ssimmons99's Full Review: Dave Ramsey - The Total Money Makeover: A Proven P...
This book is written by author and radio host Dave Ramsey. His background is that he got really "rich" with assets in his 20's by financing a lot of real estate. He hit a bump and his house of cards fell and he was bankrupt. He spent the next several years working out of the mess and paying off the debts (though he didn't have to due to the bankruptcy) and was a self made millionaire again.
In this book he teaches his plan to stop working to pay the banks and instead to make your money work for you. The plan is based on 7 "baby" steps. Although if you are like me - they seem like huge steps.
The first is to get current on all your debts, get on a written plan (budget), and save up $1,000; or if you have already $$ in savings drop it down to $1,000 in an immediate access (typical savings) account.
The second step is to list your debts smallest to largest. NOT by the interest rate (it really doesn't matter when you are paying off everything but the house in 18-24 months). You pay as much as you can on the smallest debt and then minimum payments on everything else. When the first debt is paid off, then you take the money you were paying on the first one and put that to the second one along with the minimum payment you are already paying on that debt. Dave calls it the "snowball effect".
The third step is to have 3-6 months worth of expenses in the bank in the event of an emergency. This should be in a immediate access account - like an on-line savings, etc.
The fourth step is saving 15% of your income for retirement.
The fifth step is to fund your children's college is you have any.
The 6th step is to pay off your house early.
The 7th step is to create wealth.
Dave examines all the "myths" of money like how it is not mathmatically smart to hold onto a mortgage for tax deductions, why a 0% loan is bad, and why using credit cards for anything is just asking for trouble.
The book comes with forms for budgeting and a listing of how to determine if you need to sell the $40,000 leased vehicle or need to sell your house.
Dave also explains how to earn extra money in order to get out of debt quicker. The book is full of success stories that inspire you to continue.
My husband and I have been working this plan for 7 months and we have paid of $30,000 of our $60,000 in credit card debt, student loans, home equity line of credit, car loans, etc. It has been amazing - I won't even know what to do with all the extra money I will have when I have no payments except the house.
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