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The Total Money Makeover: A Proven Plan for Financial Fitness Hardcover – December 29, 2009
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The baby steps are pretty straightforward:
Baby Step 1 – $1,000 to start an Emergency Fund - you'll find this way easier than you expect to.
Baby Step 2 – Pay off all debt using the Debt Snowball - this takes a LOT of patience, but you can do it.
Baby Step 3 – 3 to 6 months of expenses in savings
Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
Baby Step 5 – College funding for children
Baby Step 6 – Pay off home early
Baby Step 7 – Build wealth and give
The rules are simple:
1) Live and breathe by your budget.
2) Attack your debt with a vengeance. Think about how your debt is holding you back and get mad at your debt.
3) Don't stray from the path.
4) As Dave says, "Live like no one else so you can live (and give) like no one else."
I listen to the podcast as well and it helps keep me thinking forward and remembering why I started my journey. Dave Ramsey's work can be life-changing, but you have to follow it to the letter. Don't try to do your own thing. That said, know that the rules are available widely online, and Ramsey didn't create this philosophy, he just made it easier to understand than anyone had in the past.
The "makeover" is a set of 7 baby steps, but before the steps comes the cornerstone of the whole program: a written budget and a cash envelope system. The book covers why you need a written budget, and boy, it was true for us. Sure, I had a mental idea of what our bills were. But writing everything out let me see ALL the little things I tend to forget about, and how quickly they add up. The book helped us make a "zero based" budget, meaning we earmarked every dollar coming in for a specific purpose (rent, groceries, gasoline, etc.) Then comes the cash envelope system, which helped us make an immediate 180-degree turnaround on our spending. The book covers why cash is better than plastic (debit as well as credit), as well as how to create cash envelopes for each spending category and stuff them with the budgeted amounts. No more accidental overspending!
The rest of the book goes over the baby steps, a systematic, do-these-in-order money tasks to kill debt and build wealth. Each step's chapter also includes personal success stories. Honestly, you can learn the steps without this book either from the Dave Ramsey website, or even better, from watching the metric TON of YouTube videos on his channel. He does a daily show where people call in with money problems, and he uses this method to solve them. That practical, real-world advice has taught me a lot about this system. But I like having this book handy on my Kindle as a reference, plus the info given about each individual step goes more in-depth than the website.
To sum up, if you own Financial Peace University, Dave's other money books, or are a die-hard YouTube viewer, there's likely nothing new here. But if you're new to the system or want a written reference to go along with his videos, this might well be the one to get in order to cover the basics. I was desperate and at wit's end, terrified of the retirement future staring me in the fact in the next decade or so. Now, I can see a bright financial future ahead, and we have a plan. I can't say enough about this program!
Who is this book for? Everyone can benefit from it, but it is great for married couples and those in their late 20s, 30s, and early 40s. Young adults could benefit tremendously from it, but I'm worried it might not be exciting or fun enough to hold their attention. It's not really meant for retirees.
--- The Good ---
* He says financial freedom is 80% behavior and 20% knowledge which is so important, and he emphasizes this by pointing out there are a lot of broke finance professors.
* There are many real-life success stories of real people which shows his method works, and they also provide inspiration.
* He lays out his seven Baby Steps and makes them simple to understand. He points out that living right financially is not complicated. It may be difficult, but it's not complicated.
* I really liked the quote, "If you worked for a company called YOU Inc. and you managed money at YOU Inc. the way you manage your own money now, would you fire you?"
* The book includes helpful budget forms and worksheet in the back of the book.
* He isn't all gloom and doom. He wants you to have fun and even approves of buying a $30,000 watch, but only after you reach step seven and can afford it.
--- The Not-So-Good ---
* He doesn't go into a lot of detail on how to increase your income. Dave Ramsey is rich because he is a business owner who can make money from his radio show, books, seminars, programs, etc. It would have been great to get his advice on that, but he probably didn't want to overwhelm the reader with too many topics.
* I feel his previous bad experience with debt (he was over-leveraged with his real estate investments) has made him overly zealous on not having any debt. College loans can be very appropriate for some people, business loans can be great in the right situation, and his statement that you should put money toward paying down debt rather than getting the company 401(k) match seemed too extreme to me.
* The book wasn't super entertaining. I found a few parts to be a little dry and repetitive. While it certainly wasn't boring, I wish more money management books would be like the new personal finance adventure novel, but I guess that isn't this book's purpose. Still, there were a couple parts that made me chuckle and he did have some interesting stories.
* He stressed putting 100% of your investments in stock-related mutual funds. First, I feel ETFs are probably better than mutual funds because they are cheaper and won't underperform the market. Second, recommending a 100% stock portfolio to everyone regardless of age, financial goals, or risk tolerance seems risky to me. Plus you wouldn't experience the diversification benefit of owning non-correlated asset classes.
* He doesn't talk about the benefits of setting S.M.A.R.T. goals or having an accountability partner, which have been shown to greatly help people achieve all kinds of dreams.
--- Conclusion ---
Overall it is a very good book with a lot of good advice and inspirational case studies. You certainly won't regret reading it.