This simple advice from Dave Ramsey could make you a billionaire

A woman sitting in the driver's seat of a new car and talking to a salesman through the window.

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Dave Ramsey is a financial expert dedicated to helping people build wealth. He has provided many different financial tips to save more and avoid credit card debt, but a simple piece of advice could make a big difference in whether you end up rich.

In fact, if you follow this suggestion, you could potentially finish billionaire. That is how.

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Dave Ramsey Says You Can End Up Rich

According to Ramsey, there is a really easy solution to becoming a billionaire that just about anyone can implement. It’s about changing the way you buy a car.

“This cycle of ‘always have a car payment’ is preventing people from really moving forward with their money,” Ramsey explained. He believes that if he avoids car loans and instead saves up cash for a car, he can invest the extra money and end up rich.

This is not just a hypothesis either. In fact, he provided some hard numbers. Specifically, Ramsey noted that the average new car payment is $577 and that new cars lose 60% of their value over the course of the first five years. And he demonstrated exactly what could happen if you don’t take out that big car loan.

“Let’s say at age 21, instead of taking out a car loan, you invested that $577 each month. At an 11% annual return, you’d have $9,630,619 when you retire at age 67,” he said. Ramsey Solutions blog readings.

If you end up with close to $10 million, which is indeed a reasonable amount if you save $577 a month for several decades, then you’d be pretty rich, all because you didn’t borrow for a vehicle.

Should you listen to it?

Ramsey is absolutely right that getting a car loan could cost you a lot more money than you think once you factor in the lost profits you let pass by by borrowing an asset that loses value, rather than investing in assets that lose value. They produce a generous rate. back

Of course, their math overlooks the fact that you probably need some kind of car. He suggests saving and paying cash, which is a smart move. However, you would need to use some of your money to do that. So you wouldn’t necessarily end up with an extra $577 each month for your entire career if you took Ramsey’s recommended approach, since some of the money you save on your car payment would have to be diverted to buying a used vehicle for cash. .

Still, it’s absolutely possible to end up much richer if you avoid borrowing and buying new cars. As I wrote in an article a few years ago, if you save up for reliable used cars and invest the difference between what you would pay for a used car and a new one, you could easily (and realistically) find yourself with much more money.

Whether you end up a billionaire will depend on how much you can cut your car costs by paying cash and buying a used one. If you can drive your cars for a long time and pay little for them, you can save most or all of that $577 a month and get closer to Ramsey’s numbers. Worth the effort.

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