Dave Ramsey Thoughts from Investing to Bankruptcy

Dave Ramsey has lived through a lot, from filing bankruptcy to helping people understand how to stay financially healthy. It is clear that he provides new and innovative ways to increase your wealth and protect your financial health.

Dave Ramsey on Mutual Funds

If you know who Dave Ramsey is, then there is a good chance you’ve heard him talk about how lucrative investment mutual funds are. However, there are pieces to understand before jumping into mutual funds.

What are Mutual Funds?

Before taking another step forward, it is important to understand what mutual funds are. At a general level, mutual funds are investment portfolios, of which are managed by investment managers. These investment managers will go through a mix of money market funds, bonds, and stocks that align with the investor.

Dave Ramsey’s Mutual Fund Recommendation

To help with the understanding of what Dave Ramsey thinks of mutual funds, let’s dive into his mutual fund recommendation. Dave Ramsey breaks down his mutual fund as follows:

25% International
25% Growth and Income
25% Aggressive Growth
25% Growth

International: These are, as the names suggest, international companies that would help maximize your gains.

Growth and Income: This focus area is on large companies that are worth over $10 billion. These are desirable to those that are looking for a lower risk investment.

Aggressive Growth: These funds are smaller companies that have a large growth potential and tend to have higher risk.

Growth: These are companies that are medium to large and still have a lot of growth potential. You may see their prices fluctuate, but you should also see their value increase over time.

Is Dave Ramsey’s Recommendation the Best Route?

At face value, it’s hard to say that Dave Ramsey’s mutual fund recommendation is the best path out there. I will say, however, that some investment experts state that there are better ways to invest your money. You may find that experts state that any portfolio that only has individual stocks is inappropriate.

Dave Ramsey on Money Market Accounts

Are you interested in capitalizing on the growth of your short-term gains? It may be beneficial to look into using an MMA (money market account). Surely, there are many ways to increase the growth of your savings, but sometimes just using a savings account may raise red flags.

What is a Money Market Account?

A money market account is similar to a savings account, however, the interest rate is generally much better. You can often use a debit card or checkbook with the money market account as well. One thing to note is that there is most always a limit on the amount of transactions each month. With a money market account, you can:

Write checks
Make withdrawals
Use a debit card

Pros and Cons to a Money Market Account

You may find that MMA’s will have much higher interest rates compared to a regular savings account. However, it is important to note that you will generally need to keep a minimum balance at all times. Here is a breakdown of some of the pros and cons by Dave Ramsey on money market accounts:

Pros:

Higher Interest Rates
Secured and Insured
Easy to Access

Cons:

Minimum Balance Requirements
Limitation on Number of Withdrawals
Lower Return on Investment than a CD

Should I use a Money Market Account?

If you are at a place where you are uncertain if using a savings account is the best option, then it may be helpful to look into using a money market account. Dave Ramsey finds an MMA to offer higher interest rates and more security. However, as there many advantages to an MMA, there are clear disadvantages to acknowledge as well.

Dave Ramsey on Bankruptcy

Bankruptcy can be an extremely intimidating process to think about. In short, bankruptcy is a legal process where you are able to discharge unsecured debt. For instance, generally if a debtor owes the creditor a decent size of unsecured debt and does not see a chance to pay it, bankruptcy can be an option they look towards. However, the big question is, what does Dave Ramsey think about bankruptcy? Let’s dive in and try to answer that question.

Why Dave Ramsey Filed Bankruptcy

Back in the 1980’s Dave Ramsey actually filed for bankruptcy. He found himself completely broke after that bank called in his loans. He looked into his alternative options, but found himself landing on bankruptcy. Dave Ramsey wants people to understand their alternatives to avoid bankruptcy by providing these 6 steps to avoid bankruptcy:

You can take care of your four walls first
You can sell everything that you can
You can try your hardest to live on a bare-bones budget
You can get a second job
You can watch out for bankruptcy alternative provision
You can talk to a financial coach.

Dave Ramsey found the entire process of bankruptcy to be an extremely overwhelming and emotionally taxing process. With that being said, he wanted to make sure that it was clear that there were alternative routes to bankruptcy.

When Should You File Bankruptcy?

Although bankruptcy can feel quite overwhelming and intimidating, there is a time and place for it. It was put in place to help individuals who are struggling with a certain amount of unsecured debt and there is no clear chance of paying them off. Debtors may also find themselves having their wages being garnished and bankruptcy should almost always stop wage garnishment. If this is the case, there are steps to take to help you understand your bankruptcy options.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also known as the “liquidation” bankruptcy, is the process where you discharge all of your unsecured debts and assets through a one time payment. However, if the Chapter 7 payment is too high to make, bankruptcy attorneys will most always offer a payment plan. This can be a great option to take care of the unsecured debt, if you don’t have any high value assets you would like to protect. In order to be able to file Chapter 7 bankruptcy you need to qualify. Qualification is based on your annual gross income for the household. The income limit for Chapter 7 is based on the household size and state you are in. If you are unable to qualify for Chapter 7, then the next step would be to understand Chapter 13 bankruptcy.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is the process of restructuring your existing debt into a three to five year payment plan. This is an option for individuals who either have quite a bit of equity in high value assets or are unable to qualify for Chapter 7 bankruptcy. If the Chapter 13 plan payment ends up being quite high, it can be of your benefit to look into debt settlement.

Conclusion

Dave Ramsey has been through it all, from finding more strategic ways to investing, to bankruptcy. It is clear that he provides new and innovative ways to increase your wealth and protect your financial health. It can also be helpful to look into other ways to increase income and growth as well. If you are, however, looking to help with a financial hardship, it could be in your best interest to speak with a local attorney.