Dave Ramsey recommends carrying high-liability car insurance, specifically at least $500,000 in total liability coverage ($250,000 bodily injury per person / $500,000 bodily injury per accident / $250,000 property damage), to protect against lawsuits and significant, Ramsey Solutions notes, at-fault accidents. He also advises full coverage (collision and comprehensive) and increasing your deductible to lower premiums.
Like we said earlier, you should have at least $500,000 worth of liability coverage that includes both property damage liability and bodily injury liability.
Liability coverage protects against “at-fault” accidents, where a third party might sue you over injuries and/or property damage. Legal fees and a settlement can be expensive. Dave recommends at least $500,000 in liability coverage, and you may want more if you have any assets of note.
Ramsey's car-buying rule is that you shouldn't buy a brand-new car unless you have a net worth of at least $1 million. Also, the total value of all your vehicles shouldn't be more than half your annual income. This is because you don't want too much of your money tied up in something that depreciates so fast.
Dave Ramsey's insurance advice centers on protecting assets with high liability/deductibles, avoiding whole life insurance for affordable term life, getting comprehensive coverage (auto/home), using HDHPs with HSAs for health, and considering umbrella/long-term care policies as wealth grows. Key strategies include using independent agents to shop around, maximizing deductibles to free up cash for debt/investing, and getting rid of collision on older, paid-off cars.
Zander Auto Insurance Quotes - Dave Ramsey | Official Site.
Depreciation. Cars reportedly lose 20% of their value in the first year of ownership and retain just 40% of their original value after five years. Clearly, that is not a good investment. “Your goal should be to buy the least expensive car. Period,” said Orman. “That should steer you to a used car rather than a new car. ...
The Ramsey 25% rule is a personal finance guideline from Dave Ramsey, stating that your total monthly housing costs (mortgage principal, interest, taxes, insurance, HOA, PMI) should not exceed 25% of your monthly take-home pay, preventing you from becoming "house poor" and allowing for savings, investing, and financial freedom. It's a guideline for building a strong financial foundation, not a strict rule, though some find it difficult in high-cost areas.
The 50/30/20 rule is a simple budget guideline: 50% of your after-tax income for needs (like housing, groceries, and car payments/expenses), 30% for wants (dining out, entertainment), and 20% for savings and debt repayment. For a car payment, this means your total monthly car expenses (loan, insurance, gas, maintenance) should ideally fit within the 50% "Needs" category, with some experts suggesting car costs shouldn't exceed 10-15% of your income overall, making a modest car a "need" and luxury vehicles a "want".
Full coverage isn't worth it when the annual cost of collision/comprehensive exceeds a significant portion (e.g., 10%) of your car's low market value, you have enough savings to replace or repair it out-of-pocket, or if you have a clear title and don't need it for work/family, while it's still required for leased/financed cars. Key factors include your car's depreciated value, your emergency fund, and your risk tolerance for paying for repairs/replacement yourself.
Choosing between a $500 and $1,000 car insurance deductible depends on your budget: a $1,000 deductible means lower monthly premiums but higher out-of-pocket costs if you file a claim, while a $500 deductible means higher monthly premiums but less cash needed for repairs, offering better financial protection when you need it. Pick the $1,000 option if you want lower monthly bills and can comfortably afford the $1,000 when an accident happens, but choose $500 if you prefer paying more monthly for less financial risk during a claim.
And to go one step further, we recommend dividing your mutual fund investments equally between four types of funds: growth and income, growth, aggressive growth, and international.
Keeping Transportation Costs Under 10%
For the 10 in the 20/4/10 rule, it is advised to keep your transportation costs under 10% of your monthly income. Transportation costs include your monthly car payment, insurance, fuel, and maintenance.
Dave Ramsey's core car rules emphasize paying cash, avoiding new cars (unless you're a millionaire), keeping your total vehicle value under half your annual income, and using a strict budget, often suggesting the 20/4/10 rule (20% down, 4-year loan, 10% total car expenses) as a guideline if financing, but preferring no debt at all to avoid depreciating assets trapping you. He stresses buying reliable, used vehicles to prevent debt and build wealth.
He has blamed politics for what he considers Americans' economic dependence, and has said presidents should do "as little as possible" about the economy. Ramsey supported Donald Trump in the 2024 United States presidential election.
Dave Ramsey's Rule of 72 is a simple mental math shortcut to estimate how long it takes for an investment to double: divide 72 by the annual rate of return (as a whole number, e.g., 8 for 8%) to get the approximate number of years for your money to double. For example, at a 12% return (Ramsey's often-used figure), your money doubles in 6 years (72/12=6), while at 8%, it doubles in 9 years (72/8=9). It's a motivational tool to show the power of compound interest, though his use of an optimistic 12% average return is a point of debate.
Many insurers offer lower rates for customers who do the following: