Getting out of debt

The Total Money Makeover: A Proven Plan for Financial Fitness is written by Dave Ramsey, who is a financial guru specializing in providing a simple plan to help get out of debt and prioritize your spending to build wealth. Get away from the creditors as you’ll always be a slave to the lender.

He’s written a few best selling books along with the Dave Ramsey Show radio and Fox Business News TV show taking live callers and helping them with their debt situations. I’ve listened to his radio show since around 2002 and love hearing the live calls. Have learned all kinds of tidbits with his answers on topics like handling bill collectors, good and bogus life insurance policies, when to buy long term care insurance, etc. The Stupid Tax stories are always great as we’ve all done something stupid with our money and chalk it up to a lesson learned (hopefully).

Ramsey’s short but factual advices like: “A new $28,000 car will lose about $17,000 of value in the first four years you own it. To get the same result, you could toss a $100 bill out the window once a week during your commute.” and “If your mortgage payment is $900 and the interest portion is $830, you will pay that year around $10,000 in interest. What a great tax deduction! Right? Otherwise, being debt free, you’d pay $3,000 in taxes on that $10,000. But who in their right mind would choose to trade $10,000 for $3,000?”. These kinds of examples will surely wake you up and convince you that it is about time you do something with your financial matters.

I became debt free using his baby steps around 2006, and the lack of stress debts can load you with is just freakin’ awesome. I will never go back to credit cards or car payments again.

Here’s a summary of his baby steps -

1. Save $1000 for emergencies
2. Pay off debts one at a time, starting with smallest balance first
3. Emergency Fund – Save at least 6 months of expenses
4. Contribute to retirement plans
5. Save for kids college
6. Pay off the house
7. Build your wealth and give

Ramsey starts the book by examining several hurdles to financial fitness: denial, debt and money myths, and many people’s desire to collect stuff or “stuffitis” that gets them in trouble. He then lays out his seven baby steps. Throughout the book he shares stories of a number people who have followed the plan to turn their financial lives around.

The nice thing about Ramsey’s approach is that it follows a sequence. Many uptight, numerically obsessed financial “experts” criticize his approach, but Dave’s process factors in the human element of emotions that motivate us to success. And, while it may not be easy to work through the seven steps, the system itself is a simple one. That’s where this book is better than many wealth building books — it is practical and simple to understand.

If I have one complaint about the book, it’s Ramsey’s brash style – he can be at times condescending. All-in-all, I would rate The Total Money Makeover a must read for anyone who feels they need a little help in the financial circle if your reason for a side job is to pay off your debts.

His websites –

DaveRamsey.com – his resource page to help become debt free
MyTotalMoneyMakover.com - his membership site where you can have access to radio podcasts, forums, articles, and other tools.  About $10/mth.

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