Dave Ramsey: Don’t Waste Money Trying to Look Wealthy — Actually Become Wealthy
Written by
Martin Dasko
Edited by
Amber Barkley
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Sometimes, you’ll see friends or neighbors who look rich based on their possessions while it feels like you’re struggling to get by. This might make you wonder whether you’re on the right path as you’re trying to get your finances in order.
However, the popular personal finance expert Dave Ramsey has often stated that you shouldn’t go broke trying to look rich. The harsh reality is that many people will try to look rich instead of focusing on building real wealth to increase their net worth.
Ramsey shared this tweet about building wealth last November: “When people don’t waste money trying to look wealthy, they have money to actually become wealthy.”
Here’s a look at what this means — and what you can do if you want to build wealth.
The Problem With Trying to Look Rich
According to Ramsey, that huge expensive car, a vastly expensive purse and the vacation you brag about on Instagram rarely indicate wealth.
In this popular episode of his show, the personal finance expert shared insights into what secret millionaires may not tell you. He mentioned how the rich don’t try to impress others, try to be like the Joneses and, specifically, don’t worry about what others think. The goal is to live a life that’s true to yourself instead of constantly worrying about what others say.
The biggest problem with trying to look rich is that you spend money on this appearance that could be used towards investing in your future. You only hurt your future self when you squander your money on false appearances. Ramsey has often stated that trying to look rich guarantees you stay broke.
The logic here is that if you use your credit card to spend money you don’t have or try to maintain an unrealistic lifestyle, you’ll appear rich while really being broke.
The Secret Millionaires Don’t Tell You
Ramsey referred to the first level of wealth in the same episode, where people have anywhere from $1 million to $10 million in the bank. He mentioned how these individuals have built wealth without bragging about it. You may not be impressed with their vehicle, clothing or vacation, but they don’t care, because they focus on their financial goals instead of trying to impress strangers.
Ramsey also discussed the concept of “acting your wage” to make you realistic with your spending. If you want to become rich one day, instead of just trying to give off the appearance, you’ll have to live below your means like secret millionaires do. You have to be realistic with your income and savings.
The Meaning of This Message
Your main takeaway from this tweet should be that it’s a waste of money to allocate resources towards trying to look like you’re more successful than you truly are. You could use these funds to beef up your emergency fund or to set aside 15% for retirement instead of buying a designer outfit that you can’t afford yet.
Of course, there’s nothing wrong with treating yourself occasionally, as long as you have saved money for your other financial goals first.
How Can You Become Wealthy?
If you want to become wealthy instead of just trying to look rich, Ramsey has advice for you: his baby steps, which he states will help most people build wealth in twenty years.
What are these baby steps to building wealth?
- Step 1: Save $1,000 in a starter emergency fund to prepare yourself for any unexpected expenses that life may throw at you.
- Step 2: Pay off all of your non-mortgage debt using the debt snowball — focus on prioritizing the debt with the lowest balance to build momentum.
- Step 3: Save up to three to six months’ worth of expenses in your emergency fund to prepare yourself for bigger bumps in the road.
- Step 4: Invest 15% of your gross income into retirement.
- Step 5: Save up for your children’s college education.
- Step 6: Pay off your mortgage early.
- Step 7: Focus on building wealth and then begin to give back.
When you follow these baby steps, you’ll be able to become wealthy over time. If you’re trying to appear rich or want to get rich quickly, you’ll likely struggle financially until you accept that you have to focus on these steps.
The Importance of the Baby Steps
If you’re still uncertain about following these baby steps, it’s essential to remember that building wealth is a process and not something that happens overnight. While anyone can max out their credit cards or sign up for hefty car payments to look rich, very few are willing to take the time to build real wealth.
Closing Thoughts
Ramsey is a proponent of changing your mindset so that instead of thinking about looking rich or getting rich quickly, you’re focusing on finding the quickest way to get rich the right way. The quickest way is often still long when focused on real wealth.
Following the baby steps of building wealth will improve your chances of becoming financially secure one day.
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