Chad Warner's Reviews > The Total Money Makeover: A Proven Plan for Financial Fitness

The Total Money Makeover by Dave Ramsey
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Oct 24, 2009

it was ok
bookshelves: non-fiction, finance
Read in October, 2009

Ramsey presents some sound financial principles in the book, but it came across as a sales pitch because he mentions his other books and live events, and practically every other page contains a lengthy testimonial from people gushing about their Total Money Makeover. I skipped all of these since I'm looking for practical financial advice, not feel-good stories.

I didn't like Ramsey's strict no-debt stance. The only exception he allows for is a 15-year fixed-rate mortgage. Although I agree that most people are better off avoiding credit cards because they can't resist the temptation to abuse them, I like to use cash-back and other rewards cards to pay for the things I'd be purchasing anyway. I don't think I spend more money simply because I charge purchases rather than dropping cash or using my debit card. For example, I paid my college tuition on my credit card and earned 1% cash back on thousands of dollars. I also charge all my gas purchases, and make 5% cash back. Did I spend more on tuition or drive more than necessary because I had charged those purchases instead of paying cash? I didn't perform a scientific experiment to determine that, but I'd guess not.

The Steps of the Total Money Makeover

1. Set up a $1000 emergency cash fund
Sacrifice, work extra hours, and sell stuff to get the money.
Keep as paper bills or in a savings account.
Don't put it in checking or any other account or investment.

2. Pay off your debt snowball
List your debts, smallest to largest.
Pay them off.

3. Finish the emergency fund
Must cover 3 - 6 months of living expenses. 3 months if you have a truly steady job, otherwise 6 months.
$5,000 - $25,000
Put in Money Market with no penalties and check-writing abilities

4. Invest 15% of gross income in retirement
Don't count any company-matched funds.
Don't count on Social Security.
Use these accounts, in this order:
1. 401K if company matches.
2. Roth IRA.
3. growth-stock mutual funds:
25% large cap
25% mid cap
25% international
25% small/emerging

5. Save for college for your kids
Use these accounts, in this order:
1. Educational Savings Account (ESA) in a growth-stock mutual fund
2. If you want to save more, use a flexible 529 that allows you to choose your funds
3. Scholarships

6. Pay off the house mortgage
Spend every extra dollar you have left after setting aside for living, retirement, college, and mortgage.
Don't keep a low-rate mortgage just so you can invest at a higher rate. After you pay taxes on your investment returns, and factor in the additional risk that the mortgage debt brings, it's not worth it. In the long term, you'll come out ahead by being debt-free.

7. Build wealth
At this point, you're completely debt-free.
The next step is the Pinnacle Point: when your money makes more than you do.
There are 3 good uses for money:
1. Fun
Guilt-free enjoyment, if you can afford it.
2. Investing
Think long-term.
Don't try to time the market.
Choose simple mutual funds and debt-free real estate.
3. Giving
Giving it away can be the most fun you have with your money.

Additional advice
Winning at money is 80% behavior and 20% head knowledge.
"If you will live like no one else, later you can live like no one else."
Debt brings risk, not prosperity. You can't leverage debt to build wealth.
You don't need to build credit because you won't use it if you follow the Total Money Makeover.
Credit card rewards aren't worth it. You end up spending more in unnecessary purchases and interest payments than you make back in rewards. No one ever became rich from credit card rewards.

Choose high deductibles for auto and home insurance.
Make a will.
Choose a term policy, not Whole Life or Universal Life insurance.
Don't prepay your kids' college expenses. You'll make higher returns by putting this money in mutual funds.
Buy a house for 100% down, or if that's absolutely not possible, get a 15-year fixed-rate mortgage.

You don't have to wait until retirement to do what you love. Get a job that you enjoy.
A college education improves the quality of your adult life and career. But, it doesn't ensure a job or success.
If you have cash or a scholarship, go to college. But pay cash; avoid student loans.

Don't get a 30-year mortgage with the intention of paying it off in 15 years. You'll find other things to spend your money on. Having a 15-year mortgage forces you to pay off your home in 15 years.
Don't pay points on your mortgage, since you're just paying interest up front.
Your house payment should be less than 25% of your take-home pay.

Don't lend to friends. If you must give your friends money, give it as a gift. Loans ruin friendships.
"Wealth will make you more of what you are", whether you're a jerk or a generous person.
"The love of money, not money, is the root of all evil." You have a duty to possess wealth to ensure that it's used properly.

Recommended percentages for allocating your money
Charitable Giving 10-15
Saving 5-10
Housing 25-35
Utilities 5-10
Food 5-15
Transportation 10-15
Clothing 2-7
Medical/Health 5-10
Personal 5-10
Recreation 5-10
Debts 5-10
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02/06/2016 marked as: read

Comments (showing 1-22 of 22) (22 new)

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Ravishankar Radhakrishnan Amazin review


Jean I wholeheartedly agree re: the "testimonial" part of the review.


Sharon King Wish I read this instead of going through all the long drawn out stories and having to dissect the material to grasp the concept! Thank you for your review.


message 4: by Naomi (new)

Naomi 10-15% recommended for charitable giving alone? This is obviously not aimed at lower earners!


Sharon King I agree Naomi. I used to teach a class on saving and finance to low income folks and I told my students to take one thing that they spent money on all the time and instead of buying that coffee or smokes, put the money in a jar. You would be surprised how fast it adds up! I think Ramsey forgot about the little guys but in all reality, to have a successful retirement you need to save at least 10% of you gross pay every paycheck! Also Ramsey's snowball concept is a good one for getting rid of debt and if I ever teach again, I would use his baby steps and snowball plan!!


Christine The charitable giving is only applicable after you've paid off your debt. This book is aimed at everyone. Read the book and you will see how it works.


Tracey This book does read like a sales-pitch and "rah-rah I'm so awesome" (the author). I'm on Chapter 5 and he still hasn't made any suggestions of what to do yet, just what not to and why to believe everything he says. Thanks for the summary of his plan.


message 8: by Christine (new) - added it

Christine Gietzen Wow! Thanks Chad! It sounds like Ramsey just put a different title and cover on Financial Peace University. I can just read that again because I already have a copy. Haha!


Gary Chad, you said that you paid your college tuition on a credit card and that you earned 1% cash back on the thousands of dollars you spent. I'm curious if you paid off the balance of this card in full each month. If not, then the 1% you earned is offset by whatever interest you paid on your purchases, no?


message 10: by Gary (new) - rated it 5 stars

Gary Chad, you said that you paid your college tuition on a credit card and that you earned 1% cash back on the thousands of dollars you spent. I'm curious if you paid off the balance of this card in full each month. If not, then the 1% you earned is offset by whatever interest you paid on the unpaid balance, no?


message 11: by Chad (new) - rated it 2 stars

Chad Warner Gary wrote: "Chad, you said that you paid your college tuition on a credit card and that you earned 1% cash back on the thousands of dollars you spent. I'm curious if you paid off the balance of this card in fu..."

Yes, I paid off the balance in full every month. That's how I use my credit cards.


message 12: by Yulia (new) - added it

Yulia Thank you for the summary of his message! I was curious about what Ramsey suggested, but my partner has no respect for the guy (probably for the constant sales pitch), so I've avoided checking his books out for myself. I'm surprised Ramsey suggests such a low allocation for savings.


Rahel Araya What you seem to forget is this book is for individuals who have somewhat bad money management skills and who have gotten into credit card debt. He suggest low allocation for savings, because it's a beginning not an end, the first step of course is to give yourself some room so that debt does not grow any further, than focusing completely on wiping out debt. That 1% cashback is great if you are paying credit card at end of cycle, but if you cannot afford the 1000$ or however much your student tuition is, then that's awful advice to get into debt in the first place. Dave Ramsey wrote the most fantastically common sense book ...but in these times and the way financial institutions abuse normal people especially low income people...there's not that much common sense..


Rahel Araya I know a guy who paid of 30k on basically 30k salary in two years. He didn't read this book. He just had awesome focus. Not many people can do that. Anyways this book is a gem it gives people hope


message 15: by Allison (new)

Allison Great review. Thanks for summarizing everything.

I, too, was frustrated at how many testimonials there were in the book. If I've already bought the book, I dont need you to keep telling me how awesome it is...


message 16: by Joseph (new)

Joseph Cameron I think the recommended percentage for allocating your money is solid but unless it is included under charitable giving, this neglects tithing which isn't really charitable giving. Tithing, by nature, already belongs to God and therefore you're just returning the money, not giving it to him. Charitable giving would be money given beyond your tithe.


message 17: by Chad (new) - rated it 2 stars

Chad Warner Joseph wrote: "I think the recommended percentage for allocating your money is solid but unless it is included under charitable giving, this neglects tithing which isn't really charitable giving. Tithing, by natu..."

Interesting perspective, Joseph. It's been a long time since I read the book, so I don't recall if Ramsey makes a distinction between tithes and other charitable giving. Christians differ on their views of tithing in the New Testament, so perhaps he leaves it up to the conscience of the reader.


message 18: by CBD (new) - added it

CBD Start listening to the podcast. That's all I'll say in reference to your review.


message 19: by Gary (new) - rated it 5 stars

Gary Having read this book but also being an avid listener of the podcast, I know that Dave tithes off his gross income (first fruits) and any charitable giving is on top of that. I don't remember if the book mentions that or not. As for the testimonials, they do seem cheesy at times, but they are meant to be inspirational and to show readers that this plan actually works. Personally, I like hearing the stories because it keeps me motivated. Following Dave's plan, I have paid off $60K since April 2014 and only have $3,900 left to go which will be done in four months. I cannot wait to be debt free! This book (and listening daily to the podcast and watching the debt-free screams on YouTube) has been a HUGE help. When it comes to Dave Ramsey, I think you're pretty much either all-in or your not. And if you don't like him personally or believe in his philosophies, no amount of testimonials or inspiring stories is going to change that. But I could be wrong (hopefully).


message 20: by Chad (new) - rated it 2 stars

Chad Warner Gary wrote: "Having read this book but also being an avid listener of the podcast, I know that Dave tithes off his gross income (first fruits) and any charitable giving is on top of that. I don't remember if th..."

Thanks for answering the question on tithing. And thanks for sharing your personal experience with this book and Dave Ramsey; I'm sure hearing your experience will be helpful to others!


James Githinji On the question of charitable giving, a few guys at the beginning of this comment section said that the giving part is not applicable or shouldn't be done by low income earners. I disagree on two basis. First, Dave's perspective is based on the Judeo-christian values of giving to God 10% of your income. Now for non-Christians he says you give charity the 10% still. Now according to the bible this is the one thing that as a Christian you must give regardless of how much you earn. It doesn't matter if you earn $1 or $1,000 a day, it has to be given. Well, as a non-believer, you can choose as you will. Secondly, I highly recommend one does this no matter how much you earn or are dirty poor. I did this when I was completely broke, in debt and though it seemed painful at first, my biggest regret was why i didnt start giving much sooner when i was broke. I felt like i missed out on something. Also, soon after i started giving, I can't explain it but life just didnt seem to have to many problems after that. Not because my situation is vastly improved, but that It has reduced my materialism and dealing with money is somehow easier. I believe materialism is something that not only affects the wealthy but also the very poor. It gives us an excuse to not help other people "because we are not rich" or "what i have is too little to share". It makes our hearts much harder to the plight of our fellow poor. Even if we say we can connect emotional with your fellow poor, it still compares to nothing until you sacrifice the little you have to help alleviate the trouble of your fellow poor you still havent put your money where your mouth is. And by extension where your heart/emotions are.


message 22: by Chad (new) - rated it 2 stars

Chad Warner James wrote: "It has reduced my materialism and dealing with money is somehow easier."

Thanks for sharing your perspective, James. What you said towards the end reminds me of something my pastor said a few weeks ago, regarding giving to God, and referencing Matthew 6:19–21, 24: "Let every check you write be a declaration of your independence from the god of Mammon."


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