Personal finance expert Dave Ramsey says you should not rest until you have paid off your debt and built an emergency fund because these steps lay the groundwork for long-term wealth.
Talking about the importance of emergency funds on "The Ramsey Show," he said that having three to six months of expenses in cash and carrying no debt provides the ease and flexibility needed to build wealth over time.
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"When you don’t have any payments but a house payment, and you have your emergency fund, that’s a foundational place to begin to build wealth," Ramsey said. "But until you get there, you’ve got to get so fired up and wired up that your broke friends think you’ve lost your mind."
‘People Are Stupid, People Are Broke'
Ramsey urged his followers to ignore common advice and not worry about what others think because most people are ‘broke' and lack financial discipline. He said Americans collectively carry trillions in student and credit card debt, and about 70% live paycheck to paycheck.
"If people aren’t making fun of you, you’re probably not on track because people are stupid, people are broke," Ramsey said. "Stupid is on parade all around you. It’s a clown show financially. You want to be that? I don’t want to be that."
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‘Act Like a Broke Person'
Ramsey said people should not consider investing until they have an emergency fund in place and have paid off all debt other than their home loan. He urged those with student loans, credit card debt, or car payments to force themselves to practice financial discipline and cut unnecessary spending, including excessive vacations and eating out.
"Quit acting like you’re something you’re not," Ramsey said. "You don’t have any stinking money, act like a broke person. It’s time to lay these basic steps out and say, ‘That’s it. I’m tired of being broke. I work too stinking hard to be this broke. I put up with too much crap to be this broke.'"
Ramsey urged his listeners to take charge of their own finances instead of waiting for someone else to fix things, saying it's an "act of adulthood" to make a plan and follow it rather than doing whatever feels good in the moment.
"The White House isn’t going to do nothing," he said. "It’s your house that’s got to do it."
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