Dave Ramsey had a net-worth of over $1 million when he was 26 years old. He had built up his wealth by investing in real-estate and the stock market. Since going bankrupt in the mid 80’s he has certainly learned his lesson as he has worked back up. He currently is host to the radio show “Life, Love, and the Pursuit of Piles of Cash” and is an author.

Here are the basic steps he has for people to become clear of debt and start building up their wealth. A precursor to the steps is figuring out your budget to determine the amount you can afford.

1. Get at least $1,000 cash (a “baby” emergency fund) in the bank as soon as possible.
2. Pay off all debt ASAP (except the house) using what he calls the “debt snowball method.” (seen at bottom of post)
3. Build your emergency fund up to three to six months of living expenses.
4. Invest 15 percent of household income into Roth IRAs and pre-tax retirement accounts.
5. Save for your kids’ college fund(s).
6. Pay off your personal home early.
7. Build wealth and give! Invest in mutual funds and real estate.

Dave Ramsey has something he calls ‘Gazelle Intensity’ where the basic idea is to ‘outmaneuver the enemy and run for your life.’ You can discover more about David Ramsey and his methods by reading his books or by catching his nationally syndicated radio show.

Debt Snowball method

• List all debts in ascending order from smallest balance to largest.
• Commit to pay the minimum payment on every debt.
• Determine how much extra can be applied towards the smallest debt.
• Pay the minimum payment plus the extra amount towards that smallest debt until it is paid off.
• Then, add the old minimum payment from the first debt to the extra amount, and apply the new sum to the second smallest debt.
• Repeat until all debts are paid in full.