Book Review - '' The Total Money Makeover" By Dave Ramsey

Author- Dave Ramsey

About Author

Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show, heard by 23 million listeners every week. He has appeared on Good Morning America, CBS This Morning, Today, Fox News, CNN, Fox Business and many more. Since 1992, Dave has helped people take control of their money, build wealth and enhance their lives. He also serves as CEO of the company Ramsey Solutions.

After battling his way out of bankruptcy and millions of dollars of debt, Dave set out to change the toxic money culture for good. Once he got started, it wasn’t long before the crusade became a lot bigger and better than what Dave could do alone. He’s built a team of America’s top experts on money, business and life who are passionate about sharing Ramsey’s message of HOPE with everyone in every walk of life.

Book Review

You are thinking to buy new things for yourself. Like, You want to go shopping. or you want to buy a new phone, or you want to go to visit someplace this weekend. and suddenly you remembered, next week you have to pay rent. or you have to pay EMI for your car or bike, or don't know how many bills you have to pay.

And you have a limited amount of money. Either you can enjoy your life or you can pay your bills. These types of situations, we face many times in our life. So The author Dave Ramsey tells in his book "The Total Money Makeover" "You must live like no one else right now so that you can live like no one else later".

Meaning to tell that, If you want to live like 1% people in future. then you have to take all those actions that the other 99% of people are not taking. The author says Financial Freedom is 80% behaviour and 20% knowledge. I'll share 5 practical lessons which I learnt from this book, With the help of that, you will also change your behaviour and achieve financial freedom.

1.No More Denial.

If you throw a frog in boiling water, then it will jump and get out. But if you throw in normal water. Then that frog will keep swimming in that water. And if you increase the water temperature slowly, that frog won't know anything. and in the end, it will die with hot water but it won't come out.

In the same way, someone's physical health won't destroy instantly. Your health destroys slowly. Due to an unhealthy diet and not doing exercise, your body gets minor changes. That we don't notice instant and live by ignoring that. that destroy our health badly in future and this concept is also applied to your finance. The author says you should treat your finance as your physical health. Like you can't lose your 10kg weight in one night.

Same way, you can't be a millionaire in one night. Your financial situation doesn't get worse suddenly. Your decision taken in past is the reason for your current financial situation. So for Money Makeover, you have to see the whole problems of your current financial situation.

Check,

what is your income?
what are your expenses?
where do you spend your money?
How much do you save every month?

For example, You notice that you are living a good lifestyle. You have a house, a costly phone, and a car. but your credit card limit is crossing. Your loan EMI takes a major part of your income. and still, you buy things. these all signs show that you are in a financial bubble. That can blast anytime. After realising this thing, stop ignoring your financial situation. And take action seriously and fast.

2. "Get An Emergency Fund"

Murphy's Law says, "If anything can go wrong will go wrong". If something bad could happen, and you are not prepared for that, then that must get bad. Imagine that You have decided to be a responsible person. and you will invest your money in the right place instead of wasting it. But the next day, due to some emergency, you have to spend your money. By which your investing and saving plan destroy. So the author says, We have to create an Emergency Fund first.

Which, we have to save a total of $1000. That is around 75000 Indian rupees. You have to save this much money by doing anything. And you have to keep it in a place where you can easily access it. You don't have to invest in your emergency fund. and not to keep in a saving account. Because you will easily spend it from there.

One author's student converts his emergency fund into cash and hides it behind a photo frame. So that in an emergency, he can use that money by breaking that photo frame. That was easily accessible and safe also. that you can also do. So that when some emergency comes and you require money, then you don't need to use your credit card.

3. "Debt Snowball"

To build your wealth, the powerful weapon is your income. and the big enemy is your debt. The author tells us to use Debt Snowball to eliminate that. Like, if you throw a small snowball from a snowy mountain. Then snow will stick to it when going down. and that will convert into a giant ball. Same way if you start paying your debt like a snowball. then very soon it will clear your all debt by becoming a giant ball. We live in a time where we are taught that debt is good.

But a millionaire knows that there is much difference between 'seeing rich' and 'real-rich'. The author says, financially free millionaires use their cars according to their needs. Their expenses are also very low. and they have no loan. As Dave Ramsey says, any person can achieve financial freedom when he has no debt.

For this, you have to make a list of all debts. And in this list keep the low amount at the first and the big amount the last. And to start Debt Snowball, you have to be free from low-amount loans. and the money saved from there, you will use it to clear the next loan. By doing this you will clear your all loan. and doing this will not be easy. but you have to remember. "You must live like no one else right now so that you can live like no one else later".

For example- These are some of your loans, that you have kept 10,000rs debt from your friend. and you pay 1000rs every month and your new phone is 25,000rs. for which you pay 2,000rs every month. Your credit card bill is 50,000rs and you pay 3000rs every month and write all debts in the smallest to the largest order and let you save only 5,000rs from your income.

So, at first, you clear your friend's debt in 2 months by using these 5,000rs. and slowly clear your phone debt, credit card bill, and car EMI. by doing this you will create your Debt Snowball that will clear your all debt very fast.

4. Create Runway Fund

After debt free completely, when you have no debt to others. Then this time is to create a Runway. The extra income that was going into clearing your debt. By using that you save your 3 months' living expenses. So that if you will face a very big emergency. Let your Job has gone. Then you can live for 3 months without thinking about money.

By which you will have time to build new income sources. For doing this you have to make a list. Here you note down your 1 month's expenses. Like monthly rent, food cost, internet, clothes, app subscriptions, etc. After adding these all let you know that you spend 30,000rs every month. So at the start, you have to multiply this amount by 3 which is 90,000rs. and as soon as, you have to say 90,000rs.

By which you secured for 3 months and slowly increase 1-1 month. Your goal should be to create 12 monthly Runway Funds. Because the author tells, For complete financial stability, at least you should have Runway Fund for 1 year. So that you can survive by maintaining your lifestyle for 1 year without generating income.

5. Invest & Enjoy

You would be thinking that the author is stopping you to enjoy your life and saying to do hard work. But the author tells that the fun is, in enjoying after loan. financial freedom is not in enjoying taking a loan. See there is a single trick to achieving financial freedom. Where you have to sacrifice Short Term for Long term gain.

Now you won't have any debt and you have financially secured yourself for 1 year. Now the time is to maintain your financial fitness. Like you are physically fit by working hard. Then you need to exercise very aggressively. You don't need to do heavy weight lifting. You just need simple maintenance. Similarly, to maintain your financial health. Dave Ramsey says, "invest at least 15% money of your income for your retirement".

As soon as your home loan and other loans are finished. Then your saving will increase. Invest these savings, and the return you got from your investment, will be your actual wealth. You can invest in Index Funds, Mutual Funds, Stock Funds, and any other profitable business. Your aim should be to generate at least a 10% return annually. Your aim should be to generate at least a 10% return annually that can be achieved easily.

When your invested money starts giving more money than your saving. Then you will become financially independent and stable in real. Because no one becomes rich in one day but the small steps taken take you to a wealthy life.