Dave Ramsey Says These 8 Money Habits Could Do Major Retirement Damage After 50

The decade before retirement is a crucial period. Personal finance expert Dave Ramsey has often warned about the danger that bad money habits pose during this time, and how the wrong moves derail your finances.

Here are some of the habits Ramsey says to avoid at all costs if you want to eliminate some money stress as you approach your golden years.

Carrying debt

Ramsey once said, "The only good debt is a debt that is paid off."

Debt should not be viewed as a tool you could use, Ramsey says. Rather, he urges you to remember that debt makes banks wealthy, not you. "The borrower truly is slave to the lender," Ramsey has said.

Racking up additional debt in the years prior to retirement only makes a bad situation worse. Instead, try to pay off most or all of your debt before you decide to step away from work for good.

Saving less than 15% of gross income

Ramsey has developed what he calls the "7 Baby Steps" plan to achieve financial independence. Step Number four in the process is to begin saving 15% of your gross income and earmarking it for retirement.

You should start this process early in life if possible. Ramsey notes that falling short after 50 is more damaging because there are fewer compounding years left. 

However, starting late is better than never starting at all. The federal government allows those who are 50 or older to make catch-up contributions to retirement accounts such as 401(k) plans and IRAs.

If you fall into the bad habit of not saving after 50, money woes may tarnish your golden years.

Engaging in lifestyle creep

Lifestyle creep occurs when your income rises, and you use this good fortune to increase spending. Perhaps you buy a more expensive car, a bigger house, or have more subscriptions.

As the Ramsey Solutions website says, "Lifestyle creep is harmful to your financial health and your financial security. You're trading the future for the present — but you aren't even really aware you're doing it!"

Treating Social Security as a retirement plan

Ramsey is not a big fan of Social Security. He says the program is a terrible investment and has gone as far as referring to it as a "scam."

Instead, the financial guru advocates taking control of both your finances and your life. As he has said, "You must gain control over your money or the lack of it will forever control you."

Retiring before you are financially ready

Millions of people dream of retiring early. But leaving work behind before you are financially ready is a sure way to court disaster. Plus, early retirement before Medicare at 65 forces people to self-fund health care at a time when costs are high.

Ramsey has urged people to put off retirement "until you're truly ready." By his definition, that means eliminating all your debt, having robust savings, and developing a budget that clearly shows where your money goes each month.

"Work longer if you need to, and budget like your future depends on it — because it does," he has said.

Wasting money to impress your peers

Humans are social creatures. That means we care what others think, and about our place in the pecking order.

But living to impress others is expensive. Trying to keep up with the Joneses is an empty pursuit that triggers regret later when you think of all the money you could have saved for retirement.

As Ramsey has put it, "We buy things we don't need with money we don't have to impress people we don't like."

By the time you turn 50, you should have the wisdom and maturity necessary to avoid this mistake.

Not having a budget

It is easy to overspend if you don't know exactly where your money is going each month.

A good budget helps show every dollar that comes in and goes out over the course of the month. This type of snapshot helps you determine if you are overspending, and where to cut costs to get you back in line.

As the Ramsey Solutions website says, "When you learn how to budget — and make one every month — you give your money purpose. You take control."

Forgetting to build emergency savings

Life is unpredictable. Even if the skies are sunny today, rain clouds could suddenly roll in tomorrow.

An emergency fund helps you to weather the storm when life offers you a financial surprise, such as a big medical bill or an unexpected and expensive home repair.

Step number three on Ramsey's list of "7 Baby Steps" is to build an emergency fund that is equivalent to three to six months of your expenses. Having this fund handy prevents you from needing to run up debt on your credit cards.

As the Ramsey Solutions website says, "Money stress doesn't stand a chance when you're debt-free and have a big rainy day fund."

Bottom line

When you are young and get into financial trouble, it is relatively easy to turn things around if you are patient. After all, time is on your side.

But re-establishing your financial fitness is more difficult later in life, when retirement approaches fast and time is running out.

Avoiding the mistakes on this list after you turn 50 gives you the foundation you need to enjoy your golden years instead of worrying your way through them.

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