Cons: Generic. Too many happy customer letters. Dangerous financial assumptions.
The Bottom Line: I know a few people who could use this. It's a plan you can follow, but you need to *seriously* follow it. No questions asked or backsliding.
jcare's Full Review: Dave Ramsey - The Total Money Makeover: A Proven P...
It seems in the past few years everyone and everything has been in for a makeover. They're all over Home & Garden TV, TLC and all the other minor cable channels. So it's only natural that our finances should be due for a makeover as well.
As part of our church's annual fund-raising and group study program, just about every small group associated with the church was given a free copy of Dave Ramsey's book. The rationale being that many people are suffering under the current economy so it was an attempt to help - plus asking people to take a serious look at how they are spending money certainly would help the church.
Dave Ramsey's pitch is that "hundreds of thousands of ordinary people have become debt-free - here's how you can too". This is reinforced by the mantra printed at the bottom of every page reading "if you will live like no one else, later you can live like no-one else."
So what is Dave's master plan and what does it mean to you?
The first five chapters and eighty pages are filled with do's and don'ts and myth-busting. The basic premise is
•1. Stop spending money on things you want as opposed to things you need •2. Cut up your credit cards •3. Never lease a car •4. Never buy a new car, buy used cars •5. Trailer homes are a bad investment •6. Don't play the lottery
There are a few nuggets buried in the eighty pages, and a few dangerous assumptions about interest rates, rates of return and taxes. More on that later.
Finally in chapters six and onwards we get to the heart of Dave's plan:
•1. Put away $1,000 in cash as an emergency fund. Don't touch it except for a real emergency. •2. Make a budget and look where every dollar goes. Question everything. •3. List all your debts, from smallest to largest - along with interest rates •4. Don't do anything with your mortgage yet •5. Pay off all your debts using the debt snowball. Which means pay off the smallest first, then move onto the next one, adding in the payments you had been making on the first small debt - and keep going. •6. Time passes •7. Expand the emergency fund to somewhere between 3 and 6 months total expenses. •8. Time passes •9. Invest 15% of your income in Retirement ..
(and you'll have to read the book to find out the rest).
The issue with this book is that it is written for a very wide audience. As such, the advice is very generic and you can always find fault with it. If I had read this book coming out of college it may have saved me from making a few mistakes. It may also have caused me to make a few. Every couple of pages there is an example or letter from a Dave fan detailing how they became debt-free. After a while it gets simply annoying and you learn to skip anything in italics. However, if you are in debt and need a plan to help you get out of debt (rather than calling those 800 numbers on TV), or you are coming out of college with debt - it's not a bad book. I'd also suggest this book for any young newly married couple. It's by no means the only book or plan out there - but if you are the type of person who needs someone to lay out a plan and then you have the discipline to execute on it - go for it.
The other words of caution revolve around some of the assumptions built into the book. I'm no financial planner - but assuming an average annual rate of return of 12% for mutual funds is very aggressive. His advice about not investing in a 401(k) even with a full company match until late in his plan is suspect too.
Bottom line - did this book make me change my behavior? Not really. I have started to pay cash for more things than I used to and I continue to drive my 2000 Honda Accord instead of buying a new car.
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