How Do I Build Wealth for the Future?

Summary

Ramsey Everyday Millionaires: How Do I Build Wealth for the Future?

In the February 10, 2025 episode of Ramsey Everyday Millionaires, hosted by the Ramsey Network including Dave Ramsey, Ken Coleman, Rachel Cruze, George Kamel, Jade Warshaw, and Dr. John Delony, the discussion centers around practical strategies for building wealth. The episode features a listener, Connor from Anchorage, Alaska, who seeks advice on securing his financial future. This detailed summary captures the key points, insightful discussions, and actionable conclusions from the conversation.

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Listener Profile: Connor's Financial Landscape

Connor, an ambitious 18-year-old entrepreneur, reaches out to the Ramsey team seeking guidance on wealth building. He shares an impressive financial snapshot:

• Business Income:

  • Summer: $70,000 from his landscaping company.
  • Winter: $30,000 to $35,000.

• Assets:

  • Truck: Fully paid off, valued at $23,000.
  • Camping Trailer: Valued at $20,000 and rented out.
  • Motorcycle: Fully paid off.
  • Additional trailers and equipment, all debt-free.

“I just made it to this point where you're in a really good spot. You've got all the toys you need and you have the emergency fund,” says Dave Ramsey at [02:20].

Connor’s financial discipline is evident, having cleared all debts and maintaining a solid emergency fund of $20,000.

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Building Wealth: Ramsey’s Strategic Approach

Dave Ramsey outlines a structured plan for Connor to transition from financial stability to wealth accumulation, aligning with his renowned Baby Steps framework.

1. Emergency Fund Confirmation:

   • Dave: “We'll call that your emergency fund.” [02:17]
   • Connor has surpassed the initial steps by eliminating debt and establishing a robust safety net.

2. Investment Strategy:

   • 15% Retirement Investment:

     • “You begin investing 15% of your income into retirement plans.” [02:22]
     • For Connor’s $100,000 annual income, Dave recommends allocating $15,000 annually to retirement accounts.

   • Roth IRA Contribution:

     • Dave suggests dollar cost averaging:
       • “Put 583 every month in [Roth IRA]. It'll be maxed out by the end of the year.” [03:21]
       • “You still need 8,000 more of retirement account…” [03:21]

   • Additional Retirement Accounts:

     • Depending on business structure, options like SEP IRA or Solo 401K are advisable.
     • Dave encourages consulting a SmartVestor pro for personalized guidance [03:38].

3. Future Goals and Savings:

   • Homeownership:
     • Dave advises setting up a high-yield savings account for a down payment.
     • “Start shoveling any extra money into that account so that you'll look up and have a hundred grand ready for a down payment in a few years.” [04:07]

4. Budgeting Excellence:

   • Connor demonstrates effective budgeting by living debt-free and reinvesting his earnings, ensuring continuous income growth.

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Avoiding Debt: George Kamel’s Perspective

George Kamel emphasizes the importance of maintaining a debt-free lifestyle to ensure long-term financial stability.

• Commitment to No Debt:

  • “Will you make me and George a promise you'll never borrow money?” [01:15]
  • “I will never borrow money.” [01:19]

• Potential Pitfalls of Hustling:

  • “When things get dicey...it hurts your precious old feelings.” [01:30]
  • Advises Connor to remain disciplined to avoid financial setbacks during economic downturns.

• Credit Score Insights:

  • George dismantles the necessity of credit scores for wealth building:
    • “Credit score has nothing to do with how much wealth you have. It just has to do with how you've danced with debt in the past.” [05:46]
    • Encourages focusing on actual financial health over credit metrics.

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Navigating Credit and Homeownership Without Credit Scores

Connor expresses concern about building credit for future home purchases, leading to a deeper discussion:

1. Credit Card Necessity:

   • George advises against acquiring credit cards unnecessarily:
     • “What makes you think you need a credit card?” [04:34]
     • Reiterates that wealth can be built without relying on credit scores.

2. Manual Underwriting for Mortgages:

   • Dave Ramsey explains alternative pathways to homeownership without a traditional credit score:
     • “It's a process called manual underwriting.” [06:02]
     • Details how lenders evaluate the actual financial situation rather than credit history.
     • Encourages providing evidence of timely payments on rent, utilities, and insurance to qualify for a mortgage [06:52].

3. Resources and Support:

   • Dave recommends Churchill Mortgage as a partner specializing in no-score loans.
   • Offers to send Connor his book, "Breaking Free from Broke," which includes a comprehensive guide on manual underwriting [07:50].

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Practical Financial Wisdom and Encouragement

Throughout the episode, the hosts offer Connor both strategic advice and moral support, reinforcing his positive financial habits while guiding him toward future growth.

• George’s Encouragement:

  • “Don't get antsy. Don't buy what you can't afford. Just keep plugging away, dude.” [07:18]
  • Highlights the importance of patience and consistency in wealth building.

• Dave’s Commendation:

  • “You're crushing it.” [03:37]
  • “You're on the path, my brother.” [07:50]
  • Recognizes Connor’s achievements and encourages continued financial prudence.

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Key Takeaways

1. Start Early and Stay Debt-Free: Connor’s example showcases the power of early financial discipline and avoiding debt.

2. Invest Consistently: Allocating a portion of income to retirement accounts, such as Roth IRA, SEP IRA, or Solo 401K, is crucial for long-term wealth.

3. Plan for Major Goals: Establishing high-yield savings for significant purchases, like a home, ensures readiness without financial strain.

4. Credit Scores are Optional: Building wealth doesn’t require a credit score; focusing on actual financial health is more beneficial.

5. Seek Professional Guidance: Utilizing resources like SmartVestor and partnering with specialized lenders can provide tailored financial solutions.

6. Maintain Financial Discipline: Consistent budgeting and smart investing pave the way for sustained wealth and financial security.

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Conclusion

In this episode of Ramsey Everyday Millionaires, Connor’s journey serves as an inspiring blueprint for young entrepreneurs aiming to build wealth. The Ramsey Network provides actionable steps, from maximizing retirement contributions to navigating homeownership without relying on credit scores. With a strong emphasis on financial discipline, smart investing, and leveraging available resources, listeners are equipped with the knowledge to emulate Connor’s success and secure their financial futures.

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Notable Quotes:

• Dave Ramsey [02:22]: “You begin investing 15% of your income into retirement plans.”
• George Kamel [05:46]: “Credit score has nothing to do with how much wealth you have.”
• Dave Ramsey [07:50]: “You're on the path, my brother.”

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For more insights and strategies on building wealth, tune into Ramsey Everyday Millionaires and embark on your journey to financial success.

Transcript

[Dave Ramsey]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor Connor is in Anchorage, Alaska to kick us off. What's going on? Connor?

[Connor]

Hey, how's it going?

[Dave Ramsey]

Good. How are you?

[Connor]

Good, good. Hey, I just wanted to kind of get your opinion on what I should do to kind of build wealth for my future.

[Dave Ramsey]

Awesome. Let's hear your situation.

[Connor]

Okay, so I'm 18 years old. I own a landscaping company. I bring in about 70 grand during the summer and then 30 to 35 during the winter. My truck is completely paid off, and that's about $23,000. I have a $20,000 camping trailer that I rent out and that is also paid off. I have a motorcycle that's paid off and then a bunch. Like, I have more trailers and stuff like that, and everything's paid off.

[Dave Ramsey]

Goodness gracious.

[George Kamel]

So you sound like an 18 year old that suddenly started making six figures and bought every toy imaginable, just like I would have done.

[Connor]

Yeah, right.

[Dave Ramsey]

And you've done it all very wisely.

[George Kamel]

So you don't owe any money to anybody.

[Connor]

I don't owe any money. Nothing. Okay.

[George Kamel]

Will you make. Will you make me and George a promise you'll never borrow money?

[Connor]

I will never borrow money.

[George Kamel]

Listen, that you just took like one. One leap for mankind towards you having an astronomical amount of wealth. You're a hustler, aren't you?

[Connor]

I am, yeah.

[George Kamel]

Okay. When hustling is going well, hustlers get loaded. And when things get dicey, when the economy gets sideways or people don't need your. Your gear, or somebody's like, I thought you made a lot of money. Why are you driving that truck? And it hurts your precious old feelings. Hustlers get themselves in a mess. If you will stick to this principle and the principles George is going to walk you through, all of us will be working for you someday.

[Connor]

Gotcha.

[George Kamel]

Is that cool?

[Connor]

That's cool.

[George Kamel]

All right, good.

[Dave Ramsey]

Love it. Is this a solo gig or do you have a team?

[Connor]

It's. It's solo, but I do have a team for lawn care and stuff. And then I design the landscape.

[Dave Ramsey]

Okay.

[Connor]

Projects.

[Dave Ramsey]

But you're taking home 100k a year.

[Connor]

Yeah, just about that. Give or take, depending on the year. It's gone up every year, though.

[Dave Ramsey]

Amazing. Okay, how much do you have in savings?

[Connor]

I have about $20,000.

[Dave Ramsey]

We'll call that your emergency fund.

[Connor]

Yeah, let's. Let's do that.

[Dave Ramsey]

Okay, so you're at the point where you're Able to build wealth. You don't have any debt. You have an emergency fund that puts you in baby step four in the Ramsey plan where you begin investing 15% of your income into retirement plans. So for you, 100k a year, we're going to call that $15,000 should be being put away every single year into retirement. Now for you, you're self employed, you have options. You can always open a Roth ira. Do you have one of those?

[Connor]

I do, but I only have like, I only have a thousand bucks in it, so.

[Dave Ramsey]

Okay, well, it sounds like you just made it to this point where you're in a really good spot. You've got all the toys you need and you have the emergency fund. So I would begin doing what's called dollar cost averaging. So you take, you know, $7,000 is what you can contribute to a Roth IRA this year. And so come January, we're going to put in one month of that and then February, one month of that. And so by December, you've put in all $7,000.

[Connor]

Gotcha.

[Dave Ramsey]

Okay, that's what, 550. I got to check my math on that. 583.

[Connor]

Okay.

[Dave Ramsey]

So you can put 583 every month in there. It'll be maxed out by the end of the year. But remember, you should be investing 15,000 so you still need 8,000 more of retirement account, which means you might want to look into, depending on your situation, a SEP IRA or a Solo 401K.

[Connor]

Okay.

[Dave Ramsey]

Depending on how your business is set up. And I would be contacting a Smartvestor pro. This is a person who can help you on your investing journey. If you jump on ramseysolutions.com and click on smartvestor, they can walk you through the best options for your situation, for how your business is set up to get the right retirement accounts going for you.

[Connor]

Gotcha. Okay.

[Dave Ramsey]

But man, you're crushing it. And if you, you know, as your income goes up, that 15% will also increase.

[Connor]

Yeah.

[Dave Ramsey]

And then I'm guessing you have other goals. Do you want to be a homeowner?

[Connor]

I do, yes.

[Dave Ramsey]

So beyond the 15%, let's say, you know, you hopefully you have money left over because you're doing such a great job budgeting and living on less than you make that you could then also set up another high yield savings account and just start shoveling any extra money into that account so that you'll look up and have a hundred grand ready for a down payment in a few years.

[Connor]

Gotcha. Okay, that's good to know. Yeah, that would be. That would be nice. And then another question. How do I start? What's the best way that I can build credit? Because I still don't have a credit card yet.

[George Kamel]

Don't ever.

[Dave Ramsey]

You're 18 and wealthier than most Americans. What makes you think you need a credit card?

[Connor]

I was thinking, like, someday when I do want to buy a house.

[George Kamel]

George and I have both bought houses with a credit score of zero.

[Connor]

Really? Okay.

[George Kamel]

Yeah, that's. That's. That's an old story our parents taught us. And it's a news story that floats around on the TikToks and the Instagrams. You want to get stupid rich? Just delete social media. Just delete social media and become a credit card.

[Dave Ramsey]

Watch your credit accounts. Never touch the stuff. Because guess what? You've already learned that you know how to manage your money instead of managing debt. And credit scores are all about being good at managing debt. It's not something you need or are interested in.

[George Kamel]

Think about credit score like this. Imagine you're dating, okay? And since you're 18 years old and you make six figures, you're going to be a possession there in Anchorage. So all a credit score is is somebody asking how you've treated your old girlfriends before. They. They want to know everyone you've dated.

[Connor]

Okay, that makes sense.

[George Kamel]

And if you ever go on a date and the first question, somebody says, hey, hold on, before I go out, I want to know the names and numbers of everyone you've ever dated. I'm going to call them and check up on you. Just walk away. That's not gonna be a good relationship for you. It's not gonna be good.

[Connor]

Okay, that makes sense. Good to know that.

[George Kamel]

Listen, I could give you $10 million in cash today, and you could put it in your checking account, and your credit score would not change. Credit score has nothing to do with how much wealth you have. It just has to do with how you've danced with debt in the past. It doesn't matter. It's a scam.

[Connor]

Oh, yes.

[Dave Ramsey]

So here's the process, and I'll send you a copy of my book, Breaking Free from Broke. And in the home ownership chapter, I walk people through the process of buying a house without a credit score. Actually, in the credit score chapter, that makes sense where it goes. And so it's a process called manual underwriting. You'll hear this as a no score loan sometimes. And what they do is just like the olden days before credit scores existed. They'll look at your actual financial picture and they'll go, okay, Connor has a very low debt to income ratio because he has no debt, he makes a great income. We see his tax return and we're going to grant him this mortgage based on real factors. The automated underwriting is just a computer saying, hey, he's got a great credit score. You can trust him to hopefully pay back this loan. And so it's a very similar process. It's just a little bit more manual. It doesn't take more, much more time. It's simple. You just need proof of, you know, are you paying rent every month on time?

[Connor]

I am, I am, yes.

[Dave Ramsey]

Are you paying any utility bills or cell phone bills on time every month?

[Connor]

Cell phone, yeah.

[Dave Ramsey]

Insurance, Yep. Boom. Those are the types of things that would qualify you and our friends at Churchill Mortgage have been specializing in these types of no score loans for a long time. It's why they've been great partners for us. And John and I have both went through this process. So we're here to tell you it's very much possible.

[George Kamel]

And hey, you're going to learn a hard lesson. Can I go ahead and just ruin it for you, Connor?

[Connor]

Go for it.

[George Kamel]

If you've got. For easy math, let's say you make $100,000 every year on the dot, 35,000 of that you got to pull out for taxes. 15,000 of that, you're going to pull out to invest. Now you're down to 50,000 and then you're going to have an emergency fund and you're going to see, like, why your dad's grumpy a lot because he makes a lot of money and there's nothing he doesn't get to spend it on anything other than planning for the future and giving to the government. So don't get antsy. Don't buy CR you can't afford. Just keep plugging away, dude. And I'm telling you what. I'm so proud of you, George. So proud of you.

[Dave Ramsey]

You're a hero.

[George Kamel]

You're on the path, my brother.

[Dave Ramsey]

Congratulations, child. Hang on the line. We'll send you a copy of my book, Breaking Free from Broke. Hope it helps you build wealth a much more peaceful way.