financial future and be effective at managing your money, here’s what Ramsey says you’ll need.
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“Having an emergency fund is an essential part of managing your money,” he explained. “An emergency fund is money you’ve set aside to cover unexpected expenses – and only unexpected expenses! It’s a financial buffer between you and life. It’s the safety net that keeps you going. protects you when an emergency strikes you.”
Ramsey recommends that you start by saving an emergency fund of $1,000, then focus on paying down debt before saving more. Once you’ve paid off most of your consumer debt, except for your mortgage, he advises you to build an emergency fund rich enough to cover three to six months of living expenses. These are the expenses you would have to cover if your income were to drop, and it can be less than three to six months of your current net salary.
Ramsey thinks saving that money is crucial because “it’s the first step to changing your entire financial outlook” since you won’t have to worry about going into debt to cover unexpected expenses once you have saved that money.
Is Ramsey right?
Ramsey is absolutely right that an emergency fund is very important if you want to be financially successful.
Emergencies really can happen to anyone, at any time, and unless you have the money to cover them, you could be very vulnerable to a small financial disaster turning into a huge crisis. If you lose your job, for example, you can cope as long as you have the money to cover the bills until you find a new job. But if you have nothing on hand for emergencies, you risk ruining your credit and having your car seized or your house seized, which would be extremely difficult to recover.
Ramsey’s advice to save a small emergency fund until you’ve paid off your debt is also good advice. You don’t want to spend months saving a ton of money while paying 17% interest on credit card debt, but you also don’t want to start working on paying off debt only to end up owing charge your credit cards again when your car breaks down.
So in this particular situation, listening to Ramsey is a smart move. An emergency fund is an essential part of smart money management and if you don’t already have one, you should open a high yield savings account and start building one. Once you have the funds to cover emergencies, you will be much more financially secure and have much more peace of mind.
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