Dave Ramsey Says 3 Money Habits Can Hurt Your Retirement
Planning for retirement is not just about saving money. It also includes putting a plan in place to make sure you don’t run out of money quickly once you say goodbye to employees.
Personal finance expert Dave Ramsey refers to each person as the CEO of their own retirement. Developing strong investing habits as early as possible will help ensure you don’t hurt your retirement savings when you’re in your 50s, 60s and beyond. Here are three behaviors that Ramsey says can backfire.
1. Treating debt payments as ‘normal’
Debt can be an important part of the financial journey, such as a mortgage or student loan to finance your education. But building up high-interest debt like credit card debt — and not focusing on paying off your debt in general — can reduce your cash flow.
Ramsey is heavily in debt. He says that people should avoid debts, and pay them hard if they get them. Debt may make sense in some people’s plans, but the advice you can get from Ramsey’s approach is not to view debt payments as a regular part of your budget. You shouldn’t make frequent payments so you don’t have to focus on paying off that debt.
Ramsey believes that people should aggressively pay off debt and that retiring with any type of debt can ruin their golden years. He says the best way to deal with debt if you have it is to pay it off quickly, and be debt free before you retire. That way, you have fewer expenses to worry about and are more prepared for any surprises.
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2. Lifestyle moves without a written plan
Expenses tend to increase over time, but some retirees may be shocked by the rising costs that occur during their golden years. Home improvements, frequent moves and unexpected spending can add up to monthly expenses if you’re not careful, and some people spend so much in retirement that their nest eggs expand too much.
Ramsey often suggests creating a detailed budget, living below your means to avoid a hectic lifestyle and avoid reckless spending. Every random dollar you spend is another dollar that can be put to work in your retirement and compounded into a portfolio.
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3. Reversing your savings and false confidence
Planning for retirement is a long-term process, and saving right before you’re ready to step back from the workforce can leave you financially vulnerable deep into your golden years. Expecting to rely solely on Social Security without a plan to develop additional income, not growing your retirement accounts and going deeper into debt can have consequences.
Ramsey says saving for retirement doesn’t have to be difficult, but it should be consistent.
He suggests saving at least 15% of your gross income – that is, your income before any taxes are deducted.
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