How to Become Debt-Free and Retire a Millionaire

Close your eyes and imagine what it would be like to have no payments in the world.  Take a deep breath and picture how different your life would be if you didn’t spend your ENTIRE life working to make payments to banks.  Think about it.  Let it sink in for a minute.  Have you noticed the tallest buildings in cities are usually banks?  I have.  A few years ago, I discovered the best-selling author and personal finance expert, Dave Ramsey, and began learning his principles for handling money.  This post will outline his common-sense approach to personal finance.  Keep reading if you’d like to discover the steps to take in order to become debt-free and retire a millionaire.


I think it’s very important to start with WHY.  Why go through all the hard work and trouble to get out of debt and force yourself to live on the dreaded B-word (Budget)?  The truth is that anything worth doing usually involves hard work and discipline.  By sacrificing now, you’re securing your future.  There is a lot of negativity out there surrounding the subject of personal finance which does nothing but discourage the average person from accomplishing their dreams.  If you doubt that you can retire a millionaire in this day and age, I’m here to give you hope and show you that it CAN be done.


I’m convinced that personal finance is only 10% head knowledge and 90% behavior.  Yes, you need some smarts in order to develop a plan to get out of debt and gain financial freedom.  But if getting out of debt was a math problem, you wouldn’t be in debt in the first place.  Who would willingly sign up for 10%, 15%, or even 30% interest on a credit card and think that was a brilliant financial plan?  If you can change the person you brush your teeth with, you can start your path to debt freedom.  The good news is that YOU can decide today to change your life.  Ready, set, go.

The fastest way to building wealth is to free up your income.  When you gain control of your monthly income, you set yourself up to win with money.  Naturally, the way to accomplish this is by paying off any debt that you have and living on a WRITTEN plan.  Your goal is to do a monthly written budget, before the month begins, where you tell every dollar you earn where to go.  If you don’t have a written plan for your money, you’ll wind up with more month at the end of the money.  You know what I’m talking about.  I’ve been there too.  You have to end the cycle of living paycheck to paycheck and a written plan is the way to do just that.  The first time that you do a monthly written budget, you’ll feel like you got a raise.  That’s because right now you go through the entire month spending money and not knowing where it all went.  You can’t make progress when you’re constantly looking in the rear-view mirror.


I want you to first save a small starter emergency fund of $1,000.  Back in the old days, grandma used to say you need an umbrella for when it rains.  It’s not a matter of IF, but WHEN it rains.  IT WILL RAIN.  Grandma had some common sense!  This starter emergency fund is not much, but it will cover most hiccups while you’re working on getting out of debt.  After you have your emergency fund saved (in a separate bank account), list your debts smallest to largest and attack the smallest one with everything you have.  But Josh, what if my larger debts have higher interest…shouldn’t I pay them off first?  Remember when I mentioned that personal finance is 90% behavior and only 10% head knowledge?  We start with the smallest debts first so that you get a sense of accomplishment that will enable you to continue with the plan.  These small victories along the way will keep you laser-focused and intense on getting out of debt.  I know this goes against the math nerd in you, but have a little faith in the plan. As you eliminate one debt, use all of the money you were throwing at it to plow through the next smallest debt.  You’ll be debt-free in no time!

When you have all of your consumer debt paid off, return to your emergency fund of $1,000 and bump it up to three to six months of expenses.  Estimate what it takes to operate your household and save that amount in a separate money market or savings account.  It’s important to note that this money shouldn’t be invested.  Think of it like insurance.  Insurance costs you money.  By having your emergency fund in a bank savings or money market account which pays almost no interest, you lose out on the interest you could earn if the funds were invested,  But you have piece of mind that the money is safe and available if needed WHEN an emergency arises.  The next step is to start saving for retirement.  Save 15% of your household income in retirement plans.  I’ll cover this step in depth in future posts.  At the same time, you should also begin saving for kids’ college.  Any additional money you can find in your budget should be put towards paying off your home mortgage.  Once you’re completely debt-free, you have nothing left to do but continue to build wealth and become very generous.

To recap the above steps in list form:

1.  Save a starter emergency fund of $1,000.

2.  List your debts smallest to largest and pay off the smallest with a vengeance!

3.  Beef up your emergency fund to cover three to six months of household expenses.

4.  Save 15% of your household income for retirement.

5.  Save for kids’ college.

6.  Pay off your mortgage!

7.  Become very rich and give a lot of it away!

If you work these steps in this order, you’ll be on your way to becoming debt-free and retiring very wealthy.


If you’re not already inspired, I have one more thing I want to show you.  The cover photo of Albert Einstein illustrating the importance of compound interest is spot on.  Simply put, compound interest is interest on top of interest.  But since many people do not understand compound interest, I want to provide an easy to follow example.  If you’re like me, what you’re about to read is going to be life-changing!

The concept of compound interest and how it works can best be understood with the story of Ben and Arthur.  Ben and Arthur were two brothers who began saving for retirement at two different ages.  Ben started investing $167 a month ($2,000 per year) at age 19.  He saved for eight years until he was 26 and didn’t save a penny more after that.  After seeing how far ahead his brother Ben was, Arthur began saving the same amount each month ($167) starting at age 27 right after Ben stopped saving.  He saved every year for the next thirty nine years and never caught up to Ben!  Ben only contributed $16,000 and ended up with $2,288,996, whereas Arthur contributed $78,000 and only ended up with $1,532,166.  Ben came out ahead of Arthur by over $750,000!  Take a look at the below chart and see for yourself.




This story opened my eyes in two ways.  First, it shows the importance of starting to save early for retirement.  I’ve talked to many fifty and sixty year old people who wish they learned this story earlier in life.  Second, the chart visually shows the power of compound interest.  Assuming a 12% rate of return, Ben only contributed $16,000 so almost 99% of his ending balance is growth due to compound interest!

If this doesn’t get you excited, I don’t know what will!  So take the next step and begin working a plan for your money and your future.  The sooner you begin, the closer you’ll be to becoming debt-free and retiring a millionaire.

If you have any questions you’d like to ask me, please visit my newly-created ASK JOSH page and I may use your question in a future post to help other readers.  As always, thank you for reading and please subscribe to get future posts sent directly to your inbox!




  1. I’m convinced that personal finance is only 10% head knowledge and 90% behavior.”

    Very true. Personal finance is a lot easier than many make it out to be. Spend less than you make, and save the rest. Compounding interest has been referred to as the 8th wonder of the world. It really is an amazing force. That chart should be showed to all high school students. Want to become rich? All you need is time and a little self discipline.

  2. You make a great point about the importance of spending less than you make that I may not have indicated thoroughly in the post. A surefire way to accomplish this is by doing a zero-based budget at the beginning of each month. If you spend on purpose with a plan, you’d never purposely spend more than you make. I agree that the compound interest chart should be shown to all high school students. I know I wish I had seen this chart much earlier in life!

  3. I help faciliate Dave Ramsey’s FPU class at our local church. I love his baby steps and think he has a way of story telling that really helps a ton of people, although I don’t always agree with his financial advice. I think it’s a bit outdated especially with the research around passive index funds. Anyway…great article!!!

    1. Nothing wrong with index funds in my book. It’s hard to argue with Warren Buffet and his investing track record!

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