Author: Dave Ramsey
Rating: 9/10 Stars (amazing book)
If you will live like no one else, later you can “live” like no one else.
Build up your money muscles with America’s favorite finance coach.
Okay, folks, do you want to turn those fat and flabby expenses into a well-toned budget? Do you want to transform your sad and skinny little bank account into a bulked-up cash machine? Then get with the program, people. There’s one sure way to whip your finances into shape, and that’s with “The Total Money Makeover: Classic Edition“.
By now, you’ve heard all the nutty get-rich-quick schemes, the fiscal diet fads that leave you with a lot of kooky ideas but not a penny in your pocket. Hey, if you’re tired of the lies and sick of the false promises, take a look at this–it’s the simplest, most straightforward game plan for completely making over your money habits. And it’s based on results, not pie-in-the-sky fantasies.
With “The Total Money Makeover: Classic Edition,” you’ll be able to:
Design a sure-fire plan for paying off all debt–meaning cars, houses, everything
Recognize the 10 most dangerous money myths (these will kill you)
Secure a big, fat nest egg for emergencies and retirement!
In case you are wondering where my recent love for writing about financial independence and just finances in general, you can thank Dave Ramsey and his book The Total Money Makeover: A Proven Plan for Financial Fitness.
Being one of just 5 million people who have purchased this book, I can honestly say that it has made me completely changed how I view money, how I look at debt, and what I want my future to look like.
Most of the time when we think about money and debt (at least me), we tend to think that it’s going to take decades to pay off all of the things that we own. We look at the mountain of debt that we have accumulated over the years, and just the amount itself causes most of us to give up before we even start. So, what do we do? We go off and accrue more debt.
If that sounds like you, The Total Money Makeover: A Proven Plan for Financial Fitness is for you! Dave Ramsey will show you step-by-step how to pay off your debt usually within a few years. No, it’s not going to be easy for those few years, but as Ramsey says, “You have to live like nobody else so that you can live like nobody else.” In other words, embrace the suck now so that you can live a life like no other in the future.
Ramsey’s approach is easy to follow, so easy that anybody can do it. These aren’t newly developed methods to paying off debt. These are the methods that our ancestors used. Basically, you buy what you need, not what you want. Anything else you have left over goes towards paying off debt.
The Baby Steps
Ramsey breaks down his plan into 7 baby steps:
Baby Step One: Save $1,000 as a Starter Emergency Fund
The first step is to have $1,000 on the side in case of emergencies. Crazy expenses can and will pop up. In order to ensure you don’t go into more debt or use credit cards, it’s important to have an emergency fund to handle the unexpected. The Total Money Makeover starts you off with a small $1,000 fund to help you avoid debt before you start repaying your debt.
Baby Step Two: Pay Off Debt with the Debt Snowball
Start by paying off your smallest owing debt first. Forget about what debt has the most interest and focus on the smallest.
Using the Debt Snowball method will help you to get going on your journey of paying off debt. It may take a while to see any major progress, but the point it to just get started. Once you pay off your smallest debt, you will see that it can be done and will be more motivated to continue on your journey of living a debt-free life.
Baby Step Three: Finish the Emergency Fund
With all of your debt paid off, now it’s time to increase your emergency fund. Let’s be real, as nice as it may be to have a $1,000 safety net, it also isn’t a lot – at least not enough to live on.
Ramsey recommends increasing your emergency fund to about three to six months worth of your current living expenses. That way, if something happens or you get laid off, you will be able to live off of what you have already saved instead of falling backwards and going into debt all over again.
This will really help you to become debt-proof. If you take precautionary steps now, you can avoid catastrophes later on..
Baby Step Four: Invest 15% of Your Income in Retirement
Whether you are saving through a 401(k), IRA, Mutual Funds, or other investing, Ramsey recommends that you invest 15% of your income toward retirement.
To give you some context as to how much money this can lead to in retirement, let’s say you are 27, make $52,000 a year, and contribute $400 to your retirement. Now, historically speaking, the 30-year return of the S&P 500 has been roughly 12%. By the time you are 67 years old, your investment could be $4,705,911.
Let’s just say that you’re 34 and have no savings as of yet. If you contribute $400 per month until $67, you could have $2,017,425 by the time you’re 67. That’s still a lot of money.
As you can see, the sooner you start, the more your money grows. Even something as 7 years can be the difference between $2 million. The point is that no matter where you are, just get started in investing.
Baby Step Five: Save for College
If you have kids, this is where you start saving for them to go to college. Thankfully, my parents paid for the vast majority of my education. By the time I came out of college, I had less than a years worth of tuition in student loans. Had it not been for them, I wouldn’t have gone to the amazing school I did.
Someday, I look forward to being able to do the same for my children. The book goes into plenty of details on how to plan, how much to save, and where to put the money so that it can grow as quickly and as efficiently as possible.
Baby Step Six: Pay Off Your Home Mortgage
Nope, it’s not impossible. It’s not easy, but it’s not impossible.
Can you imagine how amazing it would be to have no debt to pay back and no mortgage payments needing to be made? Your paycheck would come in and it would stay with you. You would get to fully decide on where your money goes.
That’s the point of baby step six. This is when you can get rid of all of your debt – including your mortgage. This is when life will truly become enjoyable. You will have the full ability to do what you want when you want.
Baby Step Seven: Build Wealth
Have fun, invest, and give. That’s what it’s all about. Build your wealth, continue to invest your money so that it continues to grow, and give back to those around you.
For those who believe money to be the root of all evil, it’s the love of money that is the root of all evil acts, not money itself. You can do so much good in the world if you have money to give, so have fun in life, invest, and give.
We’re Debt Free!
In case you lose your sense of motivation along the way or simply think it’s going to be impossible to pay back all of your debt, Ramsey also includes stories of real people, just like you and me, who followed his advice and have paid off everything they owe. Some have paid of $20,000 in just a few years, and others have paid off $200,000 in just a few years.
Everybody is different. We are all going to encounter different challenges and obstacles along the way, but the point is to just get started. Be willing to live like nobody else now so that you can live like nobody else in the future. Be smart with your money, make good choices, and more importantly, just get started.
Before You Go
Thanks to Ramsey, I am starting my own journey of paying off all of my debt. After college and the purchase of a car, I have found myself $48,000 in debt. Not bad, but not good.
All I can say to this is BRING IT ON! I am motivated to pay off all this debt as quickly as possible so that I can start living like nobody else!
Thanks Dave for the insight and motivation you provided in this book. I am eager and anxious to get started so that someday I can yell “I’M DEBT FREE” on your show.