Total+Money+Makeover

Total Money Makeover By: Alex Miller __Total Money Makeover__, by Dave Ramsey, is a self-help book about personal finance. I have been lucky enough to listen to Mr. Ramsey speak at my church, and this book is very similar to his speech. Overall, __Total Money Makeover__ was a fairly entertaining book, as Mr. Ramsey injects a good bit of humor in with his philosophies. More importantly however, Mr. Ramsey brings up some extremely useful points about managing one’s personal finances. One important detail that Ramsey explains is his belief that one should never take on ANY debt. Period. He greatly stresses this opinion throughout the entire book. It is important to understand this now in order to understand some of his other points. For the first few chapters of the book, Mr. Ramsey goes through the psychological aspect of personal finance. Basically, he believes that there a five “hurdles” that a person must move past in order to be successful in dealing with personal finances. First, one must understand that money is a dangerous asset. A person has to understand that money will never solve all one’s problems. If a person gets too wrapped up in their money, it can ruin many areas of one’s life, like relationships with other people. Second, a person must not deny that they have a problem with their finances. Denial only makes a person fall farther and farther into debt. Third, and this goes back to Mr. Ramsey’s philosophy about debt, there is a common belief that debt is a normal part of life. Ramsey opposes this viewpoint by saying that debt is never normal or healthy, and that one should eliminate their debt as quickly as possible. Debt is particularly dangerous for younger people who do not understand personal finance. The fourth “hurdle” is ignorance. The majority of people will simply follow the crowd when it comes to personal finances. A person has to figure out for him or herself how to manage their finances. One man’s solution may not be right for another. Fifth, Ramsey stresses the danger of “keeping up with the Joneses.” When a person tries to imitate their neighbors, they often wined up in debt because the do not have the financial assets to keep up with the Joneses. This last step is why the nation is currently in a recession. Next, Mr. Ramsey gives details on how to develop a successful plan about personal finances. First, it is essential to come up with a budget. It may seem like only large corporations have budgets, but a budget is helpful on the personal level because it helps a person stop himself or herself from falling into debt. Second, pay off all debts as fast as possible. Interest will kill a person, and it greatly limits what a person can do with their money. The only exception to this rule is a home loan. Third, establish a $1,000 emergency cash fund as quickly as possible. Again, this will help limit the chance of falling into debt in case an unpredicted situation arises in which extra money is needed. As time goes on, increase the amount in the emergency fund as income rises. Finally, Ramsey discusses how to prepare for the distant future. First, as predicted, pay off home loans as quickly as possible. He recommends a 15-year mortgage. Second, begin to save for college for children’s education. Third, start a retirement fund. Ramsey recommends that a person save 15% of their income for retirement. This part was pretty complicated, but he did say that a Roth IRA contribution was a good way to save up for retirement. The most important thing I learned from __Total Money Makeover__ was the principle of not getting into debt. Once a person is in debt, is gets exponentially harder to get out of debt. Life is so much easier if a person does not have to continuously pay off loans. Overall, I would say that Ramsey’s advice about personal finance is helpful and practical. He brings up some tips that are not mainstream, but that is not necessarily a bad thing, especially looking where mainstream finance advice has brought the economy.