Dave Ramsey Style Investment Calculator
Calculate your path to becoming an "Everyday Millionaire" using Baby Step 4 principles.
How Dave Ramsey Views Investing
This calculator is built on the core philosophy taught by Dave Ramsey, specifically focusing on Baby Step 4. Once you have a fully funded emergency fund (Baby Step 3), Dave recommends investing 15% of your gross household income into tax-advantaged retirement accounts.
Dave frequently uses a 12% annual return in his examples. While many financial planners suggest using a more conservative 7% or 8%, Dave points to the historical S&P 500 average to encourage people that wealth building is possible through consistent, long-term mutual fund investing.
The Power of Compound Interest
The "Dave Ramsey Investment Calculator" demonstrates the math of compound interest. As Dave says, "Compound interest is the eighth wonder of the world." By consistently contributing a fixed monthly amount over 20, 30, or 40 years, your money begins to make its own money, creating a massive snowball effect.
Example Scenario:
- Starting Balance: $0
- Monthly Contribution: $500
- Timeframe: 30 Years
- Return Rate: 12%
- Result: Over $1.7 Million!
The Four Mutual Fund Categories
Dave suggests diversifying your investments across four types of growth-stock mutual funds, allocating 25% to each:
- Growth and Income: Stable, large-cap companies.
- Growth: Medium-cap companies with growth potential.
- Aggressive Growth: Smaller companies with high volatility but high potential.
- International: Companies based outside of your home country.
Practical Tips for Success
To maximize the results shown in this calculator, Dave Ramsey emphasizes staying debt-free (except for the mortgage). When you don't have car payments or credit card bills, it becomes much easier to find that 15% to invest. Consistency is more important than timing the market. Live like no one else now, so later you can live and give like no one else.