The Total Money Makeover: A Proven Plan for Financial Fitness

by Dave Ramsey

I am not saying you will never drive a brand-new car, but until you have so much money you can lose big bucks and not notice, you can’t afford the luxury.

The car dealer will tell you that you are “buying someone else’s problems.” Then wh...

In fact, there’s a good chance you are buying a car that came off a lease.

My last two car purchases were one- and two-year lease turn-ins with low miles.

If you understand what I am saying about this huge loss in value, you now realize that 0 percent int...

While the money to borrow isn’t technically costing you, you are losing so much in value that...

So even though the interest rate is attractive, pass it up because the whole transaction still means throwing $100 bills out the window each week.

Some people want to buy a new car for the warranty. If you lose $17,000 of value over four years, on average you have paid too much for a warranty. You could have completely rebuilt the car twice for $17,000! Also, keep in mind that most manufacturers’ warranties will still cover you when buying a slightly used car.

Of course, when you begin your Total Money Makeover, you may have an old beater, but the goal is to avoid the temptation of the 0 percent inter...

(Still want to buy a new car? Sure they look great, smell great, and drive great—but the month-after-month and year-after-year pa...

MYTH: You should get a credit card to build your credit. TRUTH: You won’t use credit with your Total Money Makeover, except maybe for a mortgage, and you don’t need a credit card for that.

The best myth is the “build your credit” myth. Bankers, car dealers, and unknowledgeable mortgage lenders have told America for years to “build your credit.” This myth means we have to get debt so we can get more debt because debt is how we get stuff.

Those of us who have had a Total Money Makeover have found that cash buys stuff better than debt.

But if I were selling debt, as the banker is, I also would tell you to get debt to get more deb...

Yes, you will need to “build your credit” by borrowing and repaying debt in a timely fashion if you want to live a life of credit cards, s...

The one question we must answer is, “How do I get ...

Later, I will introduce you to the 100-percent-down plan, or if you must, how to settle for a fift...

take-home pay

If one bank tells you they can’t do it, keep looking. You can get a mortgage if you have lived right. Let me define “lived right.”

down payment,

So if you quit borrowing money you will lose your FICO score. It is not a score that says you are winning with money or that you have a million dollars; it mathematically says you LOVE DEBT.

Please don’t brag about your FICO score; that makes you look like you love playing kissy face with some bank. Dumb, dumb, dumb.

MYTH: You need a credit card to rent a car, check into a hotel, or buy online. TRUTH: A debit card will do all that.

Remember, there is one thing the debit card won’t do: get you into debt.

MYTH: If you pay off your credit card every month, you get the free use of someone else’s money. TRUTH: CardTrak says that 60 percent of people don’t pay off their credit cards every month.

As I said, when you play with snakes, you get bitten.

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.

Maybe you think, I pay mine off, so I’m using their money. I’m winning.

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 y...

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 ...

Broke people use credit cards; rich people don’t. I rest my case.

We destroyed the credit cards and set up a plan of attack following the Baby Steps as outlined in The Total Money Makeover.

MYTH: Make sure your teenager gets a credit card so he or she will learn to be responsible with money. TRUTH: Getting a credit card for your teenager is an excellent way to teach him or her to be financially irresponsible. That’s why teens are now the number one target of credit-card companies.

American teens view themselves as adults if they have a credit card, a cell phone, and a driver’s license. Sadly, none of these “accomplishments” are in any way associated with real adulthood.

You are not teaching your sixteen-year-old child to spend responsibly when you give him a credit card any more than you are teaching gun responsibility by letting him sleep with a loaded automatic weapon with the safety off.

In both cases, you as a parent are ...

I’ve gone from being completely ignorant about my money to becoming debt-free and trying to help others gain financial peace!

David (age 30) and Tayelor (age 25) Jarrett Technical Support Rep/Small Business Owner; Clinical Assistant

Vince called my radio show with a problem that has become a trend. Vince signed up for multiple cards during his sophomore year at college to get the free campus T-shirt. He wasn’t going to use the cards unless there was an emergency, but there was an “emergency” every week, and soon he was $15,000 in debt. He couldn’t make the payments, so he quit school to get a job. The problem was, without his degree, his earnings were minimal.

The reason why lenders market so aggressively to teens is brand loyalty. The lenders’ studies have found that we consumers are very loyal to the first bank that certifies our adulthood by issuing us plastic.

They clutch it like it is an old friend. Brand loyalty is real.

The results have been staggering. Teens latch on to The Total Money Makeover before they need one.

A recent graduate of the program, fifteen-year-old Chelsea, said, “I think this class has totally changed my life. Whenever I see someone using a credit card, I think, Whoa! How could they do that to their life? I always thought you had to have credit-card payments, house payments, and car payments. Now I realize you don’t have to.” Very cool, Chelsea.

Kid Branding You have to start teaching kids early because “kid branding” is now commonplace. When my son was eleven years old, I looked at the back of a box of Raisin Bran and read “Visa . . . the official card of Whoville . . . from How the Gri...

Why are these companies selling to our small children? Kid branding intends to influence card choices later in life. This is immoral.

Again, we decided to combat kid branding with our own antidote. Financial Peace Jr. is a collection of aids to help parents teach their children (ages three to twelve) about money. Of course, you can teach the principles without the kit, but either way, they need to learn them. In my home, we used the same techniques to teach our kids four things to do with money. We wanted to create teachable moments so that the kid branding would be counteracted by common sense. We taught our kids to work—not like being at some boot camp, but that doing chores equals money.

Our children put their newly earned money in envelopes labeled Save, Spend, and Give. When a child learns to work, save, spend, and give under a mature parent’s direction, the child can avoid the messages that say a credit card equals prosperity.

MYTH: Debt consolidation saves interest, and you have one smaller payment. TRUTH: Debt consolidation is dangerous because you treat only the symptom.

Larry Burkett said debt is not the problem; it is the symptom. I feel debt is the symptom of overspending and undersaving.