Dave Ramsey, the popular personal finance expert, believes two simple questions can be a game-changer for anyone looking to build wealth: “How much does it cost?” and “How much is the deposit?”
Ramsey says that people with healthy financial attitudes tend to ask the first question, while others who are struggling financially often ask the second. He argues that this subtle difference is more important than many realize.
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Ramsey’s point is apt, given some startling statistics about America’s debt and spending habits. According to a recent survey by Debt.com, about 80% of American workers live paycheck to paycheck, while nearly a quarter are unable to save anything from month to month.
Additionally, approximately 37% of Americans would not be able to cover $400 in emergency expenses. These numbers show the impact of making too many high monthly payments without thinking about the long-term consequences, as Ramsey warns.
As personal debt skyrockets, Ramsey’s advice about credit cards resonates with many. Research from Experian shows that one in three Americans has maxed out their credit cards and that the average American has a total of about $104,215 in debt, spread across mortgages, credit cards and other loans.
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Credit card debt alone has reached record highs, reaching more than $1 trillion in the third quarter of 2024. Debt.com also found that 45% of Americans rely on credit cards for their daily expenses due to inflation, with many unable to pay off their balances. complete.
The rise in debt is not only a concern for households, but also a boon for credit card companies. Visa and Mastercard shares have posted significant gains, with Visa nearing its 52-week high. These businesses are flourishing in part because of Americans’ increasing reliance on credit.
Ramsey’s advice, while simple, also has its critics. They argue that it is not always possible to worry about the total costs. Many people are just trying to make ends meet. For lower-income families, prioritizing immediate cash flow can sometimes be the only option, despite Ramsey’s call to “think bigger” financially.
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Ramsey suggests a few practical steps for those determined to get out of debt: create a weekly budget and be strict about the need-to-want ratio. A small emergency fund, he adds, can be invaluable in avoiding debt from unexpected expenses.
