If you’ve never heard of Dave Ramsey, then I’m happy to introduce you to his teachings. Dave Ramsey is a financial expert who specializes in helping people get out of debt. If only I had heard of Dave Ramsey prior to entering law school, I probably would not have taken out so many student loans! The The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness (affiliate link) is the follow up to Financial Peace. I have also read Financial Peace, but I found The Total Money Makeover to be a more succinct money “know-how” book when FPU is more of a “why” with a some “know-how.” There is a new “Classic” edition of the book, but I re-read my copy, which is the “Revised and Updated” edition pictured to the left.
In The Total Money Makeover, Dave Ramsey describes the 7 baby steps to take in order to achieve financial success. You don’t have to read the book to learn about the baby steps. He lists them here for free on his website: The Seven Baby Steps and I have listed them below.
The Baby Steps
- Baby Step One – $1000 emergency fund
- Baby Step Two – Pay off all debt using the Debt Snowball
- Baby Step Three – 3 to 6 months of living expenses in savings
- Baby Step Four – Invest 15% of household income into Roth IRAs and pre-tax retirement
- Baby Step Five – College funding for children
- Baby Step Six – Pay off your house early
- Baby Step Seven – Build wealth and give!
Dave Ramsey provides the reasoning behind each step. For example, the $1000 emergency fund is a barrier “between you and Murphy,” or a way to keep you from taking on new debt in case of “emergencies” that pop up as you are working your way out of debt. The Debt Snowball is recommended in Baby Step 2. Some financial experts recommend paying your debt off from the highest interest rate to the lowest. With the Debt Snowball, you pay your debts off smallest to largest, so that you have a number of small victories along the way. While paying off the smallest debt, you pay the minimum on your larger debts, then roll the payment over into the next largest debt for a snowball effect.
I am currently paying off my own debts using the Dave Ramsey method. It certainly works, but I have some reservations. For people who have very large debts, it would be better to have more than $1000 saved simply because it may take many years for you to work through your debts. Now, the truth is that most people don’t even have that much saved, so saving the $1000 first is better than nothing. But, for others, it can be quite scary to have only $1000 in savings. I have been following Dave Ramsey for a number of years and my understanding is that, like all things, you should evaluate your particular situation and make adjustments accordingly. For example, I am the sole breadwinner in my home and my son was ill last year. For that reason, I plan to beef up my baby emergency fund to more than $1000.
The other issue that I have with the Debt Snowball method is that I’ve found it to be hard to roll over the minimum payment. Once the small debt is paid off, I tend to want to put that money (the payment I was making toward that debt) into my budget instead of rolling it into the next debt. This isn’t a problem with the Debt Snowball concept, but more of a problem with discipline. Throughout the book, Dave encourages readers to become gazelle intense, his way of describing being so focused and motivated that you will work your way out of debt.
As far as Dave Ramsey’s writing style, this book is written on a level that makes it easy for a wide variety of readers to comprehend. In other words, there aren’t any deep and complex financial concepts described and the average avid reader could finish this book in a day. Some parts are a bit redundant, but I think that is because Dave Ramsey is trying to drive certain points home. I would describe his approach to teaching people about debt as a sort of tough love. He tends to describe financial mistakes as being “stupid” and he makes no excuses for using debt. He does not promote credit cards, he does not support the use of student loans, and he never describes debt as a “tool.” If you are looking for a money book that will teach you how to get rich quick or how to use credit cards for “rewards,” this is not the book for you. If you are sick and tired of being in debt and need a real plan that has been followed by thousands, if not millions of people, then I would recommend Total Money Makeover. Once you are out of debt, Dave Ramsey focuses on helping you develop a fully-funded emergency fund and learning to invest. The last step is to live and give like no one else.
Once you’ve read the book, you will find a vast support network across the internet to help you work through the plan. Dave Ramsey has his own forum (it requires a subscription fee), and there are “Dave Ramsey” sub-forums on discussion boards like Frugal Village. You can also listen to Dave Ramsey’s program for free on his iHeartRadio station, and you can catch the show’s highlights on YouTube. Be forewarned, he does talk about politics from time to time and he is a devoted Christian, so Christian themes run throughout all of his programs, including his books and his radio show.
Dave Ramsey is probably the most well-known financial expert and followers of his financial teachings tend to become very devoted. Whether you agree with his methods or not, the results speak for themselves. He has had a countless number of “baby steppers” become debt free. If you are ready to make a change, a simple book like Total Money Makeover can be life changing. With the new year beginning tomorrow, now would be a great time to get started on your Total Money Makeover! How much debt can you pay off one year from now? The couple below followed Dave Ramsey’s teachings on life and money and successfully paid off $79,000 in 23 months! That’s well worth the $10.00 investment in the book. Happy New Year!
Click to purchase using my Amazon affiliate link: The The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness