Dave Ramsey: These Are the 5 Scariest Ways To Waste Your Money
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Cara Danielle Brown
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Zuri Anderson
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Personal finance expert, author and host of The Ramsey Show, Dave Ramsey often provides guidance on topics like budgeting, paying off debt and building wealth.
One area in which he frequently berates callers on his show? Wasting money. Here are five of the scariest ways to waste money, according to Ramsey.
Not Having a Written Budget
It’s often said that, when it comes to wealth building, it’s not about how much you earn; it’s about how much you keep. And failing to plan means planning to fail.
Overspending and neglecting savings goals are bound to ensue without a clear picture of your finances. And mental tallies don’t provide the same level of accountability as physically putting pen to paper. Avoid wasteful spending by taking control.
“A written budget when you will lay it out and stick to it, will give you the sense you got a raise,” stated Ramsey on “The Ramsey Show Highlights: You NEED A Written Budget.” “Your money is so stinking out of control when it’s not in control.”
Spending Money To Impress Other People
According to a video posted to Dave Ramsey’s official TikTok, people need to stop spending money they don’t have to impress people they don’t like.
While Ramsey admit he was once the guy who spent an unbelievable amount of money on a car “to impress somebody at a stop light you will never be introduced to,” he no longer caves to social pressure — especially since he went bankrupt in the process.
Keep your eyes on your own paper and, instead, invest in yourself: Put the money you would have spent in your savings or 401(k) plan.
Debt and Financing
Ramsey argues that credit cards, auto loans and student loans are all gigantic wastes of money. This is because of all the extra interest consumers wind up paying over the long-run if and when the balances aren’t paid off in a timely manner.
The longtime money expert advocates debit cards over credit cards, pulling from your emergency fund or savings account to make large purchases or simply avoiding items you can’t afford to buy outright.
“Don’t finance anything,” stated Ramsey in another highlights video. “Rich people ask ‘How much?’ Broke people ask […] ‘How much down’ and ‘How much a month?'”
Whole Life Insurance
Ramsey argues that when it comes to whole life insurance versus term life insurance, whole life insurance is almost always a waste of money. Not only is whole life insurance much more expensive than term life insurance, but, when it comes to its investment component, “100% of the time it sucks,” making all that extra money spent on whole life insurance not worth it.
“Life insurance products that give you the opportunity to pay 20 times more than you would pay for term insurance in order that you create an investment inside of the policy are basically the payday lender of the middle class,” stated Ramsey on in a highlights video.
Unchecked Discretionary Spending
Some discretionary spending is expected, but problems arise when that spending goes unchecked. Daily coffee runs, expensive restaurants and impulse purchases drain your wallet quickly and silently. They may seem like tiny expenses in the moment, but, according to Ramsey, they all add up.
What’s more, when it comes to daily Starbucks runs, Ramsey and guest, George Kamel, discuss on “The Ramsey Show Highlights: Starbucks Hacks Dave Ramsey Didn’t Know He Needed,” that consumers often pay $8 for a drink without much coffee in it. Some Starbucks menu items are primarily sugar and water. Consumers waste money on coffee with minimal coffee when they could brew actual coffee at home. (And save upwards of $224 a month).
When it comes to eating out, Ramsey stated, “If you want to spend one-fourth of what you do at the restaurant, you will […] learn to cook at home.”
There’s a Caveat to Ramsey’s Advice
Robert Johnson, chairman and CEO at Economic Index Associates, offered an important caveat when it comes to Ramsey’s advice: One person’s wasteful spending is another person’s smart spending.
“Blanket advice on what purchases are smart or problematic is misguided,” stated Johnson.
That’s because of what economists refer to as “utility theory,” or the idea that different individuals can get a different level of utility from the same purchase.
“For some people, their daily coffee purchases may come with camaraderie; with others, there may be a social component,” according to Johnson.
At the end of the day, Ramsey’s advice on wasteful spending is thoughtful and informed — but not necessarily applicable to every individual.
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