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During his long career, radio personality Dave Ramsey noted several key indicators of the financial status of Americans.
One of these metrics, he said on an episode of The Ramsey Show, it can even predict whether a middle-class family can break out of its income bracket and become wealthy.
At least, that’s what he told Micah, 24, of Washington, DC, when the military called during the episode seeking financial advice on a potential car purchase (1).
Micah said he earns $80,000 a year. He already owns a car worth $13,000, but is tempted to buy a new sports car — a Nissan 370Z — for $30,000 in cash. He admitted that this is purely an indulgence and that the new car is for “play.”
He called Ramsey to ask if he should invest the money rather than spend it on a vehicle — and that’s when Ramsey let him in on a little secret.
Ramsey’s advice was simple: say no to the second car. As for his reasoning, the finance guru pointed to something he has noticed over the years: “The way you know someone will remain middle class is when they have two very nice cars — which are obvious. [sic] Paying $500, $600 or $700 — sitting in front of a middle-class house,” he said.
Americans borrow an average of $42,332 for new vehicles and $27,128 for used vehicles, according to data from Experian (2).
The Ramsey Show hosts pointed out the obvious: more vehicles means more bills.
If, unlike Mikea, you need to take out a loan to buy a car, then that’s an even bigger reason to reconsider your purchase. Why buy another car and add an additional monthly bill to your plate if you are still struggling to pay off the old car?
If you already have a car loan, and are trying to keep up with your payments on multiple debts, consider a personal loan through Credible.
Credible makes it easy to simplify your debt repayment at an affordable rate. Their online marketplace of verified lenders provides personalized debt consolidation loan offers based on your needs, allowing you to pay off your debt more efficiently with a fixed rate without consolidating multiple accounts — or a new car loan.
Read More: Nearing retirement with no savings? Don’t panic, you are not alone. Here are 6 easy (and fast) ways to catch up
Beyond cutting back on your monthly car payment, it’s also worth reducing your monthly insurance costs.
OfficialCarInsurance makes that process easy.
Here’s how it works: enter some basic information about yourself and the vehicle you drive, and OfficialCarInsurance will show you the rates offered by major insurance providers like GEICO, Allstate and Progressive.
“If you’re going to build wealth, you want to keep as little as possible going into things that go down in value,” Ramsey said. He says that someone trying to build wealth should not have more than 50% of their income in depreciating assets like cars.
What should they do with the rest of their income? Also, Ramsey is a big fan of the emergency savings account.
On an episode of 2025 of The Ramsey Show, he said “I don’t care if you keep it in the sock drawer,” adding, “The emergency fund is not about making money. It’s insurance that keeps you from cashing out or going into debt (3).”
An emergency fund can help you pay off debt and stay on track if you’re forced to face the unpredictable — like a surprise job loss or medical emergency.
And even though an emergency account doesn’t have the potential to earn you the level of returns you can get from investing in the stock market, you can still get a boost for your money.
For example, a high-yield account, like the Wealthfront Cash Account, can be a great place to grow your emergency funds, offering both competitive interest rates and easy access to your cash when you need it.
A Wealthfront Cash account can provide a variable base APY of 3.25%, but new customers can get a 0.65% boost during their first three months for a total APY of 3.90% provided by the program’s banks on your uninvested cash. That’s 10 times the national savings deposit rate, according to the FDIC’s December report.
With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, you can ensure that your funds remain accessible at all times. In addition, Wealthfront Cash Account balances up to $8 million are FDIC insured through program banks.
Once you have enough money to protect yourself, you should set up systems that make investing automatic and painless.
With Acorns, you can invest while making the most of your everyday purchases.
Whenever you make a purchase with your connected debit or credit card, the app automatically rounds up the total cost to the nearest dollar and invests the change in a diversified portfolio. You can also link these investments to your IRA, ensuring you’re maximizing your retirement savings with every purchase you make.
Beyond investing in the market, you may want to consider alternative assets for your portfolio. For example, nearly half of Americans surveyed with bank balances of $1 to $5 million said real estate was a major factor behind their wealth, according to a survey by wealth manager Empower (4).
Therefore, rather than spending your money on an asset that depreciates like a car, you should consider putting that money into investment opportunities that will increase in value, diversify your portfolio and earn you passive income – all factors that can help you build wealth.
However, you don’t need to buy property outright to tap into this asset class. You can invest in holiday home shares or rental properties through Waslu.
Backed by world-class investors, including Jeff Bezos, Arrived allows you to invest in shares of vacation and rental properties, earning a passive income stream without the extra work that comes with owning your own rental property.
To get started, simply browse their selection of verified properties, each chosen for their potential appreciation and income generation. Once you select a property, you can start investing with as little as $100, potentially earning quarterly dividends.
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Dave Ramsey (1); Experian (2); (3) YouTube, Dave Ramsey Show; Empower (4)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.