How to Prepare for Retirement Like Dave Ramsey

Want to retire comfortably and easily? Then you better prepare for retirement like Dave Ramsey.

Over the years, there have been tons of finance gurus who have offered up excellent advice to the average man. There's no shortage of personal finance advice you can read, and no shortage of mavericks, either.

Great Wall Street gods like Warren Buffett have long offered advice on how to invest like them, while personal finance writers like Ramit Sethi have been able to give people honest advice about budgeting.

Speaking as an avid reader of personal finance books, one of my favorite gurus in terms of retirement is Dave Ramsey. His book, The Total Money Makeover, helped me pay down debt and prepare for retirement.

As far as his advice goes, it's golden and can make retirement a breeze. Want to learn how to prepare for retirement like Dave Ramsey? Here are some tips you can read.

First things first, pay down debt.

Debt is bad, okay? The more money you owe, the more money you have to pay. The more money you have to pay, the less money you have available to use to fund your retirement. As a result, you're better off investing your money by paying off debt.

Ramsey actually offered up some good advice on how to pay off debt fast. He uses a "snowball method" to make paying off credit card debt a breeze. Once you've gotten your debt manageable, you can start to prepare for retirement like Dave Ramsey—or really, any other finance guru who advocates for being debt-free.

The next thing you need to do is figure out how much money you can survive on, and what your retirement lifestyle should be like.

Obviously, the more money you save for retirement, the better off you'll be. However, we can't all save up $10 million for retirement. To retire comfortably, you will probably need to have an income similar to what you currently have.

If you have a salary of $50,000 a year, you can probably retire on $40,000. If you have a salary of $75,000, you could probably feel comfortable on an income of $60,000.

Dave Ramsey's site actually has a retirement calculator that allows you to figure out how much you'd need in order to retire at the age you want to retire. Once you have a number in mind, everything really starts to fall into place.

One thing he also points out is how important it is to define what you consider a quality life.

One thing that tends to happen when you earn a lot of money is lifestyle inflation. A person who earned $25,000 their entire life will not be that upset if they retire on $25,000. On the other hand, a person who lived their life on $100,000 per year will be totally crushed if they had to retire on that amount of money.

When figuring out what salary you want to have as a retiree, you really will need to come up with a realistic number. If you make $100,000, you're not going to be happy at a $25,000 retirement.

By knowing how much money you would need in order to retire, you can start planning for the future.

Most people, when they retire, tend to invest in stocks and bonds. These give a return on investment of around eight percent after tax and inflation. That alone isn't bad, but if you're looking to prepare for retirement like Dave Ramsey, it's not the route to go. 

Ramsey actually suggests putting your money into index funds, especially the S&P 500. By investing in the best S&P 500 index funds, you can expect an annual average return of around 12 percent.

He's also a huge fan of mutual funds when it comes to retirement planning. This video above explains why.

One thing that is worth pointing out is the way Ramsey tends to drive home that anyone can retire a millionaire.

Do you know how much saving it would take to retire with a million dollars? All things considered, you probably believe that it would take at least $400 a month, right? Well, not quite. 

If you prepare for retirement like Dave Ramsey, then you will be happy to know that you can retire a millionaire on $35 per week, as long as you contribute that much weekly for the next 30 years.

Think about it. $35 is a concert ticket. It's a meal out at Applebee's. That's really not much money at all!

Of course, there are other ways to lightning-charge your retirement.

Part of learning how to prepare for retirement like Dave Ramsey is learning how to save money. The more money you're able to free up, the more you can invest. As you invest more money, you're adding a nice extra layer of cushioning to your personal finances in the future.

Things like learning not to waste money on things you don't need, using coupons to save money on groceries, and even haggling to get a better deal on your car all matter in the long run.

Budgeting is really important, too.

Whether you're looking to just stay afloat or feeling like you need to prepare for retirement like Dave Ramsey himself, budgeting is a huge deal. Ramsey is a major fan of accounting for every penny and sticking to a budget.

By knowing what you spend in a typical month, you can get a much better idea of what your retirement needs will be like. Sticking to a budget is also great for preparing for the fixed income of a retired life.

Budgeting software like Mint can be a real help here.

Another thing you may need to consider is the importance of life insurance.

If you have anyone that depends on you for income, then another thing you might want to do is buy life insurance. Should anything happen to you, life insurance will be what will keep your loved ones from wallowing in poverty.

That being said, if no one depends on you and you're totally financially independent, life insurance might not fully make sense.

Like most other finance gurus, Ramsey also has a deep love of learning.

Dave Ramsey is brilliant, but just like everyone else, there was a time when he didn't know his mutual funds from his index funds. Like all others who have mastered personal finance, he's a huge proponent of keeping educated.

If you want to prepare for retirement like Dave Ramsey, listening in on money management podcasts or reading one of his books is a good way to really get to the meat of the solution.

Above all, don't panic.

Retirement is scary. That's no joke! Many people, especially those who have lived through the Great Recession, really get scared and twitchy when they hear the word "retirement" or the phrase "Roth IRA."

But, you need not sweat it. No matter what your current income is or how badly you messed up in the past, you can always prepare for retirement like Dave Ramsey in the future.

Now Reading
How to Prepare for Retirement Like Dave Ramsey
Read Next
Apple's $1 Trillion Dollar Evaluation