The Total Money Makeover: A Proven Plan for Financial Fitness

by Dave Ramsey

MYTH: Borrowing more than my home’s value is wise because I’ll restructure my debt. TRUTH: You are stuck in the house, which is really dumb.

MYTH: If no one used debt, our economy would collapse. TRUTH: Nope, it would prosper.

Debt Is Not a Tool Are you beginning to understand that debt is NOT a tool? This myth and all its little sub-myths have been spread far and wide. Always keep in mind the idea that if you tell a lie often enough, loud enough, and long enough, the myth becomes accepted as a fact. Repetition, volume, and longevity will twist and turn a myth, a lie, into a commonly accepted way of doing things. No more. Debt is not a tool; it is a method to make banks wealthy, not you. The borrower truly is slave to the lender. Your largest wealth-building asset is your income. When you tie up your income, you lose. When you invest your income, you become wealthy and can do anything you want. How much could you give every month, save every month, and spend every month if you had no payments? Your income is your greatest wealth-building tool, not debt. Your Total Money Makeover begins with a permanently changed view of the Debt Myths.

4 Money Myths: The (Non) Secrets of the Rich

Most Money Myths have to do with a lie about a shortcut or a lie about safety. We yearn to become healthy, wealthy, and wise with no effort and with no risk, but it will never happen. Why else is the lottery so successful in pulling in millions of dollars? Why do people stay in jobs they hate, seeking false security? The Total Money Makeover mentality is to live like no one else so later we can live like no one else. A price has to be paid, and there are no shortcuts. While no one goes looking for needless pain, risk, or sacrifice, when something sounds too good to be true, it is. The myths in this chapter are rooted in two basic problems. First is risk denial, thinking total safety is possible and likely. Second is easy wealth, or looking for the magic key to open the treasure chest.

Risk denial takes several forms in the world of money. Sometimes risk denial is a kind of laziness, when we don’t want to take the energy to realize that energy is needed to win.

someone who keeps a job he or she hates for fourteen years because the company is “secure,”

Money denial always involves an illusion, followed by disillusionment.

The second underlying problem is the quest for easy wealth.

Quick, easy money is one of the oldest lies, or myths, in the book of the human race. A shortcut, a microwave dinner, instant coffee, and lottery millionaires are things we wish would give us high quality, but they never do.

The secrets of the rich don’t exist, because the principles aren’t a secret. There is no magic key, and if you are looking for one, you’ve set yo...

Myth vs. Truth In addition to Debt Myths, we must dispel several other Money Myths as part of your Total Money Makeover. Most of these Money Myths are rooted in the problems we have already discussed: denial and/or a shortcut mentality. MYTH: Everything will be fine when I retire. I know I’m not saving yet, but it will be okay. TRUTH: The cavalry isn’t coming.

How can I put this delicately?

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...

We live in the land of plenty, and that has until recently lulled a large percentage of Americans to sleep, thi...

Things won’t be okay unless you make ...

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...

Personally, I don’t want to work at McDonald’s when I retire—unless it’s the one I own on St. Thoma...

MYTH: Gold is a good investment and will cover me if the economy collapses. TRUTH: Gold has a poor track record and isn’t used when an economy collapses.

Conventional wisdom intones, “Since the beginning of time, gold has been the standard that man has used to exchange goods and services.”

After hearing these pitches, people buy gold as an investment under the illusion of false security, or risk denial.

The truth is that gold is a lousy investment with a long track record of mediocrity.

And most of those returns are based on the doomsayer emotions brought on by 9/11 and the recession of 2008–09.

Gold will, at best, play a minor role, and the gold investor will be left with the sick feeling that real estate, canned soup, or knowledge would have been a better hedge against a failed economy.

MYTH: I can get rich quickly and easily if I join these groups, buy this DVD set, and work three hours a week. TRUTH: No one develops and makes a six-figure income on three hours a week.

received an e-mail recently from a gentleman offering me a 500-to-1 return on my money.

He didn’t have a lot of time in his busy schedule, but he would make time if I would meet with him. No thanks. I don’t know what this is, but I know it is a scam. I am not cynical, but I do know investments. Odds of 500 to 1 don’t come through, and I won’t waste my time discussing them or trying to find the flaw in the logic. It is a scam, period. Run as fast as you can to get away from these people!

As a younger man I often fell prey to this type of garbage. Later, I used to have meetings with these guys to try to find the flaw. Now I just shake my head—because I know he is heading for pain and loss, and so are his friends.

Have you seen the midnight infomercials about ordering the DVD set with the “secrets” so that “you too” can become wildly wealthy by buying nothing-down real estate or by learning t...

a stay-at-home mom

The stock market attracts the brightest business minds on the planet. These mega-nerds study, track, chart, eat, and breathe the stock market, and have for generations. Still, every other year a book or con artist comes out claiming to have “discovered” little-known keys, patterns, or trends that will “make you rich.”

how to get unbelievable returns.

A Cash Value policy

mutual funds.

Consumer Reports, Consumer Federation of America, Kiplinger’s Personal Finance, and Fortune magazine, so these are the real numbers. Additionally, a recent article in National Underwriter, The Industry Mouthpiece,

Then, when you are fifty-seven and the kids are grown and gone, the house is paid for, and you have $700,000 in mutual funds, you’ll become self-insured.

That means when your twenty-year term is up, you shouldn’t need life insurance at all—because with no kids to feed, no house payment, and $700,000, your spouse will just have to suffer through if you die without insurance.

MYTH: Playing the lottery and other forms of gambling will make you rich. TRUTH: The lottery is a tax on the poor and on people who can’t do math.

The lottery, or gambling of any kind, offers false hope, not a ticket out.

Total Money Makeover offers hope because it works. Remember, I have been broke twice in my life, but never poor; poor is a state of mind.

MYTH: Mobile homes, or trailers, will allow me to own something instead of renting, and that will help me become wealthy. TRUTH: Trailers go down in value rapidly, making your chances for wealth building less than if you had rented.

Trailers go down in value rapidly. People who buy a $25,000 double-wide home will in five years owe $22,000 on a trailer worth $8,000. Financially, it’s like living in your new car. If I were to suggest you invest $25,000 into a mutual fund with a proven track record of dropping to $8,000 in just five years, you would look at me as if I had lost my mind.

When The Total Money Makeover first released, we began a contest to see who could have the greatest change in financial position in a six-month period.

I would have taken everyone to the Bahamas, but unfortunately the contest only allowed me to take ten finalists.

While at Atlantis, we awarded one family—Chance and Kimberly Morrow and their five children—the $50,000 grand prize.

Since that time, the Morrows have continued their Total Money Makeover: Several years ago we were drowning with over $56,000 in credit-card debt and a $35,000 income. Our minimum payments were a whopping $1,200 each month! We met with a financial planner who told us it would take forty years to pay off our debt. We felt hopeless and continued to accumulate debt, using ...

Chance began listening to The Dave Ramsey Show, but it took a while for him to get me to reluctantly listen. I soon realized Dave had a plan that could work, and once w...

That Christmas we had planned on using Chance’s bonus check to buy a fancy tree, but when we realized the check was just under $1,000, we decided to put up our old scrawny Charlie Brown Chris...

We immediately stopped using all ten credit cards and set a goal to pay off $10,000...