Monday, April 07, 2008

Ramsey Review

I'm reading the Dave Ramsey book, The Total Money Makeover.  Here's my review thus far.  It's a 223 page book not including the financial forms in the back.  I skipped most of the first 5 chapters or 92 pages because they consist of a lot of cheerleading and basic knowledge.  I'm not saying that you wouldn't enjoy them or you shouldn't read them, but I didn't find them useful for myself.  Basically, he gets people to realize they have a problem if they are in debt of any sort, except your home.  Then he goes over a few "Money Myths" like; getting rich quickly by investing in stupid stocks and how bad of an idea whole life insurance is.  He also talks about bankruptcy and keeping up with the Joneses.  

I did read all the testimonies from families that are interspersed throughout the book.  They come from every walk of life and have a successful story to share.  Each story concludes with the families names, ages and occupations.  I was fascinated that many of the folks were one income families or blue collar and they still pulled themselves out of debt.

Dave's big sayings are repeated over and over in the book, "Live like no one else so you can live like no one else!"  and " Use gazelle intensity!"  He uses a lot of metaphors to explain simple solutions that I find irritating, but if you can't wrap your mind around a problem his story book simplicity will be helpful.  Especially, and he mentioned this, if you grew up in a family that never spoke of financial matters and then you went off to college to fill your head with all kinds of wonderful knowledge and then you were sent out into the world with a degree, but you never took a course about personal finance or had to learn to budget.  One of my roommates in college was this person.  She didn't know how to balance her check book or pay bills.  More than once the check she wrote to me for rent would bounce, yet her monthly income was more than mine!

So far I think Dave's book is helpful.  It's motivational.  He sets you on a path he calls baby steps.  The first baby step is to save $1000 for an emergency fund.  If you already have this or more saved then he suggested taking all your savings except for the $1000 and paying off debt.

Baby step 2 is the Debt Snowball.  Dave suggests lining up your debts smallest to largest (not by how much intrest is being charged) and then paying off the smallest first.  Pay the minimul on all the rest, apply all extra money to that smallest debt until it's paid.  Then take the amount you were paying on the smallest debt and apply it and any extra to the next smallest debt therefore, building your snowball.

Does any of this seem like, "Duh!" to you?  Good, then you're not one of the millions of Americans in debt.

I'm reading baby step 3 right now.  It's about finishing the emergency fund.  Building the initial $1000 up to a standard that would cover your expenses for three to six months, note I said expenses not income, there is a difference.  This is something Clay and I have never been able to obtain.  The second we have extra money we rush out and buy whatever it is we are longing to have.  We're not big spenders, but we are horrible savers.  We are going to rectify this with GAZELLE INTENSITY! (eye roll)  Seriously, this is one of our lofty goals. 

To sum up my review I think Dave Ramsey is a great kick in the pants for folks that are desperate, hanging by a thread, need some basic financial knowledge or need the type of motivation an excellent sales man can provide.  The thing is Dave isn't selling you anything that will hurt you.  You can check his book out at the library and skip the whole Financial Peace University thing or you can get the general idea and if you need the extra support then go find an FPU class and get started!

If you're still not motivated then rent the movie Maxed Out.  It will make you weep or wake you up. 


Autism Parent said...

Since the entertainment envelope will probably be less than healthy if you are Gazelle intense, here's some entertainment. Use this soundbard if you have credit card collectors hounding you. Pull up the soundboard, put the phone beside the PC speaker, and let Dave Ramsey confound, confuse, and hopefully anger the scumbag, bottom feeding credit card collector.

Dave Ramsey Soundboard -

Autism Parent said...

Dave Ramsey Soundboard - Play Dave. Great Prank!

Angie said...

Thanks for the review. The only thing I knew about Dave Ramsey was that he wrote some kids' books they gave away for awhile in Chick-Fil-A kids' meals. I didn't know he wrote "real" stuff too!

Anonymous said...

I liked the Automatic Millionaire book (the first one, no need to by the whole series...). I read it on a plane ride and then set up the systems and basically "forgot about it" since it's AUTOMATIC. I will infact by a 7-figure gal if I don't get hit by a bus before I'm 65.

Here's my silly system...

I carry zero credit card debt. I pay off my AmEx every month.

I bought a house that was more than 2 times LESS than what I was told I could afford.

My employer mathces 50% of what I put into my 401K up to 6%. I put in 16%. Anything that goes over the limit rolls into a roth account.

I have a money market account with a high rate that automatically snags dough out of my checking account on pay day.

I have some stocks - but they are tanking. Still, I'll let em ride.

I use coupons. When something is on sale and I have a coupon - I stock up. I have not paid ANY money for shampoo, deoderant, razors, tampons, pads, face cleanser or other hba items in atleast 3 years...and I don't use the cheap ones either. I'm a name brand girl.

We have 2 cars, 1 we share with my Mom. One car is a 2000 Toyota, the "newer" car is a 2006 Toyota. I paid cash for 50% of the 2006 Toyota and financed the other 50% over a 2-year period when Toyota ran a 0% apr promotion.

I think I'm going to do a coupon tutorial post soon - so many people don't really understand the ins & outs of them. CVS and Target are a couponers heaven...

Karen Deborah said...

We have something to help people get out of debt even faster than Dave's methods and without eatting rice and beans 6 nights a week. We can give anyone whose interested a free analysis on line, anywhere in the USA. I'm all for financial freedom.

Coffee Bean said...

We have pulled ourselves out of debt several times. Unfortunately, our medical expenses are astronomical and we get into to the position of going back into debt and digging ourselves back out again. We have excellent credit though.