Dave Ramsey: 3 Money Secrets They Don’t Teach You in School
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Andrew Lisa
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Molly Sullivan
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Whether you have a diploma from Harvard or a high school, the money lessons you learned at an academic level will eventually collide with the financial realities of life in the real world.
Syndicated radio host, bestselling author and personal finance celebrity Dave Ramsey wants to teach you the money secrets that aren’t in the school books before you learn them the hard way.
A 15-Year Mortgage Is the Key to Wealth Through Homeownership
A 30-year fixed-rate loan is the gold standard of mortgages in America. When a financial news site announces changes in “the mortgage rate,” that’s the one they’re talking about. If you learned about homeownership in school, you probably learned that a three-decade loan is the key to getting a bank to hand you the keys to a house.
Instead of just a place to live, Ramsey wants you to view a home as a powerful tool for wealth-building, which he thinks is possible only if you cut the standard mortgage loan term in half.
As a guest on “The Street,” Ramsey said, “If you’re a new homebuyer, listen to me carefully. We’ve studied millionaires for decades. The typical millionaire, their first $1 million to $5 million net worth they get is their paid-off home — and with a 15-year mortgage, you’ve got the opportunity to do that fairly quickly.”
Since your monthly payments will be higher, you’ll have to shop for less house, which Ramsey thinks you should do anyway. The tradeoff is that you’ll pay tens of thousands less in interest and own your home outright in half the time.
Invest In What You Know and Never in What You Don’t
Dave Ramsey probably wasn’t surprised when legions of people who didn’t have the slightest clue about blockchain technology lost money when the crypto bubble popped.
“The secrets of the rich are not a secret,” he said on an episode of his radio show. “They invest in things they understand. If you don’t understand it, don’t put money in it. Don’t put money in something because it sounds cool and some goob that you think is cool is telling you to do it or that has done it himself.”
Ramsey said that’s precisely how people lost their life savings with Bernie Madoff, the former Nasdaq chairman turned notorious swindler who engineered the largest Ponzi scheme in history.
Ramsey said, “They got recommended by a friend to get in on something cool that was an inside deal that no one knew about. It was a secret. It was sophisticated. They thought, ‘This is how the rich do it. It’s all behind the curtain.’ It’s just not. I was with a guy the other day worth about $200 million. You know what he’s invested in? Farmland. He’s a rancher.”
Contentment Is Your Most Powerful Wealth-Building Tool
Ramsey often cites his motto that poor people keep themselves poor by spending like rich people, and rich people keep themselves rich by spending like poor people. It’s part of his philosophy that people who spend themselves into ruin usually do so while trying to fill an unfillable void because they aren’t content.
In a discussion with fellow financial expert Rachel Cruze, Ramsey said, “Contentment might be the most powerful financial principle there is. When you’re content, you can avoid debt. When you’re content, you can get out of debt. When you’re content, you have margin to be generous. When you’re content, you have margin to invest. But when you’re just, consume, consume, consume, consume, consume, and you’re just living in the basket of materialism — that’s the opposite of contentment — you can’t make enough money to live like that. You can’t make enough money to out-earn your stupidity.”
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