Personal FinanceBeth Gwinn / Getty ImagesJoel SouthThis post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive
compensation for actions taken through them.Personal finance guru Dave Ramsey famously became a millionaire before he turned 30 by investing in real estate, taking on large debts in the process. He then lost it all when his banker called in a loan, and ruined him. But Ramsey pulled himself out of debt, built a new business empire based in media, and today is reportedly worth more than $200 million.I tell you all this for two reasons: First, because everyone loves a good rags-to-riches-to-rags… to riches again story. And second, because I think it’s safe to say that if anyone knows how to become a millionaire, it’s probably a guy like Ramsey, who has done it himself not once, but twice.
Dave Ramsey urges his listeners to live below their means to accumulate spare cash.
Once saved, cash can be invested in real estate, stocks, bonds, or even just a bank account to grow over time.
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Make your money work for youAnd what does Ramsey have to say about how millionaires make their money, and what they do with it once they’ve got it? In a nutshell, he says that millionaires make their money work for them. But what does this mean, exactly? How do you “make your money work for you”?Well the first step is to get some, money to work with. And for that you must “live below your means,” which simply means spending less money than you earn, so that there’s some money left over to (say it with me now) “work for you.” Once that’s accomplished, the money must be placed somewhere that the magic of compound interest can help it to grow over time.That might be in real estate, which can generate income (from apartment rent, for example), and tends to appreciate in value about 3% to 5% annually over time (but incurs property taxes and maintenance expense). It might be in the stock market, which tends to grow about 10% annually over time (but is subject to occasional stock market crashes, as well as sometimes long periods of flat or modestly negative growth). It might be in the bond market, which has its own quirks and can take some time to understand (different bonds pay different interest rates, for example, and when interest rates go up, the value of any bonds you already own go down).So you see, while there are multiple ways to make money “work for you,” each comes with caveats.The simplest way, of course, to put the power of compou