Total Money Makeover

The Author

Dave Ramsey is a best-selling author, financial expert and radio host of the Dave Ramsey show.

The Book

I recently had the pleasure of reading Dave Ramsey's The Total Money Makeover Workbook. I found it to be a very enjoyable read, infact I read it in just two sittings. For me to even finsh a book is rare so this speaks volumes for how good this book is.

It's a short book with just 245 pages but it's full of Dave Ramsey's financial wisdom and insight. Dave will change the way you think about money and give you a sensible plan to achieve true financial fitness.

Dave's thought-provoking questionaires gave me a completely new perspective into my own personal finances. I was so inspired by some of the first-hand stories in the book that immediately after reading it I started putting into action his patented 7 baby steps plan.

The Total Money Makeover is an absolute must for anyone looking to get out of debt and build personal wealth. I highly recommend this book.

My take on Dave Ramsey's 7 baby steps

1 Save $1000 - This is intended to be the start of the all important but often missed emergency fund. A thousand dollars isn't too difficult for most people to put aside and will cover most unexpected emergencies that may come up.

2 Debt Snowball - Get out of debt using Dave's Snowball method. This method is simple and effective, basically you list all your debts from smallest to largest balances. You focus on paying as much as you can on the smallest balance while just paying the minimum on all your other debts. As you pay off each debt the payment toward the next debt gets larger and larger and the debts get paid faster and faster - hence the name, snowball method.

This is one point where I disagree with Dave somewhat. Personally I think the Snowball method is a good strategy if you cannot transfer all your balance to a credit card with a low introductory rate. Putting all your debts on one card at a super low rate will save you a ton of money in interest and eliminate the minimum payments at the same time. However, there are a two things to keep in mind before transferring debt to credit card.

1) Make sure the term is long enough to give you enough time to pay off your debt as the rate goes way up once the introductory term is over (usually between 6mths to a year).

2) The introductory rate goes up to normal rates or higher if payments are missed or late, even if the introductory term isn't over yet.

3 Finish your emergency fund - You started the emergency fund in Baby Step 1, build up your fund to equal between 3-6 months of living expenses. Dave also says emphasizes the importance of leaving this fund alone. Is it only as intended for emergencies only.

4 Maximize retirement investing - In this section Dave shows you how and what to invest your money in and how to diversify your investment portfolio for maximum growth and stability.

5 College funding -This step is pretty self explanatory, setting up a college fund for your children. I couldn't agree more with Dave on this point - what an amazing gift it is to be able to pay for your kids education. Saving them from starting out with a huge burden of debt.

6 Pay off the home mortgage -This is another point I disagree with Dave on. Personally, I'd rather watch my money grow in a mutual fund and let my mortgage amortization run its course. While I do see some benefit to paying the mortgage early - the interest you would save would be very substantial but not as substantial as what you would have if you invested that extra cash in mutual fund all that time.

7 Build wealth like crazy - Graduating for simple registered investments like RRSP's Dave shows you how to invest in real estate and other more advanced investments.

Summary

Though I disagree with Dave on a few points involving the 7 steps, I don't doubt what he suggests will work and has worked for countless others. For me, it's about adapting the steps in a way that suits and works best for me. I think overall the Total Money Makeover is an excellent starting point to become financial fit and flex those money muscles.

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