The Total Money Makeover: A Proven Plan for Financial Fitness

by Dave Ramsey

Money denial always involves an illusion, followed by disillusionment.

Quick, easy money is one of the oldest lies, or myths, in the book of the human race.

coffee, and lottery millionaires are things we wish would give us high quality, but they never

A Cash Value policy is an insurance product that packages insurance and savings together.

pennies on the dollar,

In other words, by prepaying, you avoid the price increases, and that is your return.

Prepaying items is like investing at the item’s inflation rate. For

it is wise to preplan, not to prepay.

Dr. Covey says one of the habits of highly effective people is that they begin with the end in mind.

“A budget is people telling their money where to go instead of wondering where it went.”

everyone must budget, plan retirement, and do estate planning—everyone.

Turning all your problems over to someone else treats the symptom, not the problem.

It’s easy to overspend when you don’t have a clear boundary line. The budget tells you what that line is for each category, but when your gas money and grocery money and entertainment money are all sitting in one big lump in your bank account, one category can plow right past the line without you knowing.

Swiping a piece of plastic doesn’t register in your brain the same way cash does. When you actually lay a couple of Benjamins on the counter, you know you’re spending money! That’s why using the envelope system will help you change your spending habits. Cash is king!

“A good man leaves an inheritance to his children’s children” (Prov.

no one is born with the knowledge of how to handle money,

get our budget together, which certainly helped us to get organized with our money, but it was also our desire to live a debt-free lifestyle that allowed us to succeed. Next we had to work toward saving for an Emergency Fund and paying off our debts using the Debt Snowball. Baby Step Three, the fully funded emergency fund, was the hardest step for us.

What you don’t know about money will make you broke and keep you broke.

The change will be painful, but the result will be worth it.

You must set up a budget, a written budget, every month.

We needed to make sure we had our money going toward certain debts while cutting back on WANTS.

Our biggest sacrifice has been having to wait. We wait on a lot of things now until we actually have the money.

According to Brian Tracy, a study of Harvard graduates found that after two years, the 3 percent who had written goals achieved more financially than the other 97 percent combined! This is not a textbook on money; this

Give every dollar of your income a name before the month begins, which is called a zero-based budget.

Income minus outgo equals zero every month. Look at this month’s income and this month’s bills, savings, and debts, and match them up until you have given every income dollar an outgo name.

prioritized spending plan,

This process of midcourse adjustment doesn’t have to be a big hairy deal, but both guidelines must be met. You still zero out so you don’t blow the budget, and you get spousal approval so you haven’t broken the spit pact. DAVE RANTS . . .

Nerd and the Free Spirit. The Nerd has fun with numbers and feels like it gives them control. They feel like they are taking care of their loved ones. But the Free Spirit doesn’t feel cared for; they feel controlled! They don’t want anything to do with the numbers, and they tend to “forget” about the budget. Guess what? Neither the

There is no intellectual exercise where you can academically work your way into wealth; you have to get fired up.

We have learned that getting a hold on your attitude is the number one factor in being victorious over your finances.

The first major Baby Step to your Total Money Makeover is to begin the emergency fund. A small start is to save $1,000 in cash fast! If you have a household income under $20,000 per year, use $500 for your beginner fund. Those who earn more than $20,000 should get together $1,000 fast! Stop everything and focus. Since I hate debt so much, people often ask why we don’t start

Twist and wring out the budget, work extra hours, sell something, or have a garage sale, but quickly get your $1,000. Most

When you get the $1,000, hide it. You can’t keep the money handy because it will get spent.

but you will impulse-buy something if the money is easily accessible.

have had to learn to protect myself from me.

If this happens, stop Step Two and return to Step One until the full $1,000 is replenished. Once your beginner emergency fund is funded again, you can return to Step Two. Otherwise, you will gradually do away with this small buffer and be back to old habits of borrowing to cover real emergencies. I know some of you think this step is very simplistic.

most powerful wealth-building tool is your income.

To build wealth, YOU will have to regain control of your income.

Debt Snowball.

The Debt Snowball method requires you to list all your debts in order of smallest payoff balance to largest. List all your debts except your home;

you need quick wins to get fired up. And getting fired up is super-important.

After you list the debts smallest to largest, pay the minimum payment to stay current on all the debts except the smallest. Every dollar you can find from anywhere in your budget goes toward the smallest debt until it is paid. Once the smallest is paid, the payment from that debt, plus any extra “found” money, is added to the next smallest debt. (Trust me, once you get going, you will find money.) Then, when debt number two is paid off, you take the money that you used to pay on number one and number two and you pay it, plus any found money, on number three. When three is paid, you attack four, and so on. Keep paying minimums on all the debts except the smallest until it is paid. Every time you pay one off, the amount you pay on the next one down increases. All the money from old debts and all the money you can find anywhere goes on the smallest until it is gone.

learning to delay pleasure.

The major elements of making the Debt Snowball work are using a budget, getting current before you start, smallest-to-largest payoff (no cheating), sacrifice, and focused intensity.

Focused intensity will cause you to smell something burning, and soon you will see an actual fire.

You have to get radical to get the money flowing again.

gazelle intensity,

A good rule of thumb on items (except the house) is this: if you can’t be debt-free on it (not counting the home) in eighteen to twenty months, sell it.

Thumb rule for buying things.

we are building our three- to six-month emergency fund.

Build your emergency fund for 3-6 months. why - very important for finncial stability

no excuses and no prisoners. An

Dont be a prisoner tp yourb own excuses.