Chapter-1 Intro to Personal Finance

Hey guys, I'm Dave Ramsey, and this is my daughter, Rachel Cruz. We're so excited to welcome you to this Foundations in Personal Finance class. We really believe this is the most important class you'll ever take. The stuff you're going to learn in this class will literally change your life forever. Yeah, whether you make $50 a week or $5,000 a week, whether you're 15 or 55, you need to know how money works and how you can put it to work for you. And the best part is, is you can start right now. If you're watching this in high school, you need to stop and thank your teacher. Want to know why? Because he or she just made you a millionaire. You can air. Absolutely. You know, anyone really can become a millionaire in this country. All it takes is some discipline and planning. If you invest just $100 a month starting at age 16, you'll be a millionaire by the time you're 55, and you'll have about $3.5 million by the time you retire. That's $100 a month. That's pizza and movie money for some of you. Yeah, and this isn't rocket science. This is just understanding the basic financial principles. We'll cover all of it. Things like budgeting, basic investing, getting through college without student loans, why and how to buy a car with cash instead of a car loan, and even giving money to others in need. This class will totally change the way you look at money. You guys are in a perfect position to hear this information. You'll be out of high school soon and moving out into the real world. Some of you will go to college, others will go right to work, some of you will go into the military for a while. No matter what your plans are, it's time to learn how to live on your own. You have a lot of responsibility coming your way fast. Things like paying rent, buying a car, paying your own grocery bill, covering your college tuition, and on and on and on. So, let's learn how to handle it. Yeah, and if you're going to college, don't think you can put this stuff off for another four years. Did you know that the number one reason why college students drop out is money problems? They start school and then get stuck because they're up to their eyeballs in student loans, credit card bills, and car payments. This doesn't have to be you. Just think about what you could do, where you could go, what you could start in the world. If you were totally debt-free for life, you could do anything. Teaching me this stuff at an early age was the best gift my parents could have ever given me. I will never owe a dime to anyone because the foundation they laid in my life. That's why I'm so passionate about this material and especially putting it into the hands of high school students. If all of you guys really get this, then the world could change. It could be amazing. A lot of your friends will graduate from college with tens of thousands of dollars in student loan debt. And that will be on top of credit card debt and a car loan. What would your life look like if you did things differently? What if you got out of college with zero debt and thousands of dollars in the bank? It can happen, and we're going to show you how. Thanks for joining us for this class. We promise it can change the whole direction of your life. Now let's get started. What to invest in, try not to spend it, how to save it and how to like manage it pretty much, how to actually stick to your budget, probably just how to keep it in my savings account better because I normally just swipe my card wherever I go. My parents have never been good at managing money. It seems like every time we have an emergency we're like scratching for money, borrowing or taking out credit card loans and I just don't want to be in that situation. So you're in high school. By now you know all about class requirements and how it can feel like you're wasting your time learning something you won't use until you're older. Or maybe never at all. No matter how well you try to hide it, I bet some of you feel the same way about personal finance. Why does a teenager need to know anything about managing money? At your age, you might work a part-time job or get money from your parents for doing chores around the house. It's not much, but you earn enough to grab dinner with friends or buy a new outfit at the mall. And if you run out, no big deal. You've got a place to sleep and food to eat. Once you get older, though, things change. You'll pay rent, buy your own groceries, and pay all of your own bills. Running out of money as an adult is a big deal. And it happens, too. Seven out of ten families in America live paycheck to paycheck. That means they're spending all of their money from one paycheck before the next one arrives. If you can learn how to manage the money you've got today, you'll be ready to manage lots more when you get older and avoid the dreaded paycheck to paycheck lifestyle. And that's what personal finance is all about, making decisions about how you will earn, budget, save, and spend money in the future. To make smart decisions with your money, you've got to put into practice the key components of a successful financial plan. First up, assess your financial situation. Write down your income, how much money you make, your assets, or what you own that has financial value, and your liabilities, any bills or debts that you owe. Right now, that list might not be long. That's why it's a perfect time to start managing your money. Next, you've got to set money goals. Setting goals with your money gives you something to aim for. A goal will also give you motivation, especially when you want to quit. So set your money goals and don't be afraid to go big. Once you've set your money goals, you must write out a detailed plan for accomplishing them. If you don't budget every dollar you make, it'll slip right through your fingers. So, with the goal in mind, determine how you're going to reach it. And here's the biggie, write it down, then execute your plan. It might sound like I'm being redundant, but here's the deal. You can set goals, write down a plan, but that's still not enough. You must carry out that plan day to day. You don't get straight A's by writing the word study on your to-do list, and you definitely don't meet your money goals by simply writing out a budget. You must follow through. It's also important to know your money personality. Did you know that you're naturally a spender or a saver? Neither personality is right or wrong, but understanding your strengths and weaknesses as they relate to money will help you approach financial decisions with wisdom. To keep things moving, you must monitor and reassess your financial plan often. As you get older, graduate from high school, go to college or to work, get married, buy a house, start a family, your financial situation will change. You've got to be ready to change right along with it. Lastly, you've got to replace money myths with money truths. Society poses all kinds of big lies about money. You might hear that car payments are just a way of life, or student loans are the good kind of debt. Learn to recognize money myths and replace them with the truth. I hope you're excited because we're going to have a lot of fun. We'll cover a ton of information for sure. But here's the good news. If you put into practice what we teach, you can truly win with money. All right. Up next, folks, as you're listening to The Dave Ramsey Show, is Kate in Grand Rapids. Hi, Kate. How are you today? Good. I'm in high school and trying to decide whether to major in a field that I really like or in one that makes a lot of money. So can I become wealthy and have a career that I love? Well, Kate, that is a really good question, and you're particularly wise to be asking that while you're in high school. I will tell you this. Very few people succeed at something they hate, even if they're good at it. And so when I'm talking to a college student or a high school student that says, hey, I think accounting is a good field. I think I can make a lot of money being an accountant. And I'm pretty good at math, but I actually hate sitting and doing detailed math all day long. Well, you're going to hate your whole life. You're going to become a hateful person. You're not going to be a good accountant. And yet there are people that love numbers and they bathe in numbers and they want to be an accountant. They love it. They get great joy when spreadsheets balance. And I know those people are sick, but they're out there. And so, you know, that's the person who needs to be an accountant. What gives you the most joy? And then find a way to monetize that in the open market. You don't want to go to a dentist that hates his job. You don't want to go to a doctor or a lawyer that hates their job. You don't want a teacher that hates their job. The best teachers are those that love. Teaching. They get great. They have joy in what they do. And so you will never be good at something that you hate. You really won't. And therefore, it's very difficult to become wealthy at it. And so you may have to find some kind of an unusual way to monetize what people traditionally see as a skill set. For instance, I'm a math guy and I'm a finance guy and I love numbers. But you can be a bookkeeper with that and make $30,000 or $40,000 a year, which there's nothing wrong with that. Or you could be on the radio telling people and using those same exact math skills and be on the radio helping people with their money and doing math and finance with them all day long and make a lot of money, which is what I do. So I've got bookkeeping skills, but I applied them in a way that gives me great joy and therefore, I have become wealthy doing that over a long period of time. So hey, great question, Kate. Thank you for calling in. I've been teaching people how to handle money and build wealth for more than 20 years. I've spent a lot of time with people who are doing really, really well. And I've spent a lot of time with people who are up to their eyeballs in debt and they're struggling with the bills. What I found is that building wealth isn't rocket science. It's actually pretty simple. But it starts by taking control of your behavior. You see, most people don't have a money problem. They have a behavior problem. Hey, the stuff we teach is pretty easy to understand. The problem is that most people don't do it. And that's why 7 out of 10 households are broke and living paycheck to paycheck. Personal finance is only 20% head knowledge. Learning what to do is the easy part. The other 80% is behavior. I learned a long time ago that if I wanted to build wealth, I had to take control of the guy in my mirror. That's right. We've seen over and over and over that anyone can build wealth. I don't care where you live, what you do or don't have right now. The fact is, you're in high school. This is the perfect time for you to get this information. If you apply the stuff you're going to learn in this course right now, you'll have an incredible life without ever having to worry about debt, car payments, and student loans. This class is your roadmap to a successful life. If you actually do the stuff we're going to talk about, you will win with money. We're going to teach you the basic principles of personal finance, how to save and invest, how to follow an education and career path that excites you, how to stay out of debt, and how to help others along the way. I hear from adults all the time that say, I wish I could have learned this stuff when I was young. Why do they say that? Because they know they could have avoided so many money mistakes along the way if they had just learned this stuff when they were your age. All through this class, we're going to show you the right way to manage money right from the start. Let's get started.