Total Money Makeover

Posted by LisaV | 0 comments

My husband and I recently read The Total Money Makeover by Dave Ramsey and decided to try it out this new year. In this book, Dave outlines the seven baby steps required to get out of debt and build wealth.

These steps are:

1) save $1,000 fast,
2) the debt snowball,
3) finish the emergency fund,
4) maximize retirement investing,
5) college funding,
6) pay off the home mortgage, and
7) build wealth like crazy.

Some of the steps we already accomplished, so we could move quickly to the next step. We already had $1,000 in savings, though not enough savings to last three to six months. We carried only one credit card and paid it off each month, but were challenged to cut up all our credit cards and get a Visa Debit card instead.

In December my husband went to the bank to order a Visa Debit card for himself. He shredded his credit card, but I still had mine. I was tempted to keep it, but after experiencing problems with my credit card company, decided to make the trip to the bank to order a Visa Debit card too. I still have my credit card now, but after the Visa Debit card arrives, plan to cancel my credit card and put that piece of plastic through the shredder.

Also on our to-do list is making a budget. To quote John Maxwell,

“A budget is people telling their money where to go instead of wondering where it went.”

I like Dave’s budget plan, where you write down each paycheck and allocate or “spend” your whole paycheck before you get paid.

Years ago when we were first married, we had read Larry Burkett’s excellent book, The Complete Financial Guide for Young Couples. We created a monthly budget and meticulously kept track of all our expenses on a handwritten spreadsheet. However, I found that we didn’t follow the budget, often overspending in many categories. After a while, we gave up on the budget since we didn’t follow it anyways.

Dave recommends creating a new budget every month. If you overspend in one category, that money has to come out of a different category. I like his approach better.

After paying off your debts (other than your mortgage) and fully funding your emergency fund, work on building your retirement fund. That is followed by saving for college and then paying off the home mortgage in 15 years or less. The final step is investing and building wealth.

Once you’re at the point of building wealth, Dave says there are only three uses for money: fun, investing, and giving. I like that he ends the book with a chapter on giving, the emphasis of another stewardship book I read: Money, Possessions and Eternity by Randy Alcorn.

Dave’s motto throughout The Total Money Makeover is if you will live like no one else now, later you can live like no one else when you are debt free. It’s an encouraging book that seems doable, with testimonies from several individuals who followed Dave’s plan and succeeded.

Our kids have been learning about money using a simple incentive chart and Dave Ramsey’s materials. We created an Excel spreadsheet for them to keep track of their money with columns titled Earn, Give, Save, and Spend, and a running balance on the right. Our 8-year-old has been reading Dave Ramsey’s Financial Peace, and both our boys listened to the CD in Financial Peace Junior for Kids. It’s neat to watch them comparison shop and make decisions about money, even at an early age.

Are you unhappy with your financial situation?  Are you responsible with your money but still worry? It’s never too late for your own Total Money Makeover!

Lisa (aka Morning Rose) has been teaching her two elementary-aged sons for four years and incorporating study, work, service, and play into their homeschooling days. She enjoys reading, writing, and photography and blogs publicly at Pockets of Time and privately at Scooter and B.