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Staying Economically Healthy

I’ve been hearing from a lot of
scared people lately. The news
media have been picking up the
slowing trend of the current
economy and calling it a recession.
As consumers, this freaks
people out.

People are worried about losing their
cars, their homes and their jobs. They’re
afraid of what this means for the future
and for their family tree.

What I’ve been saying is this: Scary
news simply isn’t as scary when you
have financial peace.

Let’s say Joe has $20,000 in his emergency
fund in cash and has no debt.
His house is paid off and he has half a
million dollars in mutual funds. Robert,
on the other hand has a mortgage for a house he can’t
afford, a loan on a car he never should have bought and
credit card debt coming out of his ears.

See the difference? Robert is at the mercy of the economy
because nothing he owns is actually his. His home, his car
and all his stuff is owned by creditors. He has no savings
and is living month to month. How twisted up would he
be if the economy was to go south?

The point is that it is possible to
recession-proof yourself. You can ensure
that you will prosper no matter what the
economy is up to. If you’re debt-free,
there’s really no reason to be scared.

I’m calm because I don’t have any
debt! When the news is scary but you
have a house that is paid for, money
in the bank and a few bucks in your
mutual funds, you’re not scared. And
that’s where I want you to be.

Feeling secure definitely isn’t normal
right now, but that doesn’t mean
it’s impossible.

Everyone
needs a written budget. I don’t care how much money you have in the bank.

Nothing about my plan changes
when the economy gets a little shaky.
The baby steps still apply, but now my
debt-free philosophy suddenly makes
sense. That’s because the formula works, and anyone can
do it. Every single person can build financial stability in a
slowing economy.

Let’s say the economy does descend into a full-blown
recession. Am I gonna be OK? Yeah. Are you gonna be OK
if you’re out of debt? Yeah. But that’s the point of getting
control of your money and making it behave—you have
security no matter what. And you earn it.

The bottom line is it’s easy to become wealthy if you don’t have any
payments. If you didn’t have a car payment, a student loan, credit
card debt coming out of your ears, medical debt or even a mortgage,
it can happen quickly.

If becoming secure in an uncertain economic environment is done
by becoming debt free, becoming debt free is done by working from
a written budget.

Everyone needs a written budget. I don’t care how much money
you have in the bank, whether there is money left at the end of the
month or too much month left at the end of the money, YOU need
a budget.

When I say this, I hear things like, “A budget, oh no, not me! I am
a free spirit!” or “NO budget for me—things are pretty well under
control” or “Only nerds do written budgets. You know, the guys with
the calculators on their belts who don’t have anything better to do on
Saturday night.” Wrong, wrong, wrong.

I counseled a young single man recently about putting some
simple budgeting measures and plans in place. He soon called to
say it was as if his money had grown, as if money was coming in
from nowhere.

Developing a budget or cash-fl ow plan doesn’t sound like much
fun, does it? Does going to Europe, to Cancun to scuba dive or to
Aspen to snow ski—and coming home to face no debt or credit
card bills sound like fun? That is what a proper plan will do for you
because you can begin planning that debt-free vacation as a part
of your plan today. If you are a free spirit and want to have more
freedom or time to write or paint, then you can plan financially
to attain that status. But until you plan, you will never reach “free
spirit” status financially because “unexpected” bills will always clip
your wings.

We view budgeting as if it is a form of torture. A correctly prepared
budget is not a form of torture, nor is it so time consuming that you
can’t have a Saturday night out. On the contrary, a proper, simple,
written plan will actually give you more
free time and money with which to
enjoy it.

When we fail to plan, we plan to
fail. Developing a budget helps you get
closer to the goal of security by giving
you a plan to get out of debt and develop
a financial cushion for tough times.

Let’s say you already have all this down.
You’re living without payments and you’re feeling
pretty secure. How does a slowing economy affect you? I’ve received
calls from people asking if they should pull their investments out of
the market or stop investing until things pick up. Don’t even think
about it. If anything, you should be investing more. It’s on sale!

I never advise putting money in anything that you don’t understand,
but I’ve found that one of the best places to invest is in good
growth-stock mutual funds. A good mutual fund offers the common
man access to things to which we aren’t usually entitled, like good
diversification and good management.

Mutual funds are just what the name implies. You, me and a few
other people put money together in a fund; thus, we have mutually
funded this fund. You can visualize that big ol’ mixin’ bowl in your
mom’s kitchen. If you set that bowl in the middle of the table, I’ll put
in my $100 and you put in your $1,000 and some others can put in
their $500 and so on. Now we have a fund that was mutually funded.

Let’s imagine George is our fund manager. We picked our fund
because of its fine management track record. Our fund is a growthstock
fund so George took the money out of our mixin’ bowl and
bought the stock of companies that are growing. Like most growth
funds, he bought 100 to 200 different growing companies’ stocks.
So now we own stock in companies that make everything from
tires to toothpaste, flour to fire alarms, carpet to Coke and even
banks to barns.

These funds are great because we own a little piece of those
companies that make the products that make up inflation, virtually
guaranteeing that we stay ahead of inflation.
Although I invest and I highly recommend it to my listeners, it’s
important to remember that there are risks
in the stock market. You may
see dips or slows in your funds
from time to time, but that’s just
the nature of the beast. If you’re
smart about your investments,
they will go back up and you will
make money.

Dave Ramsey is a nationally syndicated
radio talk show host, best-selling author
and host of The Dave Ramsey Show
on Fox Business Network.

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