Dave Ramsey’s Best Advice for Getting Yourself Out of Tough Money Situations

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Nearly everyone has had a challenging money situation come up in their lives. You lose your job, you get divorced, your car breaks down, you experience a natural disaster. We’ve almost all been there. The trick is to get out of that tough money situation practically and in a way that prevents disaster from striking again. 

To that end, we’ve got some advice from Dave Ramsey, renowned speaker and owner of the successful financial advice company Ramsey Solutions. He’s been at it for decades and has proven himself to be right time and again, including digging himself out of bankruptcy and crippling debt.

Here’s Dave Ramsey’s best advice for getting yourself out of tough money situations.

Get Clear On Where You Are

You cannot improve your situation if you don’t face the situation you’re in. You’ll end up putting gas in a car with no tires — addressing the wrong issues. 

So, sit down with yourself and your spouse if you’re married, and write down your entire financial situation. Write down all of your take-home pay in one column and add up the numbers for the month. Then, write down all of your fixed expenses for the month in another column and add them up. 

Fixed expenses include your rent or mortgage, car payments, insurance payments, utilities, and groceries. 

Now, subtract your fixed expenses from your income. That number is what you have left to apply to savings and other variables like household items, vacations, and any credit cards or other debts you have. 

Make a Realistic Budget

Now, with your income and expense sheet, create a realistic budget and stick to it. Sit down each week and make sure you’re on track with your spending, not going over budget for frivolous items. Hold yourself accountable with your spouse or another trusted friend or advisor. 

This budget will ensure the money you have after you subtract your fixed expenses from your income remains stable. 

Take Care of Yourself First 

Now, every month’s first order of business is to take care of yourself and your family, no matter what. Nothing comes before food, clothing, shelter, and the gas you need in your car to get to work. 

You can do anything from this point on when you know you can do it. Without these basics, it’s time to cut fixed expenses like your mortgage, rent, car payments, or anything else to ensure you can stay safe, fed, and get to work, school, and back. 

Get creative with expenses. Maybe you don’t need the expensive car with the car payment. Maybe you have too much house. Maybe you don’t need the extra cell phone line. Maybe you can shop at a less expensive grocery store. 

Cut where you can to get your expenses well under your income. 

Pay Off Debt

Your next order of business is to pay off your debt. 

The trusted Ramsey solution is to stack up all your credit card and other debts and make minimum payments on every single one except for the smallest. With the smallest debt, throw everything you’ve got at it every month until it’s paid off. Then, take all that money and apply it to the next largest debt. Keep doing that until all of your debt is paid off, and then stay out of debt!

This includes your mortgage. Ramsey advises taking out a 15-year mortgage at a fixed rate and paying it off as soon as possible. The goal is to have zero debt and total financial freedom. 

Look Into a Side Hustle 

Still, struggling to make ends meet or handle that tough financial situation? Get a side hustle. There are dozens of ways to earn a little extra income each month. You could mow lawns, hire yourself out as a handyman, take on a position as a virtual assistant, or do bookkeeping for local businesses — you name it, someone is out there willing to pay for it. 

Even a few hundred extra bucks each month can help you chip away at your debt and start building an emergency fund and savings. 

Establish Goals 

Once you get to a place where you have a clear view of your financial situation and you understand and stick to your budget, start setting goals for yourself. 

If you want a raise, lay out a plan for how to get there. If you want a vacation, budget for it and start saving. If you hope to send your kids to college, talk to a financial advisor about setting up an education IRA. Whatever your goals are, write them down, plan for how to get there, and start working towards them. 

Set Up an Emergency Fund

Finally, make sure you have an emergency fund established as soon as your debts are paid off. An emergency fund should cover three to six months of your fixed expenses, including groceries. But don’t let that number overwhelm you. Start with $100. Grow that to $1000. Grow that to your number. 

The key to getting out of a tough financial situation, to getting out of debt, and to growing your wealth is to get clear on where you’re at and on where you want to go. Then, you chip away one dollar at a time, paying off, saving, and growing where you can. 

Before you know it, you’ll be giving this same advice to others in need!

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