Dave Ramsey's Complete Guide To Money: The Handbook of Financial Peace University

by Dave Ramsey

The concepts are simple, but that doesn’t mean the process is easy. It’s not. That’s because money is not just about math; it’s about behavior. Personal

finance is only 20 percent head knowledge. The other 80 percent—the bulk of the issue—is behavior.

The Bible doesn’t say that money is the root of all evil; it says that the love of money is the root of all kinds of evil.2 Money is amoral. It doesn’t have morals. It’s not good and it’s not bad. It’s the love of money that’s the problem—and that’s a human problem, not a money problem.

These people don’t buy with cash because they’re rich; they’re rich because they buy cars with cash!

I have never met one millionaire who said, “Dave, the secret to my fortune is Discover cash-back bonuses” or “I’ll tell you how I’ve been able to travel the world: free airline miles on my Visa.” No, they all pretty much say the same thing: the most important key to building wealth is becoming and remaining debt-free.

The credit, or FICO, score is simply an “I love debt” rating. No part of the credit score calculation even hints at how much wealth you have.

First, like I said, the FICO score has nothing to do with wealth and success, so building a good credit score should not be a goal.

The primary purpose of each one of these is the same: to transfer risk. That’s what insurance does. Its sole job is to transfer the risk of financial loss from you to the insurance company. Picture it like a big umbrella over your financial life. Without it, you’ll be caught out in the rain!

Liability is one of the best deals in the insurance world, but most people still don’t have enough coverage on their homes and cars. Never, never cut corners here. Always take at least $500,000 in liability.

an umbrella policy is fairly affordable and provides another layer of protection beyond the basic liability. It attaches to your liability and builds from there. So, if you have an umbrella policy for $1 million and basic car liability for $500,000, you’d have a total of $1.5 million in liability protection. If you’re starting to build up some wealth

in your retirement accounts, making good money, have a paid-for home or at least some good equity, and have other quality assets, you really need an umbrella policy. It’s too good a deal to pass up, and skipping this one could cost you all the wealth and assets you’ve built up from a lifetime of hard work!

Try to buy disability coverage that pays if you cannot perform the job that you were educated or trained to do. This is called occupational, or “own-occ,” disability. It can get a little pricey, so you may only be able to get a couple of years’ worth of coverage. But that will give you enough time to transition into another line of work, go back to school, or get training in another field so you can get back to work. For example, I’m a radio guy. If I lost my voice due to an accident or illness, then I wouldn’t be able to do my radio show very well, would I? If I had two years of own-occ coverage, the insurance company would provide an income for me for two years. Then, they’d tell me to get a job! That’s because permanent disability is different from occupational disability. If I’m permanently disabled, then I can’t work at all, and that’s just the way it is. If I’m occupationally disabled, it just means I can’t do that job anymore.

Stay away from short-term disability that covers less than five years.

Here’s the truth: you never want to use an insurance plan as an investment. Insurance is for insurance. It costs you money because you’re transferring risk. Keep your investments separate and you’ll always come out ahead.

it’s always better to keep your insurance and investments separate. You don’t want to faithfully invest your whole life and leave all that money to an insurance company, do you? I sure don’t.

You need to get coverage equal to ten times your income. So, if you’re working and making $40,000 a year, you need $400,000. The ten-times rule of thumb is not an arbitrary number. Remember, life insurance is designed to replace your income.

You should always keep your insurance and your investments separate. Never use an insurance product as a wealth-building tool.

Disability insurance is one of the most underinsured areas, but it is actually one of the most important. Get it today!

You should never buy any financial product or service if you can’t explain to someone else how it works.

Don’t mess around with real estate until you are out of debt, have a full emergency fund, have maxed out your 401(k) and Roth IRA options, have paid off your own house, and have some wealth built up. Only then are you ready.

Myth 2: You will learn and grow the most in the areas in which you are weakest. This is a total lie, but we buy into it from a young age because, most likely, our parents bought into it. Buckingham cites a Gallup poll that asked, “Your child comes home with the following grades: English-A, Social Studies-A, Biology-C, Algebra-F. Which grade should get your most attention?” It’s not that surprising that 77 percent of parents said they’d focus almost exclusively on the one F. Heck, I know I’d focus on the F too! But what does that do to us and to our kids? It’s a way of saying that our strengths don’t matter and that we should spend all our time focused on our weakest areas. I don’t think that we should ignore our weaknesses, but I do believe we need to see them in perspective alongside our strengths. Buckingham turns the issue around and says that we don’t really grow in our weaknesses at all; instead, we grow in our strengths, in the areas that we already know and love the most.

Mark Twain said it: “The secret of success is making your vocation a vacation.”

If you want to build wealth and have fantastic relationships, you’ve got to give.