Sunday, August 22, 2010

Book Review: Dave Ramsey's The Total Money Makeover

Cover of "The Total Money Makeover: A Pro...Cover via Amazon
Financial Guru Dave Ramsey has made financial fitness cool. Between his radio program, web site and Money Makeover Live Events he 's making new in roads to the main stream culture. I was first exposed to him on his web site when I was looking for some debt help. I believed he was some cult leader trying to sell a book. But under further scrutiny I've been sucked into drinking the Ramsey kool-aid big time. His latest book titled "Dave Ramsey's Total Money Makeover", now updated for 2010, is on bookshelves now.
His book describes a plan for becoming financially fit. Whether your a beginner or on track, this book can help you. Early in the book he describes his financial life. Starting poor and becoming a millionaire in real estate. Losing it all and declaring bankruptcy. He started a  journey to learn the right way to become wealthy. He talked to many people especially millionaire's learning how they made it and how they kept it. He has a heart for people who have lost everything like he did. Even the day they repossessed his child's furniture. His car was also repossessed and electric shut off. He eventually paid of his debts and began to build wealth. Also a career teaching others how to do it right. His book explains this plan with something called the " 7 Baby Steps".
The 7 Baby Steps are:
  1. Save up a $1000 baby emergency fund for a rainy day. Cut up all your credit cards and set up a budget. Also never use credit again.
  2. Begin the "Debt Snowball Plan" by paying only the minimums on your debts. Writing down your debts smallest to largest. Paying the smallest with all the extra money you can. After that one is done rolling that money and more into the second one. Thus making the snowball bigger. With that ones done, roll that one into the third. By then your making huge payments and accelerating your debt payoff plan.
  3. Finish your Emergency Fund by making it 3 to 6 months of expenses in savings.
  4. Invest 15% of your income in retirement accounts.
  5. Setup college funding for children with Educational Savings account invested in good Mutual Funds.
  6. Now work hard to pay off your home with large principle payments till is paid off.
  7. Build Wealth and Give.
As he describes his plan, snippets of real peoples testamonials are interspersed throughout the book. Included in the back of the book are budget, debt and planning forms for the reader to use. Dave Ramsey says its how he got to where he is today and it can work for you.  The book is written on a 6th grade level so its easy to understand by anyone. This book takes you by the hand and leads you down the road to success.
From my point of view,I am someone closer to retirement than just starting, I could see it working. Lots of books on personal finance look good on paper, but don't translate well to real life. In writing a book its hard to explain a plan that could apply to everyones situation. This one is so simple it could just work. I reccomend this book its a good read. I have enjoyed the testimonials I can see how they could be inspiring. What didn't I like about this book is baby step 2. Saving 3 to 6 months expenses in savings could be a waste. You could be using it to pay off your house or invest. He also says you should be getting an average of 12 % on your investments. Its doubtful anyone could average that. I wish he would reveal these great Mutual Funds that produce 12%. Always when reading books you take from it the best information. You apply it where appropriate.
There is something about Dave Ramsey's plan that is different from all the other plans. It's the way people talk about it. People will say "I'm on the Dave Ramsey plan." and  "Dave Ramsey got me out of debt". Do you ever hear anyone saying that about Suze Orman.

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  1. My take on Dave Ramsey is that he is very good on giving advice for steps 1-6, but not very good on step 7. Investors need to look to other "gurus" for advice in that area.

  2. I'm a Dave Ramsey fan but find that his message is pretty straight-forward. If only I could follow all 7 of his baby steps...


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