Pros: Simple steps anyone can use to reduce and eventually eliminate debt.
Cons: Ramsey makes a fortune telling people how to reduce debt, but he's honest about it.
The Bottom Line: Ramsey's principles toward debt reduction make sense. In fact, it's the responsible way our ancestors approached finances. I look forward to putting it into practice!
annsavage2's Full Review: Dave Ramsey - The Total Money Makeover: A Proven P...
Finally, financial principles that make sense!
Other financial "experts" tell people to take out the biggest, longest mortgage on their house they can get and then "invest the money at a higher rate of interest." Honestly, who does that? The people I know who take home equity loans or big mortgages spend it on more "stuff," not investments. The end result is they get deeper in debt.
This kind of philosophy never made sense to me because, in the end, what we would wind up doing is leaving all that debt for our children to clean up.
But Dave Ramsey is different! He says that it makes more sense to make a bigger down payment on a house and get the shortest mortgage (say, 15 years), or better yet, save up and pay cash for a house! That way, when the house is paid off you have that money to invest that the first guy was talking about going into debt for, only you don't have a huge debt hanging over your head.
Ramsey lays out basic steps (baby steps, he calls them) toward becoming debt free, including establishing an emergency fund, paying off and cutting up credit cards (going to a cash only system), and saving for college and retirement.
He also suggests ways to "transfer risk" and protect ourselves and our family's finances with the use of sufficient term life insurance, health insurance, homeowner and auto insurance, and long-term care insurance after age 60. And also what types of insurance we should NOT buy, such as accidental death policies or specific illness health policies.
Ramsey's steps are basic and simple. They are based, he said, on the things first-generation millionaires did to become millionaires, and what those same millionaires continue to do.
Also, unlike the financial experts that want you to go into more debt and want you to call their office to help you do it, Ramsey doesn't offer to manage your money or ask you to invest with him. He reveals the tricks of the trade that the business world uses to part us from our money and makes us better informed people!
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