Review: The Total Money Makeover

Dave Ramsey’s “The Total Money Makeover” is the defininitive get-out-of-debt book for thousands of people all over the country.

Let’s check out what this “proven plan for financial fitness” teaches us.

1 – The Total Money Makeover Challenge

This chapter is very much a call to look in the mirror. You won’t find any your-money-worries-are-someone-else’s fault type talk here. Dave even says “you are the problem with your money”. Here we are introduced to the book’s motto: “If you will live like no one else, later you can live like no else”.

2 – Denial: I’m Not that Out of Shape

Open your eyes. Many people live their lives pretending nothing is wrong. They have nice homes, cars, and other Stuff but all of it belongs to the bank and credit card companies. Ramsey presents a few stories of people who “woke up” and realized they needed to make a change: live debt free.

3 – Debt Myths: Debt is (Not) a Tool

Understand that debt is not just “the ways things are”. Americans’ love affair with debt isn’t some natural instinct we’re all born with. Companies and banks have changed the status quo and made us think that debt is necessary to live a good life. That wasn’t an accident.

My favorite part of this chapter was Dave taking on this myth: “Car payments are a way of life; you’ll always have one.” I’ve heard a few adults in my own life say this and I always shake my head. The only reason why you’ll always have a car payment is if you’re suffering from the disease known as caring what other people think and you don’t have the self-control to em save em money.

4 – Money Myths: The (Non) Secrets of the Rich

This chapter has a bunch of myths that people often believe will make them rich or clear their debt. Get-rich-quick-schemes don’t work. There is no secret way to building wealth – that takes work and time.

5 – Two More Hurdles: Ignorance and Keeping Up with the Joneses

Ignorance – no one is born knowing how to manage their finances. But that’s no excuse not to start your Total Money Makeover. If you value money, then you need to take steps to learn about it: read a book or attend a seminar Dave suggests.

Keeping Up with the Joneses – stop trying to impress people with things you can’t afford. “When you buy a big pile of stuff with no money and lots of debt, you are a financial fake.” You must make the radical change of simply not wanting approval from others. The Joneses are probably broke.

Baby Steps

People familiar with Dave Ramsey know he provides a 7 step plan that gets you debt free and financially secure. The next few chapters detail these steps.

6 – Save $1,000 Fast: Walk Before You Run

“It is going to rain. You need a rainy-day fund.” This step is simple: save up $1,000 for when shit hits the fan. Your car’s radiator bites the dust. Your job is terminated. Life happens. Be ready for it. $1,000 isn’t going to cover every major expense obviously, but it’ll help you avoid turning to Visa when a crisis hits.

7 – The Debt Snowball: Lose Weight Fast, Really

This step is where you actually get out of debt. Dave tells us to list all of ours debts from smallest balance to largest balance without worrying about interest rates (besides the house). Then, you pay the minimum amount required on all debts except the smallest. On the smallest, you throw everything you have at it. Find $20 in the parking lot? It goes to your smallest debt. Once you’ve paid off that debt, you send the money you were paying on Debt 1 to Debt 2 in addition to it’s minimum payment. Every time you pay off a debt, the “snowball” grows and soon you’re sending in huge payments.

8 – Finish the Emergency Fund: Kick Murphy Out

While having $1,000 in the bank is nice, it’s not going to cover a really big emergency like an extended job loss. Dave recommends that you keep enough money in a liquid account (like savings) to cover 3-6 months of living expenses. This prevents you from ever going into debt for when life happens.

9 – Maximize Retirement Investing: Be Financially Healthy for Life

“Invest 15% of your income in retirement.” This is a general rule-of-thumb that will allow you to have a secure and nice retirement, but not so much that you can’t get the house paid off quickly. For young people, there is some important advice here: do not expect Social Security. If it still exists, we can consider it a bonus and hire a maid or something.

10 – College Funding: Make Sure the Kids Are Fit Too

Dave starts this chapter out with a thought I wish more people would subscribe to: “College degrees do not ensure wealth”. This is important because too many students and parents are taking on enormous student loans, expecting a kick-ass job to come along five minutes after the diploma’s are handed out.

But he still values a college education, just not enough to go into debt for. He recommends parents use an Educational Savings Account (ESA) to fund their children’s college expenses. There’s no specific percentage to save, but he does include a chart so you can figure out how much you’ll need based on how old your child is and how much you want them to have.

11 – Pay Off the Home Mortgage: Be Ultrafit

Now that you’re debt free (besides the house), secure with an emergency fund, and saving for retirement and college, it’s time to eliminate the mortgage. Dave is a fan of 15 year mortgages and likens 30 year mortgages as “for people who enjoy slavery”. If you already have 30 year with a good interest rate, he suggests paying like you have a 15 and includes a worksheet to figure out what your monthly payment should be.

12 – Build Wealth Like Crazy: Arnold Schwarzedollar, Mr. Universe of Money

At this point in the plan, we are completely debt free. This chapter reminds us to actually do something with our money. Now is the time to have fun, invest to build crazy wealth, and give.

13 – Live Like No One Else

The last chapter is simply a wrap up with a warning against materialism. Remember that wealth isn’t about buying expensive toys all of the time. It’s about knowing what enough is. Finally, Dave tells us that he wants us to have hope that we can change our lives for the better by becoming financially secure and wealthy.

Buy or Don’t Buy The Total Money Makeover?

The Total Money Makeover is a good book. It provides a clear cut plan for getting out of debt and simple guidelines to follow. There’s no doubt in my mind that Dave Ramsey has gotten more people out of debt than any other person on the planet.

But the reason why Dave Ramsey and The Total Money Makeover have been so successful is simple: personality. Listen to Dave’s radio show and he comes across as a genuinely wise and nice guy. The Total Money Makeover carries that voice over.

But this book isn’t for everyone. If you aren’t in debt, then you’ll probably have a hard time buying into Dave’s strategy. As a high school senior, the stories from regular people who’ve had their The Total Money Makeover were the best part. They give me hope that if someone can pay down $118,000 in debt, then I should have no problem paying off my (projected) $30,000 student loan bill.

Finally, there are few Christian messages sprinkled throughout the book. This might bother you. I’m not a very religious person and I didn’t have any problems with it. There’s really no preaching or commanding.