Dave Ramsey: Take the Baby Steps to Become a Millionaire | Will & Amala

all right everyone we have the legendary dave ramsey on the show today it's an honor to have you sir well i'm honored to be with you guys thanks for having me yeah you know we've had uh some great prageru presenters from the ramsey network the ramsey family had a rachel cruz you know her video has over 3 million views on prageru we got to do something with you too absolutely i'm glad rachel did well yeah no it's all been very successful now you have a new book coming out baby steps millionaires tell us a little bit about the book well i really hadn't done a major trade book in about eight years and didn't have an intention to do another one but i kept running into a couple of things that well they just correlated and told me i needed to do it at this time one was i kept hearing all this drum beat in the marketplace uh from people that with a political agenda or some kind of socialist agenda or whatever it is explaining to people that you know that the american dream is dead the chances of getting ahead and building wealth and being financially successful in america is over you can't do it now the only way to have money is inherit money and i knew that to be a lie and i knew these people were out there just stealing people's hope our hope stealers i don't care for hope stealers because we're in the hope business and so and the other piece was i knew it was wrong because i kept running into after 30 years of teaching people to get out of debt so that they could be generous so that they could build wealth i kept running into these people who had followed our baby steps and become millionaires and there's like tens of thousands of them because we've had millions of people go through our classes and millions of people on the radio millions of books sold all that kind of stuff so it's easily tens of thousands of millionaires out there so i knew we had the proof that these hope stealers were wrong and so that's really what the book is it's the all the evidence from 30 years of experience from an airtight study of 10 000 millionaires from lots of wonderful stories of people who really did it uh to show that yes while america's got our troubles why we got things we got to overcome and success is never easy it is very doable today to become a millionaire yeah i'd like to talk more about that i mean i know as someone who i work in the more political cultural world and i see what's happening with the economy and you know price of education is going up price of housing is going up health care all these things are going up and when you see all of that happening do you still think that the american dream is alive for most people yes it is um because here's the thing one element of all of that inflation is the cost of wages the cost of employees and it enters into the cost of goods sold and drives the prices up we've got 1100 folks working here at ramsey and what it takes to hire a developer a senior level developer is substantially different than what it was three years ago and guess what that cost then is built into the things that we sell which drove those prices up has to be because but the developer is making money more money than he's ever made she's ever made in their life and so uh you know the wages are correlating with it for the people that choose to enter fields that where they can do that now certainly you can you manage to fail in america it's possible but if you if you will ride some of the waves of some of the wonderful things happening right now in our economy uh you can make more money than you've ever made in your life and what is the the number one piece of advice you tell people say hey if you want to be a millionaire or you want to make it in america what do you tell people as the first step what is the first baby step well the seven baby steps are what we've taught forever that's not really new material for us but the book is more about showing exactly how they work baby step one's a thousand dollars in the bank quickly do that two is get all your debt paid off except your house we use the debt snowball to do that you probably heard that list i'm smallest to largest and because if you get rid of your non-mortgage payments in most households that's 1400 bucks a month 1200 bucks a month somewhere right in there if you invest that in your 401k that alone eventually will make you a millionaire i mean that's 15 000 bucks a year and that that will turn into some serious money if you invest that over time so you get out of debt because that's your most powerful wealth building tool then you finish your emergency fund as baby step three baby step four is really where the millionaire stuff starts happening you start putting 15 percent of your income after you've done these other things you've got some money 15 of your income into retirement 401ks iras roth iras good growth stock mutual funds and then kids college is baby step five and six is pay off the house early when we studied all of these millionaires it was ten thousand of them in the largest study of millionaires ever done in north america we discovered the typical millionaire in their first one to five million dollars worth of wealth em typically amounts to a really nice paid for house four five six hundred thousand dollar paid for house some cases more in some cases less but right in there and somewhere around a million dollars in their 401ks and in their retirement mutual funds and they did that over 12 to 17 years so the biggest advice i've got is get in a system get in a proven process and don't fall prey to all the get-rich-quick that's going on out there particularly right now a whole new wave of get rich quick has come through and just getting a steady steady steady steady and you have a very high probability of building wealth then yeah and i really agree with you i think the people have to be able to take control of their own lives take control of their own finances to make something happen one thing that that i've seen is you know baby boomers at about the age of 35 they own 21 percent of the nation's wealth millennials right now at about that same age only own three percent of the the nation's wealth why do you see that that this is happening or do you think that there's a cultural problem when it comes to younger people in this country with money or what are you seeing as the biggest problems facing young people financially today well i think that uh the millennial numbers are weird because the millennial generation is it's so bifurcated i've got a whole bunch of millennials on our team and i love this generation it's an incredible generation and uh but by bifurcated i mean this there is no middle ground with millennials there's only two kinds awesome and sucks i mean they're just it's like they're useless or they'll chase the you chase down the gates of hell with a water pistol and so what you'll probably find if you dove drilled down into that stat is that a certain portion of millennials have unbelievable wealth way ahead of the game and a certain portion are almost nothing so it's not a cultural breakdown or a generational breakdown or we've got a whole generation that forgot how to be smart it's just this bifurcation in that particular generation which i think makes them incredible i i just again we love having them on the team because they're very very passionate and they do build wealth i mean i had a i had a millennial yesterday 32 years old paid off their home and their net worth is a little over a million dollars that's incredible what what are some of the success stories that you've seen do you have any off the top of your head there like this blew me away something to give people who might be watching this and saying well you know maybe it'll work for someone but it won't work for me do you have any success stories that you can stuff after doing this for so long we've met someone of every possible situation or demographic that has done it and so racism is real sexism is real but i mean people who overcome both of them all the time and and become successful financially and in other areas of life anyway and so you know everybody's got some kind of deck that is stacked against them one way or another and and the one thing all of these people that i meet have in common whether they regardless of their race their background their religion where they're coming from is they have this i have the ability to look past the stacked deck and go i'm going to win anyway i'm going to figure out a way jackie comes to mind she's in the story african-american lady just precious oh she is she is a neat woman and she grew up in poverty i mean really bad situation uh and vowed that you know she was never gonna be hungry again and never be with only one pair of shoes again and went to school went deeply in debt to go get her degree got married and started in a middle-class lifestyle with a bunch of student loan debt and a bunch of other debt and that in that marriage ended in divorce and she finds herself as a single mom right back in subsidized housing right back on welfare and she's like no i'm not doing this i'm not doing this and she made her decision that day i'm going to learn how to step by step by step get out of this mess and we meet her in the book many years later and now she's a millionaire and now she's raised two kids uh gotten remarried and has just a wonderful life but you know she overcame being a single mom lady african-american i mean she had everything going against her and with a background that didn't have anything to do with money and background that no reason she should think she could win and went and did it anyway and those are just wonderful people they're so fun to meet you talked to there about student debt and luckily myself i dropped out of school so i don't have really any student debt but i know people who i grew up with who have i mean hundreds of thousands of dollars of student debt are you seeing right now that it's worth it for people to get into that amount of debt to go to school or what do you say is like the alternative or the right path to take with that because we have we have a young audience who watches us who might be thinking you know it's just too expensive for me we just launched a uh a major uh full-on documentary that is um on amazon prime and several hundred thousand people have already viewed it called borrowed future about the student loan debacle in north america today it's an epic failure it is a serious serious problem and lots of people are really trapped it's really sad but they can get out we can show them how but man you know my recommendation would be to never go in no i there's not a situation where i have ever recommended someone take out a student loan to go to school and the reason is you can get an education without going to school with that school the school you can't afford and the problem is we got people with 200 thousand dollars of student loan debt that you know their degree is left-handed puppetry you know this just doesn't work you know so uh what we tell folks to do is if you're going to go to school and for a four-year education is a fine thing there's nothing wrong with that get a obviously get a degree in something that's usable and that the marketplace will pay you for that there's a rate of return on your investment of time and of money but first thing is pick a school you can afford and that may mean you go to two years of of uh junior college you know and a lot of states that's free get that out of the way and then go to an in-state school transfer all those credits and work while you're in school but college choice overpaying for the degree is the number one cause of the student loan mess going to schools that people can't afford getting degrees that don't matter and then people are stuck with 100 or two hundred thousand dollars and it's a mess so yeah pick very very carefully i'm not one that says all higher education is bad no i believe in getting a degree there's nothing wrong with that but there's lots of trades you can do too that make a lot more than i mean i think diesel mechanics making a whole lot more than somebody with a master's degree in social work right no talk a little bit more about trade school what do you think with that should people go into debt if they're getting trade school no i'm not going to go i'm not going to send you this dave ramsey we're not getting you in debt for anything man it's not no no but but i mean i'm i'm talking to young guys and gals that are welders uh they're diesel mechanics they're heating air uh they're setting themselves up in the trades and my friend mike rowe is really excited about this trend we're seeing dirty jobs guy and he and i've had some great talks about this it's just it's exciting to see the trades come back alive because they are legitimate and the whole higher education movement looked down upon the trades as if they weren't a valid way to live your life and they are it's just a matter what you're called to but there's not certainly but we're not going to say all four-year degrees are not worth it no some of them are definitely worth it uh particularly if you get a bunch of scholarships and you go for free you work your way through you pay reasonable tuitions and those kinds of things yeah go get a good business degree good marketing degree there's nothing you're going to learn some stuff doing that when it comes to credit cards i i i know you talk a lot about this and i have a lot of friends who will say you know i i get credit cards and i even didn't even follow your advice i have credit cards too and now that i'm talking to you i feel kind of bad about it be honest forgive me father i've seen it yeah i've seen i didn't follow the baby steps but you know people will come and say well i have a credit card because then i get these points i get these points or you know i need to have a credit card so that i can build up this credit so i can buy a house or buy a new car or you know whatever it is what is your recommendation when it comes to how people should use them or if they shouldn't even use them at all well there's a couple of different elements to your question there it's a really good question um element number one is the points that you get back we studied ten thousand millionaires the largest study of millionaires ever done airtight research very detailed very in-depth and the number of millionaires that we talked to that said that they became millionaires because of using points on their credit cards was precisely zero so it's absolutely bogus it's just a rationalization and justification 78 of the airline miles that are collected on credit cards are never used eight out of ten and yet people are spinning their butt off and going oh but i got airline miles oh but i got discover points here's the thing if you get a one percent back on your card that means you get a thousand dollars for every 100 000 you spent tell me how this formula turns into wealth it doesn't so that that's just that that whole idea is that's just someone going i need a reason so i can do whatever the flip i want to do which is i want to buy stuff i can't afford with money i don't have to impress people i don't even really like so that's just silliness the second one is the credit score issue and the banking industry has taught all of america to worship at the altar of the great fico oh great fico we bring you offerings of interest so you will raise our number so we can buy other things now let's think about what a credit score is there's only one way you get a credit score and maintain it borrowing money it's 100 having to do with borrowing money all of the algorithm is built on that it's not built on net worth it's not built on your income it's only built on your interaction with debt so if i want a high credit score i go borrow money why so that i have a high credit score why so that i can borrow money why so that i can have a high credit score why so that i can borrow money there's nothing in this equation that causes you to build wealth nothing whatsoever you're building a lot of wealth however for a bank so millionaires pay cash for everything except possibly a house and you can buy a house with manual underwriting if you want a mortgage with zero credit score with a zero credit score i had a guy on the air three days ago that did that he was in his 20s and he had never borrowed money in his life he was a financial peace baby his parents went through our stuff years ago never borrow money went to churchill mortgage got a mortgage manually underwriting absolutely no credit score same interest rate as everybody else put it on a 15-year fixed no trouble at all but you can't do a lot of things without a credit card i haven't had a credit score in 30 years so there's certain things i can't do without that but you know what i'll i'll make the trade because i'm not giving the bank all my stinking money yeah you brought up an interesting point there when you were just talking about you know people are buying things that they don't need to impress people they don't like talk a little bit about that a little bit deeper on that if you could just about you know maybe the culture of america and the way that people spend their money on things well i went broke in my 20s and lost everything and in that unbelievably painful and scary terrorizing experience uh i i lost one of the things i lost that was a huge benefit to me was i lost my need to impress other people and before that i was really concerned about what other people thought about my car or my watch or my coat or whatever i was really i was really a pretty shallow arrogant little twerp really and so uh but when i went broke it it ground that out of me and i because a lot of the people that were supposed to be my friends suddenly they didn't care about because we didn't have anything anymore we're not it was gone and you know the jaguar is gone the house is gone the trips to hawaii are gone and so uh you know all of a sudden i looked like people didn't know what to do with that and so when i when i quit caring what people thought then i only made purchases that were good for me my family and our future and when you narrow your purchases down to that it changes your purchases it changes what you're doing and it doesn't mean you don't buy some nice things i've got a really nice car a couple of them right now but i didn't buy any of those for what someone else thought i bought them because i liked the car and it was for me and it was for my wife you know and so we're going to enjoy that but my need to impress somebody at a stoplight that i'll never meet is absolutely zero and americans spend dollars a month to impress somebody at a stoplight that they will never meet i mean we're crazy out here we're just nuts the thing on our coat the thing on whatever oh my goodness gracious the prestige spending is is bizarre you know what we spent what some people spend for a purse or the color the right color on the bottom of their high-heeled shoes wow uh it it's it's it's nuts but it's fun it's fun to watch but the people that we meet that build wealth one of the things that happens to them or that they just make a decision on is they want to love their life not theirs as rachel cruz says in her book i want to wrap it up here after what you just said it's kind of a bigger question but when you look at the way that people spend money and the way that america is it seems in some ways america has a little bit of a sickness a cultural problem uh people can definitely become the millionaires like you were saying i 100 agree with you but if you had to look at the things happening with america financially maybe when it comes i know you like to say don't spend like congress what would you kind of give as a an antidote to the future of america for people to hear on this show today well it was true in my life and it's been true with a whole bunch of people we've led away from overspending away from debt into wise spending and building some wealth and into a situation where they can be outrageously generous that is a mathematical uh journey for sure but it is not merely a mathematical journey and you won't take the mathematical journey unless you first and simultaneously take the spiritual journey with it and so you've got to really decide what's real what's important where are we really going and so part of what is driving this uh ridiculous level of consumption is just our emotional spiritual shallowness and so the if we would all grow up just a little bit including dave you know we would all be running this whole thing a whole lot better and it really is it really is a lack of maturity adults devise a plan and follow it children do what feels good that's exactly right man well thank you and look we got a we got dave ramsey kids here too all right which uh i don't have any kids unfortunately someday soon hopefully but a lot of our staff here they have kids and they all use these books and awesome they're really excited about we have a we have a program with prageru for kids as well wow um that i think would be awesome to get get them involved with the ramsey kid stuff too absolutely so how how can people find out about your book find out more about what you're doing and just keeping updates on everything i appreciate that ramseysolutions.com has got everything you can find out about the all the shows and the podcasts and everything else we're doing here certainly any of the books or classes that are taught and all that kind of stuff and we'll help you out any way we can fantastic well dave it really means a lot that you came on today to discuss all this i know it's a different type of audience and i think they're really going to appreciate the things you had to say today man so i hope we can work together again soon absolutely brother thank you for having me i was honored to be with you thanks dave you