Book Review: The Total Money Makeover – Dave Ramsey

Gimme a quick summary

  • Godfather of FI
  • Best suited to helping those in debt
  • Has some divisive ideas
  • Anyone can follow on any budget
  • Direct style

Overall: 7 out of 10

What’s it about?

Considered by many to be the founding father of making Financial Independence a main stream concept, Dave Ramsey is a key, albeit sometimes divisive figure within the FI community. Publishing his first book, Financial Peace in 1992, he has built a long-standing career and empire through his books, The Dave Ramsey Show podcast and his company The Lampo Group (now Ramsey Solutions), which provides financial education.

He’s been around a long time and has a prolific media presence, though predominantly US-based.

Published in 2003, Total Money Makeover is a seven step process (or ‘baby steps’) that takes you from debt to financial independence in a systematic, logical and progressive way. It’s a method that anyone can follow, regardless of their starting financial position or their income and includes accompanying practical exercises.

Overall a thoroughly worthwhile read, even if you disagree with some of his points. At least it get’s you thinking.

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What does FI Guy 101 think?

This was one of my first reads on my financial journey. I’d heard Dave mentioned a lot in various podcasts (particularly ChooseFI where Brad and Jonathan have debated some of his concepts) and on other FI sites and blogs. I felt obliged to read it. A sort of rite of passage to enter the FI community and that I should have at least read it, if anything to have an opinion on it.

The system Dave offers certainly is logical and his passion behind it (he reads the audiobook himself) is certainly compelling, almost contagious.

This book is squarely aimed at those that are in a poor financial position to begin with. It’s starting point is helping those that are (often severely) in debt and need to get themselves to a net zero position, before they can start saving for a life of FI. Granted, a large majority of the population are in this position and this help is invaluable to them. But if you are someone debt free and well on your way to FI, you’re going to find this book somewhat wanting. If this s the case, then the first half of the book, covering level one emergency funds and clearing debt, will be irrelevant; by now you’ll be debt free, have a well established emergency fund and be more interested in topics like investment portfolio diversification, minimising fees and tax efficiency. The book does cover these, but later on and not in any great detail.

If you are in debt and looking for a system to get you to the other side, then this is a quality, solid guide. Ramsey favours the ‘snowball’ method of tackling debt, which is based on paying off the smallest debt first whilst keeping the others on minimum payments. In theory this creates a psychological boost. For me, the avalanche method (the reverse: paying off the debt with the highest interest first) has always seemed more logical in terms of how the numbers stack up. But I can’t deny the power of the positive motivational effect that the snowball method can have.

Many of Ramsey’s concepts continue to be hotly debated. For example, is it worth paying off the mortgage? With the current interest rates as low as they are and less than the average stock market return, many would say not. Which leads on to another point; should your home even be considered an investment and included within your net worth calculations?

And is all debt really bad (Ramsey is emphatic on this one)? Can the rewards of credit be good when it is managed well (ie, the balance paid in full each month)? Many FI’ers, such as the guys over at ChooseFI, promote exploiting credit cards for travel hacks if they are used well. Though they will also caveat this to be only used when you are in a solid financial position and you can trust to pay the balance each month.

Many would also argue that mortgages are a form of good credit in that they allow you to leverage someone else’s money to make a return.

Where you stand on these points is a matter of personal preference. Before my financial ‘awakening’, I’d never given these things a second thought. Having an opinion on them is all part of developing the right mindset that is fundamental to improving your financial health and this book was part of that process for me.

Ramsey also has a unique style. One that is robust, direct and challenging. You’ll either love it or hate it. I found it motivating most of the time, but there are occasions when it wanders dangerously close to patronising and belittling as to alienate the reader.

Another element to his style is the Christian aspects that Ramsey weaves in to this master plan. Whilst an atheist myself, I appreciate that financial peace can only be truly achieved along side spiritual health. Counter intuitive as it can sound, I liked how ‘giving’ is a fundamental aspect to Ramsey’s process and achieving Financial Independence.

I stand by my initial perspective in that I’m glad I’ve read this book and I’d recommend it to anyone starting their journey to financial freedom.

What about Cash Curator?

Ramsey offers a great framework to build yourself out of debt. If you’ve accumulated a debt mountain and struggle to budget, then this is definitely worth a read. His steps simplify a challenge that many household struggle to overcome and give readers actions to take. I also like the progression element which creates a game by “leveling up” through the baby steps.

Personally, I have never really been interested in Ramsey’s teachings as it has had little relevance to my circumstances. I also don’t totally agree with having such a large emergency fund or paying off your mortgage in full, but I’ll cover those off in future blogs. If you’re in this position, you already know debt is bad. I agree with Ramsey on the credit card front. I believe that the rewards in the UK are no where close to as good as those available to our American friends.

I would recommend this book to friends and family who are in debt and crippled by inaction. However for UK readers there is similar advice available from Martin Lewis around how to consolidate debt. If you are looking for the mental motivation of seeing yourself progress through the steps then debt free forums may also help.

Whilst I may not agree 100% with his methods, you cannot underestimate Dave Ramsey’s achievements. He has helped so many achieve what I would consider financial normality and educated millions of people on financial literacy. This can only be a good thing.

Want it?

If you want to buy this book, click on the picture below and it will take you to Amazon. You pay the same and we make a (very) small contribution that goes towards keeping the blog running.

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