Dave Ramsey: 10 Retirement Planning Tips He Swears By

“Live like no one else now so you can live like no one else later.”

This Zen riddle of a quote from Dave Ramsey is a go-to for Jeff Rose, CFP and founder of the personal finance website Good Financial Cents.

“The pandemic is real and not going away anytime soon,” Rose said. “Most people are in a ‘hold their breath’ approach — hoping that their job remains secure, or a new job is just around the corner and their savings won’t run out. They aren’t looking to change the way they live, but that’s not the right approach to take: It’s time to be proactive and cut your spending vigilantly, find ways to start making money (like driving for InstaCart or delivering for Amazon) to boost those savings, and find ways to cut current debt, like refinancing student loans and curbing spending habits.”

More Tips: Steal These Money Secrets From 25 Millionaires Under 25

Dave Ramsey approaches retirement planning with the same commonsense wisdom as the rest of this financial advice.

Discover More: Cutting Expenses in Retirement: 6 Home Items to Stop Buying

Read Next: How To Get $340 Per Year in Cash Back on Gas and Other Things You Already Buy

He has personally lived the path to debt freedom and has guided countless others along the journey through his bestselling books and media presence. His key to retirement planning? Disciplined saving, smart investing, avoiding common financial pitfalls, and a little soul-searching.

Sponsored:Credit card debt keeping you up at night? Find out if you can reduce your debt with these 3 steps

Set Your Retirement Goals

Only around half (48%) of U.S. workers have even tried to calculate what they’ll need for retirement. Having a plan inspires action and reduces fear. Take the time and make your goals concrete by answering Ramsey’s questions:

• What do I want to do in retirement?
• When do I want to retire?
• How much money will I need to save by the time I retire?
• How much will I need to invest every month to hit my retirement goals?
• Which retirement accounts and investments should I choose?

Get Out of Debt

You can’t go full steam ahead on funding your retirement until you’ve dug out of debt – especially high-interest credit cards, car loans, or medical payments. Ramsey emphasizes the snowball method: starting with your smallest debts, you pay each off completely before moving on to the next bill.

Learn More: Social Security: 40 States Where You’ll Feel the Biggest Increase This Year

Then you use the payment amount you were making for the smallest debt and put it towards the next-smallest amount, while you keep up minimum payments on the rest. Note that some experts suggest other approaches, such as targeting the balances with the highest interest rates first, but Ramsey highlights the motivating feeling of crossing debts off your list.

Create a Fully Funded Emergency Fund

No matter where you are today, start with an emergency fund of $1,000. Ramsey suggests that if you have credit card or other consumer debts, you should still put a little bit aside in an emergency fund while you focus on getting rid of that debt.

Then, you can build an emergency fund of 3-6 months of expenses (with the higher end being for those who have a one-income household or are self-employed or seasonal workers).

How to do this? First, set a savings goal by calculating what you need for 3-6 months. Then you can start decreasing expenses (have you checked your subscription spending lately?), increasing your income (side hustle, anyone?), and automating your savings (set it and forget it).

Invest 15% of Your Income

For years, Ramsey has advised getting a chunk of your money into investments. This makes sense since compound interest is the magic potion. Retirement is your longest-term financial goal, and even if you’re starting late – the runway of years between now and the time you stop working is fertile territory for wealth-building.

Put 15% of your household income into Roth IRAs and pre-tax retirement plans, either through your employer or on your own. Take full advantage of employer matches in retirement plans. Plus, did you know that non-working spouses can also put money into a spousal IRA and get the same tax and retirement benefits?

Strategize for Optimum Investments

Invest in good growth stock mutual funds with a long-term perspective, while being sure to diversify across various asset classes to spread risk.

Working with a financial professional is probably the best way to do this. This person will also help you review your investments regularly so that you can monitor and adjust your portfolio as needed to stay on track.

That said, you want to steer clear of investments with high fees that eat into your returns, or advisors who prey on your returns with high commissions or transaction fees.

Bonus Commonsense Tips

Combing through Ramsey’s advice reveals a few more behaviors and mindsets that will boost or protect your retirement savings:

• Be insurance-wise. Double-check that you have adequate insurance coverage, including health, life, and disability insurance.
• Save for your children’s college education using tax-advantaged plans like 529s.
• Avoid cosigning loans, as it can jeopardize your financial security.
• Start early. Begin investing for retirement as early as possible to take advantage of compounding interest.
• Finally, Ramsey insists that no one should rely on Social Security to get them through retirement. Rather, think of it as icing on the cake that supplements your other savings.

You can build the retirement of your dreams by setting your goals with soul, making a plan and keeping tabs on your progress, and reaching out to get support from financial professionals.

More From GOBankingRates

• 6 Expensive Costco Items That Are Definitely Worth the Cost
• How Much Does the Average Middle-Class Person Have in Savings?
• 5 Reasons You Should Consider an Annuity For Your Retirement Savings
• 10 New Cars to Avoid Buying in 2024

This article originally appeared on GOBankingRates.com: Dave Ramsey: 10 Retirement Planning Tips He Swears By