Book Review: The Total Money Makeover
I recently read "The Total Money Makeover" by Dave Ramsey. I was a little skeptical at first to read this book as I have read other people on Bigger Pockets criticize his "no debt" methodology.
I actually was surprised by this book. I really enjoyed it. Dave's really not focusing the "no debt" mentality on everyone; I see it as focusing it on those who have "lost their way" with money. Those who have racked up thousands of dollars in credit card and other "bad debt" and can't find their way out.
The #1 thing discussed was to save up an emergency fund. This is good advice for not just ordinary people but also landlords. Some landlords get themselves in trouble because they just can't pay for a major thing that happens in their life and they wind up losing their rental property as a result.
The "snowball" methodology was discussed in the book. This is where you take your debts and line them up from the smallest to the largest. Then you pay as much as you can toward the smallest one while just making the minimum payments on the other ones. When that lowest debt gets paid off, take all the money you were putting to that one and throw it at the next smallest debt. That one should get paid off and then rinse and repeat.
There are a lot of people, who for one reason or another, find themselves in serious debt that they seem cannot get out of. I know someone who was once in credit card debt to about $10,000. I went over his bills with him. The big wake-up call that I showed him was that he was getting charged so much in interest each month with the minimum payments that it would take 14 YEARS to pay everything off. I worked with him to come up with a plan that would get everything paid off in 3 years. That can be a very liberating thing.
So in all, after reading the book, it felt very inspiring to me.
Comments (16)
with the shape this country is in financially i think everyone should read his books
i agree that you can leverage your properties to get good cash flow
i just think you need to be careful doing this as well
Mark Brogan, over 9 years ago
@Dawn Anastasi
I can honestly say, I enjoyed your review more than I have David Ramsey's writings.
I understand where he's coming from and acknowledge that strict adherence to his approach may be good for the undisciplined - hence, I gave my book to my brother. However, I'd never have been able to grow any of my businesses in the time I did if I did not utilise debt. The key is to never loose sight of who needs to be in control of the relationship.
Roy N., over 9 years ago
Dawn, enjoyed reading your review. Many people I know at church have paid to take his multi week video program (which seems crazy to spend $100 to save money, kinda like guru's), and I've been curious to learn more about it. Cash is evil in my life, because you can't track where cash was spent, but we're disciplined to pay consumer debt off before interest kicks in. You've inspired me to move it higher on my reading list, thanks!
Michele Fischer, over 9 years ago
I'm glad you've gotten something out of my book reviews like I've gotten something out of yours!
Dawn Anastasi, over 9 years ago
Someone with free and clear properties may be a bigger target for a law suit than someone who has mortgage debt on those properties. If you are planning on owning unencumbered property it would behoove you to have a strong asset protection plan and/or good insurance.
Jeff Rabinowitz, over 9 years ago
Very good point Jeff. Equity stripping is a trick that many prominent asset protection attorneys advise their clients to employ along with other traditional strategies like adequate liability insurance coverage.
Sonny S., over 9 years ago
Thanks for your review Dawn. I've been listening to his podcasts for the past few months and agree that not everything needs to be in cash. And especially as it pertains to RE when the interest rates on property tend to be much more favorable than compared to credit cards, I think people can use leverage a little more safely.
I do like his "snowball" method, and it would appear to be a great approach to paying off properties to increase cash flow.
Matt Overbee, over 9 years ago
Yes you can do this with mortgages, not just credit cards as many of the examples in his book show. That is great if you have a full time job and aren't living on the cash flow.
Dawn Anastasi, over 9 years ago
Though I generally disagree with Dave Ramsey's advice as a disciplined investor, I do understand how his advice is helpful to those who cannot control their spending. For example, instead of paying of the credit card with the smallest amount, why not pay off the credit card with the highest interest rate. That debt is "costing" you the most. However, as a friend explained to me in the past, the psychological win of paying off debt, and then snowballing that payoff, can be huge. It's kind of like the MPG game that people play in their Pruis...lets see how efficient we can be each day will actually end up saving you money in the long run, even though the cost of the Pruis is generally not "worth" the purchase price. Anyway, thanks for sharing!
Frankie Woods, over 9 years ago
Hey Frankie ... what deals are you in right now? You are in the KC market right?
Nathan Brooks, over 9 years ago
I like Dave Ramsey too and for average people he is great but for people but dave wants you to pay cash for everything even RE investments, I heard this on one of his shows from a caller wanting to know if it was ok to take out a loan for a duplex and have some cash flow and he wanted them to pay cash for the duplex, it would have taken the guy 20 years to save up to pay for the duplex that is the problem I have with Dave and he talks about 15 to 20% on his investments but he never talks about what kind of investments. I have taken Dave Ramsey classes, I really like Robert k. for business advice.
Chip Chronister, over 9 years ago
I also disagree that you HAVE to buy everything in cash. I have 7 mortgages so obviously I don't follow that advice! However I do have several properties that I paid cash for and don't have mortgages. So it's a mixture. Ultimately people want to use leverage to buy MORE properties, but they want the properties paid off to get the most cash flow (or to re-leverage them to buy more properties).
Dawn Anastasi, over 9 years ago
I'm a big fan of Dave Ramsey .. I'm still using the envelope system after meeting him over 18yrs ago at a live event in Nashville.. However, I do believe in financing RE. His sound principles keep me from over leveraging!! I give the book to graduates.. Financial sound principles to get off to a great start!!
Rolanda Eldridge, over 9 years ago
Thank you for the review, Dawn.
I enjoy Dave Ramsey, having read a couple of his books, as well as when I occasionally catch him on the radio. I know some people struggle with the religious-side of his writing, however it doesn't bother me in the least.
His method(s) for getting out of debt, maintaining an emergency account and living within your means are ALL sage principles, and are a good reminder that many people are just one (medical) calamity from bankruptcy.
Todd G., over 9 years ago
Thank you for the good review of a great book Dawn, I love this book and think that it has a lot to offer folks from just beginning to look at themselves as financially independent to those who have large investments in RE and other areas.
Bradley Bogdan, over 9 years ago
Thanks Dawn. I agree that the book is more generally targeted than just real estate investors, but his primary message in his talks is the freedom and liberation available by becoming debt free. As investor's I think that's generally the goal of all of us. We want to purchase income producing property to liberate our time to use for other things. To do so we often use debt, but the trick is to use it and not be controlled by it. It needs to be a tool, not a shackle. Become too leveraged and it becomes a shackle.
Alan Mackenthun, over 9 years ago