The Total Money Makeover: A proven plan for Financial Fitness
An evolutionary book made by the author Dave Ramsey.
For those who do not know him, Dave Ramsey is a financial guru and a businessman. Known in the world of personal finance, he has his own TV show named after him “The Dave Ramsey Show” and his best selling books are the Total Money Makeover: Proven plan for financial fitness and the Total Money Makeover: Workbook.
But the book is not all about him. It is about people including him who got out of debt. Thanks to his get-out-of-debt strategy like the snowball method.
This book is a no-nonsense approach to dealing with your financial fitness with his proven plan.
Yes, you heard it right.
It will discuss the following small steps you can take to take control of your personal finance even if you are currently buried in debt.
The steps to a Total Money Makeover.
- Prepare a $1000 (equivalent to 50,000 Philippine Peso) emergency fund. This 50,000 php should be comparable to your 3 – 6 months expenses. You have to build this fund to end the cycle of debt. This fund will obviously be used only for an emergency like job loss, you own children moving back to your home, death of your family member, etc.
- Pay off your debt by using the snowball method. Snowball method was devised by Dave Ramsey. The method is writing down all your debts on a list and putting the smallest debt on top of your payment priorities. Eliminate debt one at a time little by little. This is the step where you need to make a lot of sacrifices. You have to take all measure to get rid of your debt like selling your stuff (luxury), taking on a part-time job, or working overtime at your current work. Do whatever takes to finish that debt off.
- Invest 15% of your gross income in retirement. You can start with 5% using an autopay system in your bank. You won’t even notice the difference.
- Save for college fund for your kids. Dave said that it would be wise to put your college fund in a growth stock mutual funds to profit more than a college plan from an insurance company.
- Pay off the house mortgage. This is the last debt you have to deal with because this is more likely the lowest interest debt you have. It may have low interest but debt is debt. And you can’t build wealth without clearing your debt.
- Build Wealth. At this point, you’re completely debt-free. You may need to start making your money work for you. By this time, you are financially mature.
- Have fun with your money.
Words of wisdom and teachings from Dave Ramsey.
“Personal finance is 80 % behavior and 20 % head knowledge” – This one is especially true in the Philippines. I’ve seen lots of corporate financial consultant and accountant here in the Philippines who can’t use their money wisely. They may be knowledgeable when it comes to financing but they are all talk and no action. They are probably high earners with no savings.
“Live like no one else now so later you can live like no one else” – Live like a poor man today so you can live like a rich man tomorrow.
Debts bring risk, not prosperity. You can’t leverage debt to build wealth.
You don’t need credit because you won’t use it. If you follow the total money makeover.
Credit card rewards aren’t worth it. You’ll end up spending more on unnecessary purchases and interest payment than you make back from rewards. No one ever became rich from credit card rewards.
Don’t fall for prepaid college education plans. You’ll make higher returns on mutual funds.
Buy a house for 100% down payment if that’s impossible get a 15 year fixed rate mortgage.
You don’t have to wait for retirement to do what you love. Get a job that you enjoy.
College education improves the quality of your adult life and career but it doesn’t ensure a job or success.
Avoid student loans. There’s a lot of scholarship program out there.
Don’t lend money to your friends. If you must give it to your friend instead. Loan ruins friendship.
The love of money is not the root of all evil. You have the duty to possess wealth.
The Total Money Makeover has a coach-like way narrative. It’s like you are a fat boy undergoing fat camp when you are reading this.
The only difference is it is coaching you to your financial fitness.
Overall, this book is a great read and it’s probably the only book you need to read in personal finance if you are not very fond of books. You can buy a copy at Fully Booked or buy online at Amazon.
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