When it comes to your finances, self-awareness is key

The Street

Dave Ramsey, CEO of Ramsey Solutions, joins TheStreet to discuss why self-awareness is so important when it comes to your finances.

Transcript

00:00And how much of this has to do with self-awareness?

00:02What role does self-awareness play in your financial strategy?

00:10Oh, everything.

00:11That's a really good insight.

00:13I appreciate that question.

00:14Because personal finance is actually about 80% behavior.

00:18It's only about 20% math or head knowledge.

00:22It's not a math problem.

00:23No one sits down and goes,

00:25hey, I can prosper by going into $16,000, $36,000 worth of credit card debt at 22%.

00:33No one says that.

00:35I mean, anybody that graduated from the third grade knows that's not going to work, right?

00:39So no one says that out loud.

00:41But what happens?

00:42We spend money we don't have.

00:44We feel like we're trapped.

00:45Or we feel like we have to keep up.

00:46Or we keep hitting the Amazon Prime button over and over and over again.

00:50And buying superfluous stuff, like we need more stuff in our lives.

00:55And we just keep doing this stuff.

00:57So it's all about self-awareness.

00:58To look up and go, you know, one of the things that happened to me, Conway,

01:01when I was in my 20s, I went broke and lost everything.

01:04And what I discovered in that experience was I looked in the mirror and I found the problem.

01:10It was me.

01:12I was the idiot.

01:13You know, I'm the problem.

01:15And the good news is I also found the solution.

01:18I can change tomorrow.

01:19I can just decide.

01:20I'm not spending money I don't have anymore.

01:23I can just decide.

01:24My wife and I are going to sit down and do a written budget.

01:27If you work for a company and your job was to run a profit and loss center for that company

01:32and you turned in a budget like most people's personal budget, you get fired for incompetence.

01:38So most people don't have anything written down as a budget.

01:41They don't have any idea where their money's going.

01:43And so when you start being intentional like that, that's a self-awareness activity.

01:48And it goes, crap, look at what we're spending here.

01:51What we spend eating out.

01:53You know, one guy sitting in one of our groups one day, he's a country boy and sitting in overalls.

01:58He said, I think I found out why we don't have any money in retirement.

02:01When we did our budget, I think we're eating it.

02:04And that's exactly right.

02:05They're going out to eat every stinking night.

02:07And I'm not against restaurants.

02:09I love restaurants.

02:11But you can't go out to eat every night if you're broke.

02:14So again, all of these things are self-awareness.

02:16So you really put your finger on something very important there.

02:19And it's true in all of our lives, in every area.

02:22I mean, it's self-awareness.

02:22I got to back away from the donut if I don't want to be fat.

02:26You know, and so again, me talking to me.

02:29You're the great Dave Ramsey.

02:31When you finally sat down and looked at the budget and had this self-awareness,

02:36what did you realize about yourself and about your spending habits

02:41and about the way you needed to change?

02:45You know, I think that's one of the reasons I love people well

02:49when they have not done these things, by telling them the truth.

02:53People call it tough love.

02:54But it's just, I love you enough to tell you the truth, and nobody else will.

02:59And sometimes to some people, that sounds harsh.

03:01But it's not harsh.

03:02It's I actually care deeply that you get that.

03:05So what I found when I sat down and did the yellow pad, got the yellow pad out,

03:09and my wife Sharon and I sat down and did a budget.

03:11We're so broke, we can't pay attention.

03:13We've just gone through bankruptcy.

03:15We're trying to figure out how to live life.

03:18What I found honestly was embarrassing.

03:21I have been spending a lot of money for what other people saw.

03:27I bought watches that I couldn't afford for people to see me wearing that watch.

03:32I was driving a Jaguar because I cared what people thought about what I drive.

03:37I cared way too much about what other people thought.

03:41And that was a childish, immature, sad, vain person that I saw in the mirror.

03:50And I just decided I'm not going to be that guy anymore.

03:53And so now when I buy a car, it has nothing to do with what anybody thinks.

03:59And it started that week.

04:01It started then.

04:02I'm no longer driving cars based on what somebody thinks.

04:04I drive a car I like.

04:06Now, it's a nice car, but what you think about my car is irrelevant to me.

04:11And when you quit caring what other people think,

04:14you will suddenly be on the path to wealth building.

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