Sometimes the simple methods are the most effective.
- Dave Ramsey and Kevin O’Leary recommend minimizing non-essential expenses if you’re in debt.
- This is a smart strategy for those with high interest rate debt or large debts.
- In addition, a balance transfer credit card or a debt consolidation loan could also help.
Debt is something that many people struggle with. It comes in all forms, from credit cards to personal loans to financing plans. And that can take a toll on your finances. In fact, recent data shows that the average American spends a huge 9.5% of their income on debt each month.
Both Dave Ramsey and Kevin O’Leary are well known for their financial advice. Ramsey, in particular, is famous for helping people no longer have any debts. While O’Leary’s main claim to fame is featured on shark tank and being a cryptocurrency supporter, he also provides advice on personal finance the subjects.
Although these two are wildly different in their philosophies (Ramsey would never recommend going anywhere near crypto), they share the same strategy for eliminating debt. If you’ve been trying to get your own debt situation under control, their advice could be a big help.
What Dave Ramsey and Kevin O’Leary recommend for getting out of debt
Both Ramsey and O’Leary recommend that if you are in debt, minimize non-essential expenses. By reducing your expenses, you won’t take on more debt and you’ll have more money to spend on what you owe.
Ramsey provides a detailed plan for people struggling with debt. He advises you:
- Set a budget to take control of your money.
- Make sure your four basic needs are met first. These are food, utilities, housing and transportation.
- Reduce non-essential items. Look for automatic payments that drain your bank account, cut coupons, and get rid of discretionary spending, like going to a restaurant.
- Stop taking on new debt, which also means stopping spending money on your credit cards.
O’Leary recently provided his own advice via his Twitter account, and he kept it short and sweet. He said “Don’t buy anything you absolutely don’t need until you are debt free.”
Should we follow this advice?
If you are in debt, reducing or eliminating non-essential expenses is good advice. The more you reduce your expenses, the faster you will be able to pay off your balances. Once you have done this, you can use the money you were spending to pay off your debts to save or invest.
There are a few things to add, however. Some types of debt are more pressing than others. When financial advisors talk about eliminating debt, they normally refer to high interest rate debt and big debts. For example, if you have a lot of credit card debt, it is worth prioritizing because of the interest it will cost you. The same is true if you have large debt balances relative to your income.
On the other hand, low interest rate debt is not as problematic. Mortgage debt is the best example. O’Leary says don’t buy anything you don’t need until you’re debt free, but he probably doesn’t mean paying off your mortgage in full before you buy everything you want. Car loans are another type of debt that is not always a problem. If you have a low-interest car loan for a reasonable amount, you don’t necessarily have to force yourself to pay it off as quickly as possible.
There are also good debt repayment strategies that can help you save on interest. Depending on your credit scoreyou can do one of the following:
- Balance transfers: Open a credit card balance transfer with an introductory APR of 0%. You can transfer your debt and you will not be charged interest during the introductory period.
- Debt Consolidation: Obtain a debt consolidation loan and use it to pay off your debt. If you have high-interest debt, a loan might get you a lower interest rate and you can pay it off in fixed monthly installments.
Ramsey and O’Leary have sound advice for those struggling with debt. In this situation, the best thing to do is to keep the expenses as low as possible. While this may be enough on its own, it’s also worth looking at ways to pay off debt faster and with less interest. For many consumers, a balance transfer or debt consolidation could make a big difference.
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