Book Review: Dave Ramsey’s Total Money Makeover
Posted in Academic Pursuits and tagged with Book Review, Finances, Money on April 6, 2010I don’t know why it took me two years after I was recommended to check out Dave Ramsey to actually do it. Probably because I thought I knew better, given my line of work. Sure, he didn’t tell me much I didn’t know, but reading this has given me the motivation that I needed to get serious about living life debt-free. If I live by his system to a T, I easily could retire at 50 and retire well at 60 on my average starter salary (which also assumes I never get a raise again…even with inflation).
Dave set up his book well. Testimonials from people from all walks of life and all sorts of financial situations are found every few pages. These remind the reader that this really does work and more importantly, it works for people like me.
The funny thing is, there’s not really anything special about Dave’s plan. Except that it’s counter-cultural…and that’s a big thing.
He’s broken his plan up into 7 baby steps. The idea is, that you don’t try to put all the fires out at once, you focus on one thing at a time, but you intently focus on it.
These baby steps are:
1. Build up $1,000 emergency savings.
2. Pay off all non-mortgage debts, starting with the smallest and working up to the largest.
3. Finish off the emergency savings (3 to 6 months of expenses).
4. Invest 15% of your pre-tax income for retirement.
5. Start building college savings for your children (if you have any, of course).
6. Finish paying off the mortgage.
7. Enjoy, give, and live. (By this stage you’re well on your way to having your money do all the work for you.)
Obviously, this is a simplification of what he spend a whole book explaining. The cool thing is that I can see how it works. It’s possible to achieve my goals (at least monetarily…he didn’t give any husband-catching advice) without going in debt to do it. And I don’t have to be a miser either…part of my financial goals is to live on less and less of my income so I can give more and more. Just means that I won’t have as much “stuff” now as everyone else.
My big goal in doing this is that I want to be as financially fit as I can be before marriage. And if I don’t get married? I’ll be able to see my plan to the end. It’s rare that I want my plans to be interrupted, but that would definitely be a welcome interruption.
I’d recommend checking out Dave Ramsey’s Total Money Makeover regardless of where you are in life. I think debt-free living is something more of us should work towards, and not just dream about.
April 6th, 2010 at 8:39 am
Debt free? What is that? ;-)
The “only” debt we have is the house, Peter’s car, and my little student loan. But it is amazing how just saving a little bit at a time adds up over time. So many people think they can’t save because they can’t put hundreds of $$$ each month, but if you start out at say, $25, you adjust your budget accordingly, then you realize how easy it is to live on less.
Of course, we use most of our disposable income on travel, and I think that is okay. :-)
April 6th, 2010 at 8:51 am
Jacki: A good chunk of my income goes to traveling, too!
April 6th, 2010 at 10:12 am
Jeff LOVED this book and has recommended it to several people. I admit that I haven’t finished it yet… I started it and then found out we were pregnant and so I focused my reading energies there. But this reminds me that I still need to finish it!
April 6th, 2010 at 10:17 am
I think debt-free is a wonderful goal, and I’ve been meaning to check out this book, too…I’ll add it to my list on your recommendation! The only caveat I have, though, is to be careful of your credit score…ironically, you have to have debt to build a good score. I don’t know if that’s discussed in the book. We keep two credit cards that we use regularly and pay off each month. We also make some major purchases (like furniture or a computer) on credit sometimes and pay it in full in the first month. My sister and her boyfriend have lived debt-free for years, including no credit cards. They’ve saved up over a 20% downpayment for a house (in San Francisco no less!) but are having trouble getting mortgage approval because of their lack of credit history. Seems like a cruel catch-22 after living responsibly for so many years :(
April 6th, 2010 at 12:43 pm
We’ve been SLOWLY working through Dave Ramsey’s Financial Peace plan. I do think it’s the only thing that kept us afloat when my husband was laid off.
April 6th, 2010 at 12:48 pm
WhatACard: According to Dave’s plan, you don’t actually need credit (truly). Most *good* mortgage lenders are willing to work with alternative credit (and this is my experience as a housing counselor). That said I do use my credit cards *gasp*. This is where I deviate from his plan…I use my cards, but pay them off every month. It takes more self-control this way, but my thoughts are that plastic is here to stay, so I’d rather learn to use it responsibly than avoid it (though I rarely recommend this to my clients). I’ve earned 3 or 4 free flights this way…it’s been worth it.
Carol: Yeah, I’m still on step 1. And I’ll be in step 2 for quite a while, but not a long time when you consider how long I’m expected to live. It’s worth the sacrifice.
April 6th, 2010 at 9:53 pm
This is one that I’ve always meant to pick up and probably still should…wonder if I could get it on paperbackswap. Spring sounds like a great time to start a budget :)
April 6th, 2010 at 10:02 pm
Britni: I got it on PBS myself, but it took several months. Partly why I delayed so long in reading it!
April 6th, 2010 at 10:05 pm
I loved how simple this one was. A lot of it is stuff I do already, but even still, there was a lot to dig into, too. I like his debt snow ball idea.
My one problem with his plan: housing. If you aren’t planning on living in your home for the life of the mortgage, it’s not always worth paying it off as quickly as possible, especially with such low interest (our mortgage interest is 5%, compared to 7.2% on student loans). The extra money would be best put into savings, since you likely won’t recover a lot of the money from the mortgage upon resale, especially now.
April 6th, 2010 at 10:07 pm
Kelly: I noticed that some of the things don’t apply as well in this economy, but the general principals work. I’m thankful that I DO have a low interest rate on my student loan right now, because I likely can have a good chunk of it paid off before higher interest rates are back.
April 6th, 2010 at 11:35 pm
I’d be really curious what he says about a few things in this economy, for sure. I suspect mostly the same principals…and no joke on the student loan interest rates. That’s my next goal (since that and the house are my only debts) – that is one awesome hurdle to jump, but the Ramsey ideas are easy!
April 10th, 2010 at 7:53 am
Looks like a book I need to get and read…it sounds like it would be very helpful in our current situation. Thanks for the great review!