“The best time to plant a tree was 20 years ago. The second best time is now.” – Ancient Chinese Proverb
Dave Ramsey will not make you wealthy.
A lot of people follow him.
He does know what he’s talking about when it comes to reducing debt.
But…
He will never get you to a place of total financial freedom.
I’m really excited to show you a better way.
A way that can take you from basic economics and understanding how to get out of debt to a place of actually growing your wealth and reaching total financial freedom.
Dave Ramsey is Great for the Masses
Maybe you’ve gotten stuff out of Dave Ramsey – his principles, his books.
He’s kind of everywhere, if you’re into financial guru stuff.
He’s part of religious organizations.
He goes all over, telling people how they need to get out of debt.
And I would say, in general, a lot of people love him.
He’s great for the masses.
I think for most people, he’s absolutely great because most people are in way too much credit card debt.
They spend more than they earn.
We as a nation spend way more than we take in.
This is really Finance 101, right?
It’s the very basics.
And that’s what Dave really teaches.
We’re going to talk about some of his principles about getting rid of credit card debt.
I totally agree with getting rid of debt!
The problem with Dave Ramsey is he can’t get you to a place of real financial freedom.
If you really want to grow your wealth, you can’t use the same principles that got you to a baseline.
Before we keep going, I do want to say:
I’m not your investment advisor.
These are just my opinions.
This is educational.
Actually… let me give you a metaphor.
I’m gonna talk about my background in the medical field real quick.
Don’t worry, there’s a point to all this!
In the medical field, you give a prescription to a patient that has a certain diagnosis.
For example, if somebody came into the ER and they had an emergent issue, you have to take them immediately to surgery, right?
On the other hand, if somebody comes in and they have a splinter in their finger, you’re going to do something very different than you did with that first person.
That’s why it’s really important to know who I’m talking with on the other end here.
If you’re reading this, you might be saying at this point:
“I’ve gotten some help from Dave Ramsey.”
Or “I’m looking for financial help, but I’m really looking to get to the next level.”
Again, there’s a different prescription for each person based on where you’re at now.
Dave has these seven baby steps that you do:
1. Save $1,000, get it into your emergency fund
2. Pay off all your debt, besides your house
3. Have three to six months saved
4. Invest 15% in your retirement
5. Work on your kid’s college fund
6. Pay off your house
7. Build wealth and give
If that’s a bit overwhelming, I’ve summed it up in four steps:
1. Save
2. Pay off debt
3. Invest
4. Give
Now, these are all good things, especially for the majority of people.
But again, these things are Finance 101.
A few of these things I completely disagree with.
I think that it’s actually not good to pay your house off early in a lot of cases.
However, I will acknowledge that different people do need different advice.
If you’re someone who just got out of jail, you would not need the same financial advice as someone who just graduated college.
The advice depends on where you’re at.
Dave Ramsey is a good baseline, but he will never get you to a place of financial freedom.
Why Dave Ramsey is 101
I’m not trying to be disrespectful with the stuff I’m sharing.
I’m just going through point-by-point and saying things that don’t necessarily measure up when it comes to actually building wealth.
So what I want you to do is remember that advice is a buffet table.
Whether you’re looking at stuff I’m presenting or stuff Dave Ramsey is presenting…
You can pick and choose what helps you.
If it doesn’t help you then don’t use it.
So, first thing Ramsey says is baby steps.
Steps are great because they help people to know what to do.
Let’s go through them point by point.
1. Save $1,000
I’m assuming that you’ve already done the first step of saving $1,000.
Or, if you haven’t, you’re on your way to that.
So we won’t spend much time on this one.
2. Pay off Debt
Step number two is to pay off debt.
I would say this one really depends on the interest rate.
If you have credit card debt, you have high interest.
That’s 101. You need to pay that off.
If it’s low interest rates, it’s actually sometimes good to take on other debt.
We take on tons of debt to buy large multi-family buildings.
Our company takes on tens of millions of dollars of debt to go do these big projects.
We know that having long-term debt at a low rate is actually a very positive thing.
For example:
Somebody approached me with $100,000 for what’s called a personal line of credit.
They said they were going to give me $100,000 at 2.75% and with a fixed rate of 10 years.
I know I can take that money.
I can invest it and get about a 15% return with a pretty high degree of confidence.
It’s going to be at least 10%, maybe higher, but it’s much higher than the 2.75% that I’m getting.
3. Three to Six Months Savings
For this step, I’m also assuming you’ve done this or you’re on your way to doing so.
This is also 101 and is very likely on your radar.
4. Invest 15% Into Retirement
Number four is to invest 15% into your retirement.
The bigger thing with this is not necessarily how much you’re putting into retirement or the percentages.
What you should be asking is: What are you actually buying?
If you’re buying stocks and bonds, I would be really concerned.
As I have mentioned in other blogs and videos, I used to be an investment advisor.
After hanging up my adviser coat, I realized these products don’t necessarily serve people and they can crash.
Some call stocks and bonds traditional.
But when something can go down 50% in 12 months and it’s happened multiple times over the last 50-100 years…
It is not a safe investment.
If you’re interested in finding out ways to multiply your retirement returns by 17x, you can check out this video!
Sounds a little too good to be true, but you can check out the math and find out how you can greatly increase your investment or retirement returns.
5. Save Money for Kid’s College
Ramsey says to save money for your children’s college tuition.
Now this one I actually really disagree with.
But it’s not in the way you might think!
I don’t disagree with saving money for college.
I have an eight-year-old daughter.
I don’t specifically put money into investment or an account.
I buy assets.
These assets produce cash flow and they appreciate.
Over time, they will be worth more and I will have more money available to be able to pay for things like college.
Instead of what Dave Ramsey calls a snowball and reducing debt in that way, you want a passive income snowball.
You want to be rolling this thing that gets bigger and bigger and bigger.
Eventually you will have more than enough passive income to pay for college – and anything else you want!
6. Pay Your Home Off Early
I really disagree with paying your home off early.
For some people that aren’t interested in learning more about investing, then maybe that’s okay.
But if you have a low interest rate, you can potentially find other investments.
Imagine you have $200,000 left on your mortgage and you decide to go pay it off.
You’re getting a 3% return or whatever your mortgage rate was going forward.
But if you knew you could get a higher return, something in the 10-15% range per year…
You would be doing much better to just pay the minimum payment and invest on the side.
I’m not saying what you should do, but this could be a much better option.
If you want to learn more, you can check out this video here!
7. Build Wealth and Give
I really agree with this last step.
I agree that you should build wealth.
You should give.
A question you should ask yourself is: What is the reason you want to become financially free?
The answer comes down to your why.
Is it because you want to be a better parent?
Is it because you want to write that book?
Do you want to make an impact in the world?
Think about those answers.
And in the meantime, we’ll talk about my why and how it might help you discover your journey to financial freedom.
Advanced Wealth Strategy
I am really excited to share this with you!
You need to know that there are some prerequisites to be able to do this.
In the words of my friend, George W. Bush: Use your strategery.
All jokes aside, you do have to have a strategy.
If you want to operate with complete financial freedom, you have to plan, plan, plan!
Let’s first get into the prerequisites:
Assets and Liabilities
So the first thing is you have to understand what an asset and a liability is.
An asset is something that puts money in your pocket every month.
A liability is something that takes money out of your pocket each month.
A house that you live in is actually a liability because it takes money out of your pocket each month.
You can read more about this in Robert Kiyosaki’s “Rich Dad, Poor Dad”.
If you haven’t checked out that book yet, it is required reading.
After you read it, you will understand assets and liabilities much, much better.
Pay Off Debt
You want to pay off any credit card debt or other high interest rate debt.
This is very, very important, for reasons I’ve already talked about.
Saving and Investing
When you are able, you really need to shift from spending to really on saving and investing.
This also includes living within your means.
If your income equals your expenses, you are not getting wealthier.
In fact, I would say you were getting poor.
A lot of people start making more money and their expenses go up.
They make more money, and the expenses go up.
Then, there are people that are really miserable.
These are the people that start spending more money than they’re making.
I would say if your income equals your spending, you’re actually getting poor because of inflation.
Because your time is really valuable, you’re not going to be able to work forever.
If you’re just breaking even on your earnings and spending, that’s something you’ll have to do.
How are you gonna retire?
How will you be able to do things down the road to have more income?
So there’s two sides of this equation if you want to see success:
Growing your income and reducing your expenses.
The whole goal is financial freedom so you don’t have to maintain a job.
You don’t have to work for a paycheck.
You have passive income and you can do what you want with your time.
If you’re interested to see how I quit my great corporate job and retired with passive income, you can check out this video!
It’s a great story of how that equation actually works.
So let’s talk about the actual steps of the Advanced Wealth Strategy:
1. Find investments that return 15% per year
How in the world do you get 15% return per year?
That sounds impossible!
I felt the same way.
You might be thinking: “I’m not Warren Buffett. How do I get those kinds of returns?”
Well, let’s go on and find out:
To get these returns, you learn and you network and you find different ways.
Here, we do multifamily investing and we do it phenomenally well.
When you average out our good and our not-so-good investments, we tend to do at least 15% per year.
I’m not giving endorsement to any specific investment.
But I really do think you should look into multifamily investing.
If you are interested in how multifamily investing works and how to find multi-family deals that look great, check out this video!
Every five to seven years, your goal is to double the money that you have.
If you’re getting 15% returns, you’re doubling every five to seven years.
Einstein has been credited with saying that compounding interest is the most powerful force in the universe.
Now, whether that’s true or not, if you look at these numbers, it really is compelling:
Using the 15% return, $100,000 will become $813,000.
That’s an 800% increase over 15 years.
Over 30 years, with no additional contributions, that $100,000 becomes 6.6 million.
That’s 66x what we started with!
Compounding interest just picks up and up and up!
That’s what you’re going for.
That’s why a lot of people that are very, very wealthy started a long time ago.
There’s a saying that says the best time to plant a tree was 20 years ago, but the second best time is today.
So you start today.
You find investments.
You start making and doing the actions that are going to get you where you want to go.
2. Low Interest Rate Debt
The other way to accomplish total financial freedom is to invest in other types of investments.
I’m giving a disclaimer here:
This is educational.
I’m not telling you to do this.
I’m telling you what I’ve done.
These are simply things to consider.
So there are some risks involved in low interest debt, right?
If you have short-term debt or if you have variable rate debt, the best way to do this step is have long-term fixed debt and be able to invest on a shorter horizon.
Remember the earlier example I gave about my personal line of credit?
I was able to get it at 2.75% fixed for 10 years.
I’m able to invest that to do other much higher return things with it as well.
What some people do is have a mortgage on their house.
They can have a home equity line of credit.
Instead of paying down, they can use that money to do other things.
They can take it and invest it.
If you’re interested in other things you can invest in, check out this panel I did on the topic!
But for now, what I will say is you should look at inflation protection.
I talk a lot about inflation because I believe it’s actually much higher than what they’re saying.
Investments with a fixed rate are not actually inflation protected.
It’s really important that you’re in assets that offer inflation protection.
However don’t buy a bunch of crypto or Bitcoin with this or other speculative investments.
Now, I want to hear from you!
What do you want me to talk about next?
If you want to learn about a topic in finance that’s interesting to you, please stick it in the comments below.
I may end up talking about what you put in there!
And before you leave, make sure to check out our special report about investing. It compares the stock market to real estate, and it also includes how the pandemic affects your investment future. If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.
