Dave Ramsey, financial guru and coauthor of Smart-Money Smart Kids (Lampo Press, $24.99), talked to us about making the most of your savings. Here are his tips.
Try to avoid a tax refund.
That means you loaned the government interest-free money. Change your deductions for next year.
Use a windfall wisely.
If you are getting a refund check, here’s how to use it: First, save $1,000 for a starter emergency fund. Then, pay off debt using “the debt snowball”—list all your debts smallest to largest and pay off the smallest first, working your way down the list. Put the rest toward a full emergency fund of three to six months of expenses.
Get mad at debt.
Understand that credit card, student loan, and car payments are ruining your financial future. If you’re sending everything you earn out the door to pay off what you owe, you’ll never be able to save money and achieve financial peace.
Make a plan.
The biggest money mistake people make is not bothering. They spend money without thinking about it, and then wonder at tax time where all their money went. You have to be proactive. Try a simple zero-based budget on paper every month before the month begins.
Back-to-school season can mean a lot of expenses every year. But the good news is it isn’t a surprise – you know it’s coming, so you can plan ahead. Set aside money each month starting now, so it won’t feel so difficult when the time comes.
Teach your kids about money.
The best way to teach a teen to save is to help them set a long-term goal. Consider matching what they save, to help them purchase a big ticket item. When teens save for something they really want they’ll work harder and make better decisions about where to spend their money.