How Dave Ramsey Made His Fortune

At the age of 26, Dave Ramsey was bringing home a quarter of a million dollars a year and had a $4 million real estate portfolio under his belt. Two years later he lost everything.

Today Ramsey, 54, is one of America’s most trusted sources for financial advice. His syndicated radio program, "The Dave Ramsey Show," is the third largest talk radio show in the United States. It is available on more than 580 radio stations nationwide and is heard by more than 13 million weekly listeners.

As an evangelical Christian, Ramsey uses biblically based principles to teach his followers how to improve their financial conditions. For example, he often advises others to avoid debt because Proverbs 22:7 states, “The rich rule over the poor, and the borrower is slave to the lender.”

Dave Ramsey has come a long way since filing for personal bankruptcy in his early years. With an estimated net worth of $55 million, he's living proof that anyone can turn a bad financial situation around. Here's how Ramsey made his first million, lost it and rebuilt an even larger fortune in a relatively short period of time.

Dave Ramsey Grew up With a Work Ethic

Dave Ramsey grew up in a household that instilled a strong work ethic. In “Live Like No One Else,” a 20-minute documentary on his life, Ramsey tells the story of when he was 12 years old and asked his father for money to purchase a popsicle. He said his father responded to his request by saying, “You are old enough to get a job. That’s where money comes from.”

That conversation with his father inspired Ramsey to become an entrepreneur. That same day he printed 500 business cards at the local print shop for his first venture: a lawn care business. Throughout his school years, he had a number of other businesses, one of which sold leather bracelets. Ramsey said his early business ventures taught him valuable lessons like customer service and the importance of keeping your word. 

Real Estate Success and Failure

Three weeks after turning 18, Ramsey took and passed his real estate license exam. In fact, he used the commissions he made from selling property during college to help pay his tuition. As a child, he had been exposed to the world of real estate, and in his book Dave Ramsey's Complete Guide to Money, he explained, "My parents were in the real estate business, so it has always been a big part of my life."

After graduating from college, he started to flip properties himself. As a result of having a few family connections at the local banks, Ramsey was able to secure financing for his deals. At the age of 26, his real estate portfolio was worth $4 million, and his net worth was just over $1 million. (For related reading, see: Simple Ways to Invest in Real Estate.)

His initial success was short-lived, and he ended up filing for personal bankruptcy protection at age 28 in 1988, mainly because his largest lender—to whom he owed $1.2 million—was acquired by a bigger bank. The bank demanded Ramsey pay the entire debt off within 90 days. Shortly after receiving his first demand notice, another bank called his $800,000 worth of notes. Ramsey managed to pay the majority of the debt down, leaving $378,000 outstanding.

Counseling Business

Ramsey's fall from grace led him to Christianity. He began to read the Bible and discovered that "God's word has a lot to say about money." In the documentary, Ramsey says one day after church, a man going through financial difficulties asked him how exactly he survived his money troubles in the past. He agreed to help the man and his wife create a financial plan for their life—and so began Ramsey's financial counseling career.

Ramsey started a personal finance counseling company called The Lampo Group. His money management class started with 37 students, but membership grew to more than 350 students after a few years of operation.

The Dave Ramsey Show

Following the success of The Lampo Group, Ramsey began to co-host a personal finance focused radio show called ‘‘The Money Game’’ with his friend, Roy Matlock. Around that time, he also published his first book, ‘‘Financial Peace,’’ and leveraged his growing radio audience to help sell it.

Ramsey then launched a spin-off radio program called ‘‘The Dave Ramsey Show.’’ In each episode, people from all over the country call in to ask Ramsey a wide range of personal finance questions. 

How He Invests

Ramsey is transparent about his investment style. He encourages his followers to avoid investing in individual stocks and purchase mutual funds that have a long track record of good performance. Personally, his equity investments are allocated into four types of mutual funds: growth, growth and income, aggressive growth and international. (For more information, watch: An Introduction to Mutual Funds.)

Besides mutual funds, Ramsey owns a portfolio of rental properties. His real estate investment philosophy is based on acquiring properties without the use of debt financing

The Bottom Line

From a very early age, Dave Ramsey understood there was value in a day’s work. As a child, he started several different business ventures to earn extra pocket money. His impeccable work ethic helped him become a millionaire by the age of 26. A few years after reaching the million-dollar net-worth milestone, Ramsey filed for personal bankruptcy. Since then he has created a business empire that revolves around using his previous money mistakes and Bible scriptures to teach smart money-management practices. Today millions of Americans have turned to the teachings of Dave Ramsey to guide them along the path to financial security and wealth.