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If you’re looking to build your wealth, don’t listen to this advice from Dave Ramsey.

Key Point

  • Dave Ramsey has provided excellent financial advice for many years.
  • However, he also made some suggestions that people might not want to follow.
  • If you put your retirement savings on hold because you’re paying off debt, you might miss the opportunity to earn an income that matches your employer or save as much as you can for a comfortable retirement.

Dave Ramsey is a financial expert and provides excellent advice on a wide variety of financial matters. But he also makes some suggestions that many people need to think carefully about before following along, for example he suggests declining credit his card, but doing so would mean losing credit. It means giving up opportunities to build and earn rewards. He also suggests opting for a 15-year loan when many prefer his 30-year loan.

But while these suggestions are open to disagreement, following one piece of advice Ramsey gave can actually be very dangerous. Here it is.

If you want to build your wealth, don’t follow Ramsey’s advice

Dave Ramsey’s most dangerous piece of advice concerns money priorities. Specifically, Ramsey said, “If you’re paying off debt, you should pause your retirement contributions.”

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Ramsey believes that paying off debt should take precedence over investing in retirement. “Pressing pause is the best way to break that chain and allow us to invest more in the future,” he said.

He suggests that using all the excess cash to pay off debt would free up more money to invest in later retirement. You can start again, you can be truly focused and focused and nothing is holding you back from your destination!”

Why is this advice dangerous?

Ramsey’s advice to pause your retirement investments isn’t advice most people should follow. Especially since he believes you should pay off pretty much everything you owe before you can switch to retirement savings (mortgage debt can be an exception).

However, there are many big problems with this advice.

First and foremost, if your employer offers commensurate contributions, suspending your retirement investments means giving up the opportunity to get free money. If your employer matches your contribution, you’ll get a 100% return in no time. no riskThis is a much higher return than you can get by paying off almost any debt. If you pay off your credit card early, your ROI is just the interest you save, which is much less than 100%.

You can always work on paying off your debt, but you won’t get a chance to retrieve your forgotten employer matching funds. Also, ignore tax credits and potential tax credits (such as savers credits) if you don’t invest. If you don’t contribute to your retirement account, you won’t be able to regain your chance to claim these deductions that you should have been eligible for.

As if this wasn’t enough, you Also You miss the chance for compound growth to start working for you. As you invest, your wealth will grow exponentially as your money begins to generate money that can be reinvested. Delaying the start of investment for years until the debt is paid off For real Even if you become as diligent about saving as Ramsey suggests, it will be difficult to make up the difference and have as much wealth as if you had started earlier.

For example, let’s say you want to end up with a million dollar nest egg. If you start saving with 30 years left until retirement and achieve an average rate of return of 10%, you will need to save about $506 per month. However, if he starts saving when he has only 20 years left until retirement, he will need to save $1,454.96. Delays almost triple the amount you have to invest.

So instead of letting your life suffer, it’s better not to follow Ramsay’s advice. Instead, you should pay the minimum amount of all your debts, then invest enough to earn an amount comparable to your employer, and then decide how to distribute the remaining funds. Pay extra to the broker or your debt.

This approach is the smartest way to get wealthy, but Ramsey’s risky advice may fall short of your long-term goals.

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