Dave Ramsey: ‘Live Like a College Student’ If You Want To Be Financially Free — Here’s How
Dave Ramsey has never been one to mince words. Every week, he gets real with callers on “The Ramsey Show,” telling them what he believes they need to do to achieve financial freedom. And if that process involves sacrifice, he says so.
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In a recent episode, he talked with a young father who was dealing with college loans, car debt and a new baby. It’s a relatable scenario these days, as it’s estimated that more than three-quarters of U.S. households carry debt.
While it can feel like a hole you’ll never crawl out of, Ramsey has a characteristically blunt solution: Stop spending money you don’t have. Read on for more tips from Ramsey on how to “live like a college student” to get on the right track with your money.
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View Debt as Money Already Spent
When the caller argued against drawing from his savings, Ramsey pointed out the man’s $50,000 car debt. “You already spent it,” he said. “You just hadn’t admitted it yet.”
If your goal is financial freedom, memorize that quote. Every time you take out a loan or put something on a credit card, you’ve spent that entire total. You’ve spent even more if interest is involved.
If you buy a $30,000 car, you’ve spent $30,000. You can’t unspend it unless you sell the vehicle, which Ramsey told his caller to do. A $40,000 car on an $80,000 income doesn’t make sense, Ramsey argued — and that’s advice anyone can take to the bank.
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Don’t Buy What You Can’t Afford
Ramsey is famous for his hard-line attitude about debt. He says that if you can’t buy something with cash, don’t buy it.
Ramsey has shared this hard-to-hear advice on his radio show, website and social media pages. His TikTok account includes a powerful message about the difference between “I can afford this” and “I think I can afford the payments.”
Ramsey says payments are how people end up on a financial treadmill. The more of them you can avoid, the better. For most of us, that means cutting back on the standard of living we’ve adopted as adults.
Embrace the Broke-Student Lifestyle
Even if you’re not broke, living like you did as an 18 to 22-year-old is an excellent way to cut your expenses.
It reminds you that you didn’t always have expensive car payments or spend hundreds of dollars at trendy bars. You didn’t have the resources then, and just because you may now doesn’t mean you need to take on unnecessary expenses.
Avoid the ‘Lifestyle Creep’ Effect
Most people move on from student life when they get their first “adult” jobs and immediately begin spending more. Money experts call it “lifestyle creep” — the gradual slide into a higher standard of living with better cars, nicer apartments and ordering cocktails instead of beers at dinner.
Lifestyle creep is partially self-inflicted and partially peer-driven. Your friends also earn and spend more, so you feel the need to keep up.
If you’re strong enough to break that cycle, you can lower your spending and pay off your debt. It requires discipline, but you don’t need to nickel-and-dime yourself. You need to remember what it’s like not to have a high income and readopt that lifestyle.
Remember How To Live Frugally
Typical students develop the valuable skill of living on nearly nothing, and Ramsey isn’t the only one who thinks that’s important. Young Finances contributor Chonce Maddox encourages thrifty savers to remember how they lived on the barest of budgets. Here are some ways:
Pursue free hobbies: Go hiking, get museum passes from the library, have movie nights at home and check out community festivals. Ask your friends and neighbors what they do for free and try it out.
Join freecycle groups: Many communities have online giveaway groups where you can get all kinds of necessities and extras, from cookware to used electronics.
Work out with friends: Ditch the gym membership and find a few friends with whom you can run, bike or do YouTube fitness sessions.
Share expenses: Speaking of friends, look for ways to split basic expenses, like carpooling or sharing an internet account with roommates.
The most important ingredient is your mindset. Instead of cutting back on one thing or another, you’re starting at zero with your budget and reflecting on what’s necessary. Free is best, cheap is next best, and debt is dangerous.
No Debt = Financial Freedom
Ramsey’s advice boils down to one goal — getting rid of debt so you can be financially free. The student lifestyle is a means to that end.
When you live frugally with an adult income, you can set aside more for debt payments and savings. The less you spend, the faster you can save and rebuild your finances.
If you want to pay off your debt and be financially independent, try living like you have next to nothing. Look for free and cheap ways to enjoy life as you did when you were younger.
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This article originally appeared on GOBankingRates.com: Dave Ramsey: ‘Live Like a College Student’ If You Want To Be Financially Free — Here’s How