The Foundations Of Building Wealth - Dave Ramsey Rant

what type of account do you recommend for baby step ones emergency fund William says on Twitter you can follow me there at Dave Ramsey and anytime you'd like the you know baby step 1 is $1,000 save William it really doesn't matter what kind of country put it in it's not going to make any money if there's no such thing as a 10% account on a thousand dollars I mean it's you can put in a money market if you want and you're going to make 1 percent and so we're talking about 10 dollars a year so I don't care if you even put it in the account as my point I don't care if you keep it the sock drawer I just want you to have a thousand dollars set aside that you don't touch for anything now if you want to put it in an account it'd just be a little money market type account at your local bank or you can get to it if you have an emergency the downside of keeping it on the sock drawer is you might think the pizza man at the front door is an emergency and he's not so you need to be careful about how you define emergency this is just to be used for emergencies one lady took hers and put it into a frame she bought a cheap frame down at Walmart and wrote under the road across the bottom of the frame in case of emergency break glass and then hung the thousand dollars behind her coats and her closets because I mean you're not going to make any money on it William I mean it's just it's there just to be used only for emergencies only for emergencies that's all it's for and you know your little thousand dollar account hopefully now when you grow the account up and baby step three to a full three to six months of expenses then I'm going to keep it in the money market account even at that point you're not making any money let's say you've got fifteen thousand dollars in there one percent it's a hundred and fifty bucks I mean it's no money at all you're not making any money on this account so the emergency fund is not about making money it's insurance to keep you from cashing out or going into debt cashing out stuff you shouldn't have to cash out and so insurance doesn't make you money insurance cost you money to protect things that make you money and that's the best way to look at your emergency fund it's not an investment it's insurance and that help if you do it that way so I you know when I had when I finally got a thousand dollars and then I finally got ten thousand dollars and and it was all I had I was all concerned that it needed to work really hard and you know I started realizing that it's not going to work hard when it's in an emergency fund and so then I want to start investing my emergency fund well that's a dumb idea because by definition an emergency fund needs to be easy to access what we financial people call liquid and so you have to set that aside you just set this money aside and say it is not for it's not the money that's going to make me money it's the money that's going to protect the stuff that makes me money I don't have to I can you know when you've got a big emergency fund you can carry a higher deductible on your insurance which causes you what have lower premiums when you've got a bigger emergency fund you know you don't have to tap out your 401k or borrow on your 401k if your car's transmission goes out and so you get to leave alone the things that are making you money and you get to increase your decrease some of your costs like insurance and those kinds of things you know buy insurance on everything that turns around because you've got fifteen or twenty thousand dollars set aside for your rainy day fund one lady called it her Gok fund my god only knows fund and I don't care what you call it but that's how you do it so good question William I appreciate you bringing that up so baby step 1 is $1,000 saved 2 is pay off all your debts except your home using the debt snowball where you list your debts smallest to largest and pay them off in that order with great focused intensity once you're out of debt then you go accept your home then you go back to the $1,000 account in baby step 3 and raise it up to a fully funded emergency fund of 3 to 6 months of expenses you need to run like your hair's on fire until you get those 3 steps done you need to be in a panic until you get those 3 steps done because if you have $15,000 or $10,000 or whatever 3 to 6 months of expenses in your life represents in cash in the bank and you don't have any payments but a house payment just think about your life right now how would that feel no payments but a house payment in fifteen or twenty thousand or ten thousand dollars laying there you're not even there yet and you just started breathing better just thinking about it you took a deep breath and a sigh it's exactly what you did after I said that when you don't have any payments but a house payment and you have your emergency fund that's a foundational place to begin to build wealth that's a foundational place to begin to your level of outrageous generosity but until you get there you're just scrapping and clawing like a rat in a wheel man and so you have to break the cycle you have to flip this thing on its head and make it behave you've got to get so fired up and wired up that you're broke friends think you've lost your mind if people aren't making fun of you you're probably not on track because people are stupid people are broke they said and I heard is the dumbest financial planning firm out there because if you look around seventy percent of Americans are living paycheck to paycheck one point four trillion dollars in stupid student loan debt another trillion is stupid credit card debt car fleeces 78% of the cars that leave a new car lot are fleeced right now and most of the rest of them are financed stupid is on parade all around you it's a clown show financially you want to be that I don't want to be that that's where that's where when I hit bottom I mean I didn't hit bottom I completely splatted because I was stupid with steroids men I know what stupid looks like I looked up boy in the mirror I know who he is he was wrapped around my neck so you don't want to live like that but your foundational stuff is to at least get rid of your debt not counting your home and at least get you a rainy day fund and you don't need to be doing any investing until you get that crap straight now it's time to put on your big-boy pants your big-girl pants this is grown-up talk here you're not in Congress you have to live on less than you make you have to apply yourself to these situations you have to look in the mirror and look at each other as a married couple or as a single look in the mirror and say no we're not going on vacation we're broke we have two car payments and a credit card loan a credit card debt and a student loan that's been around so long we think it's a pet no we're not going out to eat we're not going to strut around acting like we're something we're not Tom Stanley who wrote the book Millionaire Next Door his last book erode before he was killed in a car accident a couple of years ago was stop acting rich it was the title of the book is a great title stop acting rich that's what it comes down to quit acting like you're something you're not you don't have any stinking money act like a broke person why it's easy you're a broke person you make sixty or ninety or 160 a year and you got nothing nothing no money payments coming out your ears out of control strutting around acting like you're something in Texas they call that big hat no cattle stop it it's time to lay these basic steps out and lay into them and say that's it I'm tired of being broke I work two stinking hard to be this broke I put up a too much crap to be this broke and anybody gonna fix it in this election cycle the only people's going to fix it's in your house the White House isn't gonna do nothing it's your house it's got to do it people in your house got to start behaving and then you can turn your money around but it's an act it's a it's an act of adulthood adults devise a plan and follow it children do what feels good this is the Dave Ramsey show hey guys thanks for watching if you enjoyed this video click the subscribe button to get the latest content and check out these other great clips from the show you are not a victim you're not a victim of big corporations you're not a victim of Wall Street you're not a victim of capitalism you're not a victim of wealth inequality you're not a victim of racism you're not a victim

Channel: The Ramsey Show Highlights

Views: 1,411,563

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Id: FcE8cf8dQEM

Length: 9min 35sec (575 seconds)

Published: Thu Feb 11 2016