Book report: “The Total Money Makeover”

What is the absolute best gift one could give for a Birthday/Christmas/Wedding present?

Is it a hand made trinket from your children? “Surprise, surprise, a coupon for some fries; that was really very thoughtful you guys“.

Is it some tool that is needed, but not in the affordable range?

Is it a lavish meal at a fancy restaurant?

I believe that the best gift you can give anyone is a financial education.

Now you’re probably thinking: “I don’t want to spend time in school or with a financial advisor“. And I agree, you don’t need to waste your time like that.

I’ve made several posts through the years regarding money, and capitalism in general. And most likely, you did not read any of them. I don’t blame you because I understand that talking about these topics is not an easy subject. More couples break up and/or get a divorce simply because of financial matters than any other reason.

Many people don’t like hearing good advice from people who are close to them; yet at the same time, they are willing to hear advice from a total stranger (even though it’s the exact same advice). It’s a paradox fueled by stubbornness that drives even the most educated folks crazy.

When I was growing up, I watched my own father spend so much money on “get rich quick” ideas yet sadly he never put any effort into any of them. Had he tried even ONE method, maybe my parents would not have lived paycheck-to-paycheck.

This post is NOT about “get rich quick schemes”. Read this sentence as many times as needed before going any further. Go ahead, I’ll wait….


Recently I did a book report on another “financial education” book, and quite frankly, it was a let-down. Today’s book report is not at all like that one.

What everyone needs are simple ideas that work. Dave Ramsey’s book “The Total Money Makeover” addresses this and he’s formed these steps perfectly.

  • Make a written monthly budget
  • Save up a $1,000 emergency fund
  • The debt snowball
  • Finish the emergency fund
  • Maximize retirement investing
  • College funding
  • Pay off the home mortgage
  • Build wealth like crazy

A written monthly budget – This needs to be established not just so that you know where your money is going, but also so you can tell it where to go at the beginning of the month. I’ve been using a spreadsheet to track our major expenses, but this method is flawed – it only shows where your money went AFTER it’s gone. It does not have any power to direct the money to the proper bills or accounts. Sure, a tracking sheet is better than nothing, but only by a small margin. You have to live off of less than you make, that way you stay out of debt and you can use the extra money to work FOR you. And if you’re married, you and your spouse have to agree on the budget, because it doesn’t work if you’re pulling in opposite directions.

Save up a $1,000 emergency fund – Because everyone needs to have a fund to handle life’s little emergencies. But don’t kid yourself and borrow from this fund, thinking that you’ll repay it later. You won’t. People are lazy and this fund is intended for true emergencies only.

The debt snowball – This is my favorite method of paying down debts, but I’ll admit, we’ve been doing it slightly different; and of course, we have slightly different (worse) results. In our case, my wife & I have been making slightly-larger-than-minimum payments on all of our debts. This method has gotten the debts under control, but is very slow at paying them *OFF*. I’m switching to Dave’s method of paying off the smallest debt first, then rolling that payment onto the next debt (in addition to that original payment), to pay off debts quickly. I’ve already looked at next month’s payments and we should be able to totally eliminate several of our smallest debts. This will go a long way in getting the snowball rolling. On average, this step takes about 2 years to complete.

Finish the emergency fund – After your debts are paid off, you need to fill up the emergency fund fully. Take the $1,000 that you already have and add to it until you have between 3 & 6 months worth of living expenses saved away.

Maximize retirement investing – Dave recommends putting aside at least 15% of your income towards retirement. He uses a combination of mutual funds that are a safe and easy way to earn 12% over the long term. My wife and I are very close to retirement age and currently have very little retirement money, so I’m not certain how effective this step will be for us. For younger folks (anything under age 50), I’d say this is a great strategy.

College funding – My wife’s children are grown and so is my son, so putting away for college seems like a step we can skip. Or we could use this step to set up college accounts for the grandchildren’s education.

Pay off the home mortgage – This is the really big one. Everyone assumes that having a home mortgage is just part of life, but it’s not. We (as consumers) have been conditioned to think this way by those who profit from us. Dave says a home mortgage is the only debt he won’t argue against, but he does have some simple guidelines: Get a 15 year loan and do not get a payment that is more than 25% of your monthly take-home income. I personally think after you’ve paid off your debts, you should “Debt Snowball” your home mortgage in the same manner. Why not?

Build wealth like crazy – Dave says there are only 3 reasons to build wealth: To have fun with it, to invest, and to give it away. We all like to have fun, so that’s a given. Investing your money (to make more money) is how you make your money work FOR you (instead of the other way around), and giving it away (directly and indirectly) helps others succeed in life.

Starting early in life is a very important step to gaining financial freedom, but that does not mean you can’t start now. The sooner you start, the easier it is. Using compound interest to your benefit works over time, so the more time you have, the better off these principles will work. Following the steps DOES WORK.

Now, truth be told, there are some down-sides to all of this.

  • You HAVE to be diligent. If you don’t stick to the program, it won’t work.
  • You will have NO LIFE for quite some time. This is easier to do when you are single.
  • If you have bad personal spending habits, you will HAVE to change them. No one wants change and change hurts, but it can be very beneficial.

This is only a summary of this book. If this subject interests you (and it should!), I’d suggest you get a copy of the book and give it a read. I went through my copy a 2nd time with a highlighter so I could quickly find the really important ideas at a glance.

Dave is a Christian and has inserted small Bible quotes along with the user testimonials throughout his book. I’m not a Christian but I am curious to hear what Dave (and Christians in general) might say about Deuteronomy 15: 1-6, which says :

15:1 At the end of every seven years thou shalt make a release.
15:2 And this is the manner of the release: Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the LORD's release.
15:3 Of a foreigner thou mayest exact it again: but that which is thine with thy brother thine hand shall release;
15:4 Save when there shall be no poor among you; for the LORD shall greatly bless thee in the land which the LORD thy God giveth thee for an inheritance to possess it:
15:5 Only if thou carefully hearken unto the voice of the LORD thy God, to observe to do all these commandments which I command thee this day.
15:6 For the LORD thy God blesseth thee, as he promised thee: and thou shalt lend unto many nations, but thou shalt not borrow; and thou shalt reign over many nations, but they shall not reign over thee.

It seems obvious (at least to me) that if debts were forgiven after 7 years, our entire outlook on money, debt, and personal finances would be changed completely. But that’s a discussion for another post….


About hemibill

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2 Responses to Book report: “The Total Money Makeover”

  1. hemibill says:

    And I’d like to add, *FOR THE RECORD*, that I have no aspirations of becoming “wealthy”. Not because I’m 55 and doubt I’ll ever be able to actually ‘retire’, NOT because I’m an anti-capitalist at heart, but simply because that’s NOT who I am”.

  2. Pingback: Money Matters – An Introduction to Personal Finance Management | Hemibill's Blog

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