Dave Ramsey Helps Boomers Figure Out If They’re Financially Ahead, or Behind

“The rich get richer and the poor get poorer.”

That’s according to finance coach Dave Ramsey.

Key Points About This Article 

• Over the last three decades, the top 1% of the U.S. now holds about a third of all total wealth. That’s up from 22.8% in 1989.
• The bottom half of the country, which held about 3.5% of the nation’s wealth in 1989, now holds about 2.8%.
• According to Dave Ramsey, much of that is because of the financial decisions we’ve made and are still making to this day.
• Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

Even now, as we can see from the current wealth gap, it’s true.  In fact, over the last three decades, the top 1% of the U.S. now holds about a third of all total wealth. That’s up from 22.8% in 1989. Meanwhile, the bottom half of the country, which held about 3.5% of the nation’s wealth in 1989, now holds about 2.8%.

According to the St. Louis Federal Reserve, the top 10% of U.S. households by wealth had about $6.9 million on average. As a group, they held 67% of household wealth. The bottom 50% of households had $51,000 on average. As a group, they held about 2.5% of the total household wealth in the country.

And, according to Dave Ramsey, much of that is because of the financial decisions we’ve made and are still making to this day.

Why is the Wealth Gap Growing?

For one, richer Americans don’t typically ask, “How much is this going to cost me per month?”

Instead, they’ll ask how much and pay for a majority – if not all – to avoid interest payments, which can eat up a good deal of money. At the same time, the middle class will make multiple payments and think they’re making a fortune from airline miles as credit card rewards.

Meanwhile, those with less money rely more on pawn shops and lenders, which can also eat up a good deal of cash. Worse, many will play the lottery more often, believing it’ll make them rich. Consider this. America’s poorest households spend 33 times more of their income on lottery tickets than richer households, according to Fortune.com.

“Unsurprisingly, the nation’s most popular game of chance has a sinister undertone as major lotteries capitalize on people’s hopes and dangle the ever-elusive carrot of a jackpot over financially vulnerable Americans,” added Fortune.

“The average adult living in the poorest 1% of zip codes spends almost 5% (or $600 annually) of their income on lottery tickets, per the analysis. The rich, buoyed by their relative economic stability, are less preyed upon by the promise of millions or billions. Those living in the wealthiest 1% of zip codes spend only $150 on tickets, amounting to 0.15% of their paycheck.”

If you want to build wealth, there are some big steps you can take 

One, create a budget.

This is crucial. Without a budget, many of us lose account of what’s coming in financially and what’s going out. When others have asked me for financial advice, my top question is, what are you spending on? Unfortunately, I’m often met with the deer in the headlights stare and a response of “I don’t know.” Unfortunately, not knowing will destroy you financially.

Two, if you don’t already have an emergency fund, create one.

Start small with an emergency savings goal of at least $1,000.

Sure, it’s small but it’s a safety net, and it’s a start. If you can put away about $85 a month, you’ll reach that goal and have some wiggle room. However, be sure to store this in a separate “don’t touch” account, automatically depositing money every time you’re paid. Plus, if you ever receive another source of income, such as a bonus or a gift, put it directly into that “don’t touch” account instead of spending it immediately.

Three, pay off your debt if you can.  That includes credit card debt, mortgage debt, and student loan debt. If you want to get better control of that debt, according to Dave Ramsey, use the debt snowball method – where you pay off your debts in order of smallest to largest. In doing so, list out all of your debt, including student loans, car payments, mortgages, credit cards, etc.

Four, live below your means. As Suze Orman has said, live below your means to achieve financial freedom. Identify your needs and your wants, eliminating part of the expenses tied to wants. Automate your savings. Figure out your savings goal.

Five, as noted by 247WallSt.com analyst Joey Frenette, “Of course, the ‘put it on credit’ mindset that keeps many trapped in the paycheck-to-paycheck cycle is difficult to escape. Subtle behavioral changes made over time, though, can add up over time, perhaps by enough to make a profound difference in the grander scheme of things.”

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