The Money Saving Mistake You Should Never Make, Per Dave Ramsey

Dave Ramsey is widely recognized as one of the most impactful financial influencers out there. Coming from humble beginnings, he started off his financial journey by mowing lawns before embarking in a career in real estate at 18. By the age of 26, Dave was already financially successful, making $250,000 a year and possessing a net worth of over $1 million dollars. However, even though things seemed great for Dave on the surface, there was a significant problem.

In the process of amassing his wealth, Ramsey had also amassed an insurmountable amount of debt. This caused him to go from being on top of the world to quickly losing everything he had worked for. However, this also allowed Romsey to learn very valuable lessons that would go on to change his life's direction forever. From that point on, Ramsey made it his mission to teach financial literacy to others, so that he could help people get out of similar situations to the one he experienced. While Ramsey has an abundance of wisdom across many different financial topics — like exactly how much money to keep in your savings or what age you should consider taking Social Security — there's one money saving mistake in particular he says you should never make: keeping large amounts of cash in one place, like an envelope. 

While some might think of stashing money in envelopes or even under their mattress, Dave Ramsey is adamant that consumers should never keep the majority of their savings in cash in a physical location. While this is a bad idea for many reasons, the most notable is that this method won't allow your money to grow in value. Since inflation is, unfortunately, not going away any time soon it's more important than ever to combat inflation with smart financial decisions. For starters, it's important to realize that any cash that is not put somewhere like a high-yield savings account will actually lose its purchasing power over time instead of growing with — or even outpacing — inflation.

Also, when it comes to saving money in the current economy it's fair to acknowledge just how hard it can be. Although there are ways to help save, like putting aside $5 every day into safe index funds like the S&P 500, there are also an equal amount of mistakes you could make in the process. This is part of what makes the financial advice of someone like Ramsey so valuable for consumers. With that said, beyond savings advice Ramsey also has some important advice to keep in mind when it comes to managing debt. 

There is good debt and bad debt. If you're questioning how can any kind of debt is good it's important to understand exactly how creditors view potential borrowers. For example, mortgage debt is generally considered good because it show creditors that you are financially stable enough to maintain regular payments and are therefore a responsible person to lend money to. However, Dave Ramsey views this situation differently, instead believing borrowers should pay off their mortgage as quickly as possible. Ramsey's logic is that the faster you pay off your mortgage, the less interest you will ultimately pay on your loan.

Outside of mortgages, the one type of debt that most people have in common is credit card debt, which data shows is exploding across the country. Worst of all, when you have a lot of it, it can lead you to feel like you're drowning. While many financial experts out there stress the importance of saving for retirement, even if you are in a lot of debt, Ramsey has a different take. Having been in a great deal of debt himself throughout his financial journey, Ramsey believes that it is more important for consumers to pay off their high-interest debt first, before putting money away for retirement. In fact, he even makes the case that you should go as far as to pause retirement contributions altogether until your high interest debt is settled.