Friday, February 26, 2010

Review - Total Money Makeover by Dave Ramsey

Dave Ramsey's "Total Money Makeover: A Proven Plan for Financial Fitness" is a very serious book written in a very casual tone for those who want to take charge of their finances. It's a great resource for anyone in debt, even serious debt, who needs motivation and information on how to get out of a hole. It's also a good resource for those who have so far avoided debt but want to understand the benefit and relative priorities of emergency funds, retirement planning, college saving, debt-reduction, and investing. This new edition is able to comment on the 2008-2010 recession, as well as provide hope.

In Dave's own words, "personal finance is 80% behavior and 20% head knowledge." Because of this, Dave presents many stories, a ton of motivation, and some recommendations that while non-optimal from a mathematical perspective, work extremely well in practice. (For example, with multiple credit card balances, do you pay down the smallest one first or the one with the highest rate?) In this case, the results do speak for themselves. Also, Dave shares his story about becoming a millionaire and losing it all, so his perspective is from experience.

If you want more in-depth material or investment theory, you should also check out other books including Ramsey's "The Financial Peace Planner: A Step-by-Step Guide to Restoring Your Family's Financial Health". The strong focus here is on a simple-to-follow but tough-to-do process of 7 basic steps : start a $1000 emergency fund, payoff debt using the Debt Snowball, get 3-6 months of expenses in savings, invest 15% of household income in retirement plans, college funding for children, payoff your mortgage early, and build wealth and give. If you've listened to Dave Ramsey's show these may not be new, but this book puts it all together very nicely in one place. If you haven't taken many of these steps to financial fitness, definitely checkout Total Money Makeover, available at Amazon or other booksellers.

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