TheStreet sat down with personal finance guru Dave Ramsey to discuss the importance of self-awareness in managing finances, particularly debt. He offers anecdotes from his own experience of getting out of debt to help others do the same.
Transcript:
CONWAY GITTENS: And how much of this has to do with self-awareness? What role does self-awareness play in your financial strategy.
DAVE RAMSEY: Everything. That’s a really good insight. I appreciate that question because personal finance is actually about 80% behavior. It’s only about 20% math or head knowledge. It’s not a math problem. No one sits down and goes, hey, I can prosper by going into, you know, $16,000 $6,000 worth of credit card debt at 22% No one says that. I mean, anybody that graduated from the third grade knows that’s not going to work. So no one says that out loud. But what happens. We spend money we don’t have. We feel like we’re trapped or we feel like we have to keep up or we keep hitting the Amazon Prime button over and over and over again and buying superfluous stuff like we need more stuff in our lives and we just keep doing this stuff. So it’s all about self-awareness to look up and go, you know, one of the things that happened to me when I was in my 20s, I went broke and lost everything. And what I discovered in that experience was I looked in the mirror and I found the problem. It was me. I was the idiot. You know, I’m the problem. And the good news is I also found the solution. I can change tomorrow. I can just decide. I’m not spending money I don’t have any more. I can just decide. My wife and I are going to sit down and do a written budget. If you work for a company and your job was to run a profit and loss center for that company and you turned in a budget, like most people’s personal budget, you get fired for incompetence. So most people don’t have anything written down as a budget. They don’t have any idea where their money is going. And so when you start being intentional like that, that’s a self-awareness activity and it goes crap. Look at what we’re spending here on what we spend eating out. You know, one guy sitting in one of our groups one day, he’s a country boy and sitting in overalls. He said, I think I found out why we don’t have any money in retirement when we did our budget. I think we’re eating it. And that’s exactly right. They’re going out to eat every stinking night. And I’m not against restaurants. I love restaurants. But you can’t go out to eat every night if you’re broke. So again, all of these things are self-awareness so that you really put your finger on something very important there. And it’s true in all of our lives, in every area. I mean, it’s self-awareness. I got to back away from the donut if I don’t want to be fat, you know. And so, again, me talking to me.
CONWAY GITTENS: So you’re the great Dave Ramsey. What when you finally sat down and looked at the budget and had this self-awareness, what did you realize about yourself and about your spending habits and about the way you needed to change?
DAVE RAMSEY: You know, I think that’s one of the reasons I love people well when they have not done these things by telling them the truth. People call it tough love, but it’s just I love you enough to tell you the truth and nobody else will. And sometimes to some people, that sounds harsh, but it’s not harsh. I actually care deeply that you get that. So what I found when I sat down and did the yellow pad, got the yellow pad out, and my wife Sharon and I sat down and did a budget. We’re so broke we can’t pay attention. We’ve just gone through bankruptcy. We’re trying to figure out how to live life. I was what I found, honestly, was embarrassing. I had been spending a lot of money for what other people saw. I bought watches that I couldn’t afford for people to see me wearing that watch. I was driving a Jaguar because I cared what people thought about what I drive. I cared way too much about what other people thought, and that was a childish, immature, sad, vain person that I saw in the mirror. And I just decided I’m not going to be that guy anymore. And so now when I buy a car, it has nothing to do with what anybody thinks. And it started that week. It started then. I’m no longer driving cars based on what somebody thinks. I drive a car I like. Now it’s a nice car, but what you think about my car is irrelevant to me. And when you quit caring what other people think, you will suddenly be on the path to wealth building.
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