This book provides a clear plan towards financial freedom. Not only does it leave those who read it feeling hopeful, but it’s easy to read! The author, Dave Ramsey, lays out a simple path called “Baby Steps” which are helpful for people at any stage in their financial journey.
It reads more like a “Self Help” book than a finance book, and offers little-to-know financial advice. If you need a coach or a cheerleader, this is the book for you!
If you don’t’ know Dave Ramsey, he preaches a life dedicated to ZERO DEBT. No mortgage, no credit cards, nothing. He has a very strong personality (Check out his podcast for proof) and it comes off in his writing.
The first five chapters of The Total Money Makeover focus primarily on psychological hurdles that one must overcome in order to be ready to build up their personal finances. Perhaps more than any other part of the book, this first portion is imbued with the “Dave Ramsey philosophy” of no debt, no matter what.
The hurdles are: debt myths, money myths, denial, ignorance, and keeping up with the Kardash, er “Jones’”
The second portion of the book, is the building of a financial foundation upon which you can grow.
Dave’s a big proponent of the one step at a time concept and proposes a 3 step plan to gaining control of your finances.
First, develop a budget. To many people, this is a scary step, but it’s essential.
Second, get all of your accounts current.
Third, build up a $1,000 emergency fund as fast as possible. This fund exists to keep you from failing in your plans if a disaster occurs, such as a damaged vehicle or so forth. This is absolutely essential, to the point that Dave encourages people to take out second jobs and sell some of their stuff to create such a fund. He also requires that it be liquid
Fourth, pay off all debts (except the home). Dave teaches a “snowball” approach, in which you list all of your debts in order of balance due from smallest to largest, then make minimum payments on all but the smallest and make a large as payment as possible on that smallest debt.
Fifth, build a FULL emergency fund. Once your debts are gone, you should continue to build up that emergency fund up to the point where it can replace three to six months of salary. Now save cash for everything! Since you have no debt, it should be easy to stash cash!
The third part of the book is about building wealth. Which again, is broken down into steps
Put 15% of your take-home pay into retirement accounts and utilize compounding interest.
If you have money left over that month,
Fund college accounts for your children (aside from teaching them a life of debt free living).
If you still have money left at the end of the month,
Throw it at your mortgage. Pay it off ASAP
If you’ve trained yourself well enough to reach this point, you should know very well how to manage your money and suddenly you’ll have more of it floating around than you can imagine. The rest of the book focuses on this stage in life, which we are all striving for: keep some goals, remember who you are, and keep investing.
The book although packed with commonsense knowledge, has some religious undertones. It’s not offensive, or abrasive, it just….is.
If you’re struggling with debt, budgeting, or sick of living paycheck to paycheck; this book is absolutely worth the read!
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