The Total Money Makeover: A Proven Plan for Financial Fitness – Dave Ramsey

Here are the 3 most important steps to creating a total money makeover:

How do you give your money a total makeover? In his book Dave Ramsey, American businessman, radio host, television personality, and motivational speaker, breaks down the steps to giving your money a total makeover. First, get out of debt by paying off the smallest amounts first regardless of its interest rate. Second, create an accessible emergency fund with a minimum of $1,000 first and then build that up to enough for 3-6 months of expenses. Third, start saving 15% of your monthly income for retirement. Fourth, save for your kids’ college. Fifth, pay off your mortgage. This book is for those primarily who are struggling financially and feel inundated with paying off their debt. If you don’t have any debt and want to learn how to grow/invest your money, then this book is not for you. I would recommend I Will Teach You To Be Rich by Ramit Sethi as it’s a great book on personal finance for beginners. Here are some of the points to the book:

 

1. Becoming debt-free and financially independent isn’t as complicated as you think. It’s more so mindset and behavior than knowledge. The knowledge to create, save, and multiply money is necessary but the knowledge alone won’t get you there. Even multi-millionaire Grant Cardone has said the same thing. He said that wealth creation is 2 parts behavior and 1 part technical knowledge.I have a challenge for you. Are you ready to take on the guy or gal in your mirror? If you are, you are ready to win. I rediscovered God’s and Grandma’s simple way of handling money. Wealth building isn’t rocket science, which is a good thing for me (and probably you). Winning at money is 80 percent behavior and 20 percent head knowledge. What to do isn’t the problem; doing it is. Most of us know what to do, but we just don’t do it. If I can control the guy in the mirror, I can be skinny and rich. We will let other books work on the skinny, and I will help you with the rich part. No, there are no secrets, and yes, this will be very hard. Hey, if it were easy, every moron walking would be wealthy.

 

2. Live like no one else now, so you can later live like no one else. When we think of wealthy people, images of luxury sports cars, fancy houses, and fine jewelry pieces pop in to our minds for most people. However most millionaires don’t live that sort of lifestyle according to the book The Millionaire Next Door where 2 Ph. Ds. conducted an extensive study of millionaires within America. Sorry to be the bearer of bad news but becoming wealthy (for most people) isn’t sexy, it’s actually quite boring. “This plan works, but it will cost you. It will teach you to say new words, like ‘no.’ In short, your Total Money Makeover will be a personal money makeover where you learn this motto: IF YOU WILL LIVE LIKE NO ONE ELSE, LATER YOU CAN LIVE LIKE NO ONE ELSE. This is the motto of your Total Money Makeover. It’s my way of reminding you that if you will make the sacrifices now that most people aren’t willing to make, later on you will be able to live as those folks will never be able to live. You will notice the motto all through the book, even across the bottom of the pages. I’m sorry there isn’t an easier path to feature in the motto, but the good thing about this one is that it works. You can repeat the motto to yourself as you pass up a purchase in order to hit your goals. When you work late and are tired, you can say the motto to yourself. Of course, this isn’t a magic formula; I’m not into that. But it does remind you that you will win, and the payoff will be worth the cost.

 

3. Be cautious of who you get your financial advice from. Are you getting your advice from those who are broke? Are you getting financial advice from just those around you? Think about the quality of advice that you’re getting as it may be advice that have just been passed down/on to them without any logic/reason behind it. “John Maxwell tells of a study done on monkeys. A group of monkeys were locked in a room with a pole at the center. Some luscious, ripe bananas were placed on top of the pole. When a monkey would begin to climb the pole, the experimenters would knock him off with a blast of water from a fire hose. Each time a monkey would climb, off he would go, until all the monkeys had been knocked off repeatedly, thus learning that the climb was hopeless. The experimenters then observed that the other primates would pull down any monkey trying to climb. They replaced a single monkey with one who didn’t know the system. As soon as the new guy tried to climb, the others would pull him down and punish him for trying. One by one, each monkey was replaced and the scene repeated until there were no monkeys left in the room that had experienced the fire hose. Still, none of the new guys were allowed to climb. The other monkeys pulled them down. Not one monkey in the room knew why, but none were allowed to get the bananas. We aren’t monkeys, but sometimes we exhibit behavior that seems rather chimplike.

 

4. Debt is a double-edged sword. It can either serve or hurt you. According to Ramsey, never pay for anything with debt, even a place of dwelling. This is his personal approach to his finances as he said he’s gone bankrupt before because of it. I personally don’t agree with his position as I use debt (credit cards) to pay for things all the time. However, I ALWAYS pay it back in full AND before the payment date. I’ve never missed a payment or had to pay interest on any of my loans. In fact, I’ve even profited from the use of credit cards through the rewards given. I can understand Ramsey’s argument though. If you’re the type of person who has difficulty paying back loans on time then debt and credit cards AREN’T for you.As I said, when you play with snakes, you get bitten. I have heard all the bait put out there to lure the unsuspecting into the pit. A free hat, airline miles, brownie points back, free use of someone else’s money, a discount at the register—the list goes on to get you to sign up for a credit card. Have you ever asked why they work so hard to get you involved? The answer is that you lose and they win. You won’t wear the hat, and according to MSNBC.com, 90 percent of the airline miles are never redeemed. Next time you are in the store that gave you a discount for signing up for a card, you will have forgotten your cash, you’ll use the card, and the cycle begins. Maybe you think, I pay mine off, so I’m using their money. I’m winning. Wrong again. A study of credit card use at McDonald’s found that people spent 47 percent more when using credit instead of cash. It hurts when you spend cash; therefore you spend less. The big question is, what do millionaires do? They don’t get rich with free hats, brownie points, air miles, and the use of someone else’s money. What do broke people do? They use credit cards. An American Bankruptcy Institute study of bankruptcy filers reveals that 69 percent of filers say credit-card debt caused the bankruptcy. Broke people use credit cards; rich people don’t. I rest my case.

 

5. If you don’t plan and focus on your finances for retirement, no one else will. No one has your best interest at heart like you do. Don’t rely on the government or others to ensure that you’re financially stable when you retire. The government doesn’t always have your best interest at heart and to rely on them for that would be foolish in my opinion. How can I put this delicately? There is no shining knight headed your way on a white horse to save the day. Wake up! This is the real world where sad old people eat Alpo! Please don’t be under the illusion that this government, one that is so inept and dim-witted with money, is going to take great care of you in your golden years. That is your job! This is an emergency! The house is on fire! You have to save. You have to invest in your future. You won’t be FINE! Do you get the picture? We live in the land of plenty, and that has until recently lulled a large percentage of Americans to sleep, thinking everything will be “okay.” Things won’t be okay unless you make them that way. Your destiny and your dignity are up to you. You are in charge of your retirement. We’ll talk about how to take charge of it later in the book, but for now, you’d better be 100 percent convinced that this area deserves your full attention right now—not tomorrow or pretty soon. Personally, I don’t want to work at McDonald’s when I retire—unless it’s the one I own on St. Thomas in the U.S. Virgin Islands.

 

6. Just as Bill Gates has stated, “If you are born poor, it’s not your mistake. But if you die poor it’s your mistake.” You weren’t born with financial literacy and knowledge, no one was. We weren’t born with an innate ability to naturally drive, read, write, cook, and etc. We were obviously taught these skills. The same goes with financial literacy. If you want to become debt-free and financially independent, it requires learning about it. “If you made a mess of your money and/or haven’t gotten the best use from it, usually the reason is that you were never taught to do so. Ignorance doesn’t mean dumb; it means you have to learn how. I’m fairly intelligent. I have had multiple best-selling books, speak to millions on my radio and TV programs, and run a multimillion-dollar company, but if you asked me to work on your car, I would make a mess. I don’t know how; I’m ignorant in that area. Overcoming ignorance is easy. First, with no shame, admit that you are not a financial expert because you were never taught. Second, finish this book. Third, go on a lifetime quest to learn more about money. You don’t need to apply to Harvard to get an MBA with a specialization in finance; you don’t have to watch the financial channel instead of a great movie. You do need to read something about money at least once a year. You should occasionally attend a seminar about money. Your actions should show that you care about money by learning something about it. Sharon and I have a great marriage—not perfect, but great. Why? We read about marriage, we go to marriage retreat weekends, we date weekly, we sometimes take a Sunday school class on marriage, and we even meet once in a while with a friend who is a Christian marriage counselor. Do we do all these things because our marriage is weak? No, we do all these things to make our marriage great. We have a great marriage because we work at it, make it a priority, and seek knowledge on marriage. Great marriages don’t just happen. Wealth doesn’t just happen. You will spend some time and effort on getting rid of ignorance. Again, you do not need to become a financial geek; you just need to spend more time on your 401k options and your budget than you do picking out this year’s vacation.

 

By Ryan Timothy Lee

 

Thank you for reading! Please share this post with someone who you think will benefit from it. Also, join my Facebook group here, to receive exclusive content and updates on posts. If you have any book requests or recommendations, I’d love to hear them out so please let me know through an e-mail at bookstakeaway@gmail.com.

 

My rating:
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