Book Review: The Total Money Makeover
Sep 22, 2019
It was inevitable that one day I would write a blog post about Dave Ramsey, but it has taken me over three years to get around to it. This month I finally read his book The Total Money Makeover: A Proven Plan for Financial Fitness
When this blog post arrives in your inbox it will elicit a certain response and that will determine if you even read this blog post or not. I predict that you will fall into one of three categories:
Who is Dave? I might read this; could be interesting!
Oh, yes, I vaguely know who he is, I’m already on a journey to be better with my money and I’m hashing out my own plan - I might learn something here?
Meh! Next!
So, I’ll cut to the chase.
Dave Ramsey is a big deal in the personal finance space in America. He has a huge company called Ramsey Solutions and within it, he runs a radio show/podcast/Youtube, hosts live events, writes books, runs financial classes and has several offshoots of all of these with various other ‘Ramsey Personalities” who talk on all sorts of money related topics. They are based in Tennessee and employ hundreds of people with their primary focus to teach people to win with money. He hates debt and he learned the pitfalls of it the hard way.
In his mid 20’s Dave had used purchasing property to grow his net worth to over $1 million dollars by acquiring real estate worth $4 million dollars. The difference between these two numbers was a whole heap of debt and that is what came back to bite him and he was forced into bankruptcy, giving him a massive wake up call. With a wife and a young family to support he was at rock bottom.
This sent him on a mission of learning, to discover everything he could about money, how to earn it and most of all how to keep it and as he acquired this knowledge he began to share it and to teach others to avoid the mistakes that he and many others had made.
He created a simple plan which he called The 7 Baby Steps to help others change the behaviours that were keeping them poor and to help them get out of debt and stay out of debt, forever. He literally started from nothing and today he teaches “common sense for your dollars and cents” and is known to say that he “gives the same advice your grandma would give”.
The reason that I said that you will be either 1, 2 or 3 is that:
Number 1’s
If you are struggling financially and just can’t seem to find your feet and are always living paycheque to paycheque, when you stumble upon Dave Ramsey it’s a real “ah-ha” moment for many. I have spoken to countless people who reference him as one of their first steps in the right direction. I’ve also spoken with countless people who have been working their way through a get out of debt process that they have created for themselves - only to have someone say “oh, you are following the Dave Ramsey 7 Baby Steps”. They hadn’t been… but he is an excellent starting point for so many.
Number 2’s
His name might not be new to you and you may have started to really pay attention to your finances already and are making much better decisions. But you are still on a quest for information to add to your arsenal so anytime someone mentions something PF/Investing related, your ears prick up. You might finally think that he is worth checking out because his name keeps coming up! He will save you having to reinvent the wheel and work things out for yourself.
Number 3’s
Yep, you know who he is, have probably listened to or read some of his content a few years back and are now debt-free and investing. You have learned how to control money, not have it control you, have put debt behind you and are getting on with life. What he has to say is still great advice for others, just not so relevant to you anymore… Some of you may also just find his brash American approach just a little OTT.
Personally, I’m in the last group here, BUT because I think about PF 24/7 I still tune in to his podcast probably once a fortnight to hear him coaching people who have phoned in to ask his advice. He started a radio show back in 1992 which has transformed into a YouTube show and the podcast. I listen to the podcast because they are shorter and I can listen while on the move.
I think he is good because the advice he gives is always basic, consistent and black and white. He has heard any and all financial problem you and I could ever have and he has a logical answer to each (which often involves him telling people to sell the vehicle they can’t afford), using principles he has taken from “God and your grandmother”. Plus he is good at explaining the math in really simple terms. He uses a lot of common sense and although, especially as Kiwi’s, we think that we have common sense in spades, my observation is that many of us don’t anymore, so he offers a pragmatic plan to get you handling your money in a common-sense way again.
The Book
This book I’ve just read is for those who are looking to put a structured plan in place, who want to have a Total Money Makeover. So if what you have been doing just ain’t working for you, then give this a read. I get emails from people who are just so lost that they don’t know where to begin, this book is a good place to begin. The first half of the book sets you up to implement The 7 Baby Steps and covers off all the arguments you may have with yourself (or that your mates might have with you) about what you may believe to be true about how to handle money. It gets all the objections out of the way nice and early. Throughout the book, there are short stories from people who have used this plan to win with money (geez, I’m talking like Dave now). These stories of the people who have followed his plan also illustrate that it has to be a process that the entire family buys into, otherwise it just won’t work. The second half gives you the steps to follow to get out of debt.
And those steps are:
Baby Step One
Save $1,000 cash as a starter emergency fund. Having this money set aside will cover emergencies which will inevitably come along and it will prevent you from going further into debt
Baby Step Two
Pay off all debt (except the house) using the debt snowball. We are talking credit cards, store cards, student loans, Afterpay and money your Mum loaned you. List your debts smallest to largest. Make minimum payments on all but the smallest. Start aggressively paying off the smallest debt, when it is done then use that payment and move on to the next one - and the next one - and the next one…
Baby Step Three
With the money that you were throwing at your debt now finish the emergency fund by increasing it up to 3-6 months of living expenses
Baby Step Four
Invest 15% of your income into retirement
Baby Step Five
Save for kids college (not something we Kiwi’s typically tend to do, but worth considering given our rising levels of student debt)
Baby Step Six
Pay off your home mortgage early. This is the step that can take the longest but this is what sits between you and the freedom of having no debt
Baby Step Seven
Build Wealth - with no more payments this happens quickly and you can now really get into investing and building wealth to benefit your own whanau and others in your community. “It’s time to live and give like no one else”!
Although American based the steps are translatable to any country in the world. But there are a couple of differences. I spoke with someone recently for my podcast who was on an aggressive debt payoff plan, paying off $94,000 in consumer debt and she thought that a $1,500 emergency fund would be better in the first instance. Also, when you get to Step Four, retirement, the funds they use will make no sense to us here, but you just have to use...common sense...to work out the New Zealand equivalents.
Also, when you get to Baby Step Six we have a bigger mountain to climb here in NZ, our house prices and the attached mortgage are just so much higher these days. If you listen to his podcast people are in a race to pay off a home which is worth $150,000. Oh, we wish!!! So, you need to brace yourself and realise that following his plan to become debt-free (or ANY plan to become debt-free) will work, BUT IT TAKES TIME, years and years of time. That’s why having a goal to aim for is so very important, it keeps you focussed and on track because otherwise, your resolve will wane over time and you sink back into the trap of being in debt for your entire adult life.
Via my blog, I’m in contact with a lot of people who are focused and on fire to clear consumer debt and mortgage debt and it’s a long haul to the finish line. But each of them, many without even knowing they are applying the 7 Baby Steps to their journey, do become debt-free. It works. One of them even phoned into his show and did a Debt-Free Scream - now THAT is pretty cool! The First Ever Debt-Free Scream From New Zealand
These following points are not really in his book but I do think they are worth noting because many people are put off by Dave Ramsey because of his religious beliefs (he is a Christian), the fact he is an avid gun collector (I’m still trying to work out how those two sit side by side?!), he is just so VERY American and you do get to hear his political views from time to time, but as I say, they are not really in this book but you will hear them in his podcast. But I have to be honest that I’ve heard enough of what he has to say now that is good guidance and advice that I can overlook the other aspects of his character that don’t sit as well with me.
Another downside is the fact that you have to READ a book and I know that is a turnoff to many people. A way around this is to get your partner/mother/sister/friend who hopefully DOES like to read to read it first and give you the bullet points, or you can also get it as an audiobook. And I would also say “boo hoo” if you don’t like to read because if you want to get out of debt and set yourself up financially and give yourself freedom, sometimes you just have to “lick that slimy toad” and do something that you really don’t want to do in order to get ahead. If you believe that what you have been doing to date has not been working for you, maybe it’s time to try a different approach? As Dave says in his book “you can wander your way into debt, you can’t wander your way out. You have to get really mad, really intense, and really focused to get out of debt”.
So, as far as my thoughts on this book go, it took me forever to get around to reading it, but I think that this is very much worth checking out if you are in a position of ‘feeling sick and tired of being sick and tired”, if what you are doing with your money is simply not working and you feel stressed out and often wonder if this is your lot in life, then this will show you that it’s in your own control to change your own situation. He has literally helped millions of people get out of debt, his plan clearly does work and it might just work for you too. And I would love to hear you do a Debt-Free Scream on his show!
Happy Saving!
Ruth
BOOK GIVEAWAY:
The Total Money Makeover
The BOOK GIVEAWAY of The Total Money Makeover by Dave Ramsey was a great success and congratulations to our winner who won a copy of the book. Thank you to all my subscribers who entered.
