The Total Money Makeover: A Proven Plan for Financial Fitness

by Dave Ramsey

Being willing to delay pleasure for a greater result is a sign of maturity.

Debt is so ingrained into our culture that most Americans cannot even envision a car without a payment, a house without a mortgage, a student without a loan, and credit without a card.

The silly marketing that America falls for has resulted in this: we buy things we don’t need with money we don’t have in order to impress people we don’t like.

If you keep a $495 car payment throughout your life, which is “normal,” you miss the opportunity to save that money. If you invested $495 per month from age twenty-five to age sixty-five, a normal working lifetime, in the average mutual fund averaging 12 percent (the eighty-year stock market average), you would have $5,881,799.14 at age sixty-five. Hope you like the car!

If you insist on driving new cars with payments your whole life, you will literally blow a life’s fortune on them. If you are willing to sacrifice for a while, you can have your life’s fortune and drive quality cars. I’d opt for the millionaire’s strategy.

Second, creating an unneeded business expense for the sake of a tax write-off is bad math.

Those who are worried about polarization, the widening gap between the haves and the have-nots, need not look to government to solve the problem; just call for a national Total Money Makeover.

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.

The Total Money Makeover mentality is to live like no one else so later we can live like no one else.

Gambling represents false hope and denial. Energy, thrift, and diligence are how wealth is built, not dumb luck.

So Sara, age thirty-nine, paid $3,500 for a prepaid funeral. Again, it is wise to preplan, not to prepay. Why? If she were to invest $3,500 in a mutual fund averaging 12 percent, upon an average death age of seventy-eight, Sara’s mutual fund would be worth $368,500! I think Sara could be buried for that, with a little left over, unless, of course, she is King Tut!

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

We go to school to learn to earn; we earn and then have no idea what to do with the money.

Stanley found that most millionaires don’t have those things. He found the typical millionaire lives in a middle-class home, drives a two-year-old or older paid-for car, and buys blue jeans at Wal-Mart.

Brian Tracy, motivational speaker, says, “What does it take to succeed on a big scale? A tremendous God-given talent? Inherited wealth? A decade of postgraduate education? Connections? Fortunately for most of us, what it takes is something very simple and accessible: clear, written goals.” 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!

If you are sending your kids to college because you want them to be guaranteed a job, success, or wealth, you will be dramatically let down.

Because we have turned a college degree into some kind of “genie in a bottle” formula to help us magically win at life, we go to amazingly stupid extremes to get one. I have been a millionaire starting with nothing two times before I was forty, and I attribute 15 percent of that to college knowledge and 0 percent to the degree.

The best 529 plans available, and my second choice to an ESA, is a “flexible” plan. This type of plan allows you to move your investment around periodically within a certain family of funds.