How To Truly Beat Debt

After spending about 2 months listening to his nationally syndicated radio show and being a member of the subscription-based My Total Money Makeover (MTMMO), I finally decided to pick up Dave Ramsey's book "Total Money Makeover".

After only reading 10 pages of this book I realized that I had done the right thing here. After reading other book from prominent financial figures, this book is hands down the most comprehensive, hard hitting, powerful financial book you can get today. For those of you who have never really heard of Ramsey, he is a former real estate investor who had $4mil in business and properties. However, he used debt to build this fortune, and when the housing market took a dive in the late 80's, he lost everything! At 30, he was broke and filing bankruptcy, left only to start over again. However, he started on a cash only basis and eventually built wealth again via his financial coaching, books, and programs.

It may seem at first that he may be just another financial guru selling advice to stay rich, but when you look deeper into his advice and coaching, you realize he is anything but conventional in today's standards. He challenges the reader to immediately face themselves in the mirror and acknowledge they are the true reason for being the financial shape they are in. From there begins the baby steps to financial freedom.

BS1 - get an emergency fund of $1000 in place. Although you can add a little more based on situation, this is the minimum Dave recommends to his listeners. This can handle most small emergencies without need to borrow money in any form.
BS2: begin the debt snowball. All this means is to take the smallest debt to largest (not including the house) and pay the smaller first, add payment from former smallest debt and pay off next smallest, and so on... Some of this may require drastic means such as selling vehicles, personal items, and other toys.
BS3 - 3-6 month savings. After consumer debt is gone, build up an emergency fund to handle a considerable amount of expenses or a major emergency without borrowing money.
BS4 -15% investing for retirement. This should be easy now after all consumer debt is gone and a strong savings fund. Dave uses 12% average return on mutual funds as a reference point for growth. This may not be exact figures, but he uses this nicely to show the reader the kind of money they are losing to debt payments vs. what they could really have in a few decades.
BS5- college funding. Pretty self-explanatory here. Figure out how much you may need to kids to go to school without those student loans which can cost an arm and a leg over several years.
BS6 - pay off house early. With the cost of a house these days, it is hard to include it in BS2, so Dave suggests getting all the consumer debt gone and get a savings program and retirement in full effect before tacking the monstrous home debt. He states in his book on average people who follow these steps tend to pay their homes off in about 7 years.
BS7-Build wealth. This is possibly the most interesting chapter because Dave values wealth as spending, investing, and giving. He clearly states that when we work hard and build wealth, we should enjoy some of it, but with a working plan always in place. He also encourages that people continue to invest and build what they already have to stay wealthy. And last, he stresses the utmost importance to give to others in need, much more than they ever could imagine when having those pesky payments sucking money from under them each month!

When I closed the last page on this book, I felt that I truly had a good plan to shapen my financial future, and know what to do with it once I arrive there. Most financial books seem to focus on aggressive complex formulas and FICO scores, but Dave Ramsey begins with changing your attitude towards money and irrational desires and begins slowly guiding you out of stupid debt and into have complete control over every penny you earn. Then, he states that once your money work harder than you do, you are officially wealthy. Great point!

If you want to start challenging our have it now culture and become truly indepent, then this is the only book you need. Dave also has another book Financial Peace, which deals with other details around the baby steps. I havent read it yet, but will post a review once I get it and read it.

Other extras in this book are different success stories of people who have followed the plan and won. They range from all kinds of incomes and situations. Also, there are generic forms for helping someone with budgeting, snowballing, and planning an estate. Very good places to get started if you have never actually written down your expenses and income flow.