Personal finance expert Dave Ramsey takes a deep dive into one financial writer. recent episodes Ramsay Shaw’s.
“There are some really stupid people who write financial articles on the Internet,” he says. “They crunch all these numbers in math, but they don’t understand that life never happens the way they plan.”
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Ramsey argues that “math nerds” who write financial articles are offering overly complex advice. However, simple 6th grade math is enough for the average saver to enjoy a comfortable retirement.
To fly under Ramsey’s radar, here’s another financial article that explains his philosophy.
the writer is not god
financial advisor Although writers may try to outline your financial future based on precise calculations, Ramsey doesn’t believe that will help because life is unpredictable.
“When these people write financial articles, they act like you missed something. [something] “A difference of 0.2% will not suffice,” he said. “You can’t predict this to within 0.2%. Unless you’re God, you don’t know what’s going to happen. And I promise you, God is not writing financial articles.”
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He emphasized the fact that even the current economic situation was unpredictable. After 40 years in the industry, Mr. Ramsey is now a millionaire and a household name. He has written several best-selling books and has millions of followers who watch his shows and read his published articles. However, such success was difficult to predict, especially after he filed for bankruptcy in 1988.
“I’ve acquired hundreds of millions of dollars worth of real estate today,” he said. “None of that was in my equation.”
Rather than focusing on exact numbers, Ramsey suggests setting broad goals and working towards them with a margin of error in mind.
Importance of average value
You can’t predict what you’ll be like in a few decades. Economic crises, personal lifestyle changes, business success or failure are all beyond your control.
Therefore, rather than focusing on rigorous financial planning, Ramsey recommends setting long-term goals and working from assumptions based on averages. For example, a saver might earn an average salary in his or her industry, retire at an average age, save an average amount of money each month, and earn historical average returns on stocks and bonds over the course of his career. can be assumed.
The annual average stock price of the S&P 500 is 11.36% return According to official data, since 1983. The real return adjusted for inflation is 8.31%. So let’s say your salary is $60,000. If you saved 10% of that amount ($6,000) and invested it consistently in the S&P 500 for the past 40 years at 11.36% per year, that savings would be worth approximately. If you calculate interest compounded every year, it will be $4 million in 40 years.
Simply put, a 30-year-old can become a millionaire by 70 by earning, saving, and investing based on average assumptions.
Of course, your personal situation may be better or worse than average. Also, past performance is not indicative of future returns, so inflation may be higher than expected or stock returns may be lower than expected. But these average assumptions should help savers achieve some degree of financial security, even if the $1 million goal is still out of reach.
Or, if you’re lucky, experience a windfall Or if the stock performs better than expected, conservative estimates will further strengthen your financial security.
Managing your personal finances is a lot like steering a boat toward the horizon. You may not be able to see the exact landing spot, but by heading in a general direction and making small course corrections along the way, you will eventually reach your destination.
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