A debt free master plan: Dave Ramsey’s Total Money Makeover

Total Money MakeoverOf course, I had heard of Dave Ramsey. I knew he had a series of books and a radio show to help those in debt. But I hadn’t taken the time to read or listen to anything. I finally purchased a second hand copy of his Total Money Makeover: A Proven Plan for Financial Fitness from Amazon just after Christmas. Once I had started to read it, I couldn’t put it down!

A total money makeover is the answer

Now I am actually in love with Dave Ramsey. How did I avoid reading this book for so long? His approach isn’t just inspiring, it is logical and achievable. It is clearly aimed at a US audience and at points I needed to Google to work out what he was talking about (what was an IRA?). I also skipped the college funding section as it doesn’t apply to a UK readership. However, on the whole the advice in the Total Money Makeover is directly applicable to those in the UK or elsewhere.

Dave Ramsey was famously both a millionaire and a bankrupt before he hit 30. His approach was derived from a few desperate and painful financial life lessons that he learned the hard way. He rants about how debt has become a normal way to live and advises learning to be ‘weird’ – and debt free. Don’t worry about keeping up with the Jones’s.  Learn to live within your means whilst investing your money to safeguard your future.

He uses what he says are biblical principles to get out of debt or, better still, to avoid it in the first place. The book is peppered with advice from the bible. But if you aren’t religious, don’t let this put you off. Biblical or not, it is really just a common sense approach to living that will get you out of debt and enable you to build wealth.

Save your emergency fund

The Total Money Makeover outlines what Ramsey calls ‘baby steps’ to financial peace. The first baby step, before you even think about clearing your debts, is to save £1000 as fast as you can. This is your emergency fund, to prevent you getting into more debt because your car or your washing machine breaks down.

Once you have your rainy day fund, the next step is to use the ‘debt snowball’ to clear your debts. To give you a series of psychological wins and to keep you motivated, you start with your smallest debt. You throw all your resources at this debt and when it is clear you start on your next smallest debt. The more debts you clear the more money you have to throw at each debt in turn.

You sell everything you don’t need, live frugally and work extra jobs to speed up this process.

Baby step three starts once your debt is gone. All the money you would have been using to repay your debts now goes towards finishing your emergency fund. This involves saving 3-6 months of expenses. If this is all sounding a bit like hard work, Ramsey peppers the book with inspiring stories of individuals and couples who have followed each baby step and come out the other side.

Investing for the future

Your next baby step involves investing 15% of your income towards your retirement. The Total Money Makeover gives you advice on how to do this, recommending mutual funds as a long term tool to grow your investment.

Baby step five focusses on college funding, and saving for your children’s education. We have concerns about student debt in this country, but in the US it seems even more of an issue. I decided to stop worrying about my daughters’ university loans when I read this article. So I skipped reading and jumped to baby step 6.

Who doesn’t like the idea of being mortgage free? This is next step in the Total Money Makeover. Some of the inspiring people in Ramsey’s examples have achieved this before they even hit 40. Imagine your middle years, with no debt at all, six month’s worth of expenses in the bank, investments for your retirement and you own your house outright!

Financial utopia

Baby step 7 is the zenith of this financial utopia. This is when you start to really build your wealth. You are also allowed to relax and have a little fun after your marathon effort. I can’t pretend I understood everything in this chapter and suspect some of it was lost in translation. However, the principle is clear. Why stop at being debt free? This is the point when you can use your money to make more of the stuff.

This is a great read and the Total Money Makeover is a book I wish I had discovered in my twenties or thirties. But I am still taking some of Dave Ramsey’s advice to maximise the money I have. Get your kids to read it!

It is also worth listening to Ramsey’s radio show on You Tube. Who knew finance could be so entertaining? I am addicted!

For my other reviews of inspiring books, check out My Frugal Bookshelf.

This post contains affiliate links.

I am taking part in the Monday Money linky with Lynn from Mrs Mummy PennyFaith from Much More With Less and Emma from EmmaDrew.Info

11 thoughts on “A debt free master plan: Dave Ramsey’s Total Money Makeover

  1. Hi Jane,

    Have you seen Australian Scott Pape’s book and website, the Barefoot Investor? It’s similar to Dave Ramsey, without the biblical Hallelujah Save Your Soul and Your Wallet All In One Afternoon approach. While I don’t agree with everything he says, Scott Pape is mostly practical and offers sound advice. He has a pleasingly wry sense of humour, too.

    By the way, I do NOT work for the Barefoot Investor and I’m not connected with it in any way – I borrowed it from my local library! But I thought you and your readership may find it useful, although it is adapted for Aussie conditions (our private pension known as superannuation, for example, is a key part of the book).

    Hope you’re feeling better, Jane. It sounds like things have been a bit unpleasant lately, so I hope you’ve bounced back.

  2. Dave Ramsay was my inspiration to overpay my mortgage massively! 5 years ago. Now it is gone,. Yeeeesssss should have been paying it another 13 years. Sense of security is massive. Admit i did not have the £1000 safety net at the time is a good idea, crossed fingers n wing and a prayer that no applience breaks down is not the best idea. Now building up funds . Sure as American site some is not relevant healthcare insurances thankfully, 401K . But the advice hints and tips are!. Thanks Dave!.

  3. When we cleared all of our personal debt, we started overpaying our mortgage. We also built up a small emergency fund. Then my husband became ill, was off sick for several months and we were surviving on statutory sick pay at around £81 per week. Due to the nature of his illness, mortgage payment protection wouldn’t pay out. He then lost his job! When I phoned our mortgage lender to ask for a mortgage holiday, it was declined because my husband was out of work. I was informed that, despite having overpaid the mortgage by thousands of pounds, and despite the mortgage being only 8% of the value of our home, that within two months of not paying a mortgage, proceedings may begin for repossession. This really shocked me. Fortunately, mum in law stepped in to help temporarily until husband found another job.

    Personally, I wouldn’t overpay the mortgage again until we have at least twelve months living expenses in an emergency fund, because once you have overpaid your mortgage, you can’t get it back in an emergency. We intend overpaying it once we are at that stage.

  4. Hi Jane
    I saw veggie soya free sausages yesterday in Morrisons. I can’t find the post where you mentioned you were looking for some, but thought it might interest you: Gosh sausages £3 butternut tomato and basil. Gluten free and diary free.
    I’ll try and email you a pic!

  5. I love the idea of a money makeover. I haven’t read this yet but it looks fab so I might have to look into it. Sounds really engaging. Thanks for joining #MondayMoney. Hope to see you next week.

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