Most helpful positive review
7 of 7 people found the following review helpful
on January 15, 2012
I must admit, I was pretty cautious when I first picked up Dave Ramsey's book The Total Money Makeover. It's not a particularly threatening book - it's just that the cover has a similar effect to receiving an unsolicited sales email. There is a picture of him staring into the camera with an all-knowing gaze. Everything is green and red and gold ' money, money, money. The caption, all-caps: "Hundreds of thousands of ordinary people have become debt-free ' here's how you can too." It's not exactly subtle.
Upon digging into the information, it's pretty useful stuff. It's not so much a technical manual for places to cut costs as it is a motivational book to refer to when times get tough. Dave writes in a refreshing, conversational manner, and begins by bringing the low-down on various "Money Myths." He discusses the reasons that playing the Lotto won't make you rich ("Lotto and Power Ball are a tax on the poor and people who can't do math"), why pre-paying anything isn't really worth it, and why bankruptcy is hardly ever a good option.
From here, Dave takes the reader through the extremely simple "Baby Steps" which make up the meat of the book:
Create a $1000 emergency fund while paying the minimums on every debt. Make sure it's liquid. Budget hard.
List all your debts ' every last one. Pay them off in order of smallest to largest, regardless of interest rates. This is to keep you motivated as you gather "small wins" on the road to being debt-free. Any mortgage shouldn't be listed here, but student loans should, according to Dave.
Finish your emergency fund. Bump that sucker up to three to six months (or more) of living costs. Ramsey says this value is $10,000 +-, depending on if your income is steady . If you're in a contract position, at risk of losing your job, or self employed, more money is better.
Invest 15% of your income in your retirement. Don't fatten your kids' college funds first. That was something I definitely thought about the second I saw my Student Line of Credit balance. Ramsey says, "your kids' college degrees won't feed you at retirement," and he's right.
Fund your kids' college. In this step, Ramsey talks about how the number one rule of going to college is to pay cash. He really rails against borrowing ("Student loans are a cancer") and at times even seems against the idea of going to college if you can't afford to pay up front. My parents had not set me up with a college fund, so I thought debt was the only way to do it.
Pay off the mortgage. Straightforward.
Get super rich. At this point, Ramsey says, "You are not Mastered by a Card, you have not Discovered bondage, American Excess has left your life." He urges us to use our money wisely ' have fun, invest and give.
Ramsey peppers the book with a bit of religious gospel coupled with the financial stuff. It's not intrusive at all and shouldn't be a deterrent to any open-minded individual. I do not count myself as a member of the Christian faith, but the Bible verses included were relevant elaborations on the concepts in Ramsey's book.
Some of the advice in the book directly contradicts the math of what's going to save you the most money - logically and on paper, that is. At first I thought this idea was preposterous, but upon further consideration I realized that the math doesn't really matter at all. If it's just a matter of math, all we need to do to be rich is simple subtraction, making sure our incoming money outweighs the outgoing money. Chances are, if you're reading this blog or this book, you know the math but haven't been keeping up so well on the motivation part. This book is a psychological push in the right direction for managing your finances, and as such it should take up a place on the bookshelf of anybody who cares about their finances.
I didn't learn anything particularly technical from the book, but it's all well-grounded common sense. Ramsey drives home the point that rich people don't get rich by knowing any well-kept secret. He says that having stable finances comes from being able to stay motivated while putting very basic concepts into practice. Total Money Makeover is a great place to start getting your finances in order.