Dave Ramsey has clear words about the secret to financial freedom

The level of American household debt has risen to $17.8 trillion this year, with credit card debt comprising more than $1 trillion of the total. Americans are struggling with unsustainable levels of debt, and many face a shocking financial future.

Experts agree that paying off high-interest debt is the first step in taking control of your finances, but it’s often difficult to cut back on spending to have extra income to pay off debt.

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TheStreet spoke with Dave Ramsey about how consumers can realistically cut back on spending to stay within their budget. He offers a pragmatic approach: remove all non-essential elements.

The key to reducing debt is cutting non-essential expenses

Ramsey offers tough love when asked about what Americans can do to get out of debt.

“Just cut out all the fat,” he said. “The deeper you cut, the more your friends think you’re crazy for not doing anything, the faster you get out. It’s math.”

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Visa found that with the exception of 2020, consumer spending on leisure has grown steadily since 2013, reaching about 13% of total spending in 2022. Recreation and leisure have become such a constant in people’s lives that it can be difficult to completely give up their budgets.

However, Ramsey suggests it’s the easiest way to become debt-free.

He continues, “Deep sacrifice increases the speed with which you get out of debt and the likelihood. And that could include three jobs.”

People are seen eating at a restaurant.

Image source: Shutterstock

Short-term sacrifice leads to long-term financial freedom

“The typical family we coach on the Ramsey show or in our classes is able to pay off all of their debt in about 18 to 24 months. But those 18 to 24 months are hell. It’s awful.”

For many people, cutting back on recreational spending is the biggest budget challenge.

Related: Dave Ramsey has a warning for people looking to buy a home now

Visa Business and Economic Insights analysis found an interesting paradox. Although time spent on leisure activities has decreased in recent decades, this has created an inverse effect on consumption.

In 2013, spending on leisure time represented 9.5% of total consumption; by 2022, this has increased to 13%. Ramsey suggests that this increase in leisure spending is a big part of the problem.

“You have to work all the time,” he said. “You don’t see the inside of a restaurant unless you work there. You don’t go on vacation.”

He continues, “People will think you’re crazy. But those two years are the catalyst that takes away the math and allows you to build wealth for the rest of your life.”

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