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The Total Money Makeover
Read in 14 min.
Listen in 18 min.
Learn the key ideas of the book by Dave Ramsey

The Total Money Makeover

A step-by-step program to help you become debt free

The Total Money Makeover plan debunks some of the most common myths about money and debt and offers a 7-step program to help you rid yourself of debt and finally be free from financial worry. The program is aimed at everyone, from rich people to those who are drowning in debt. By implementing the steps in the right order, and by being consistent, you can become ‘financially fit’ and turn your life around.

The Total Money Makeover
Read in 14 min.
Listen in 18 min.

Breaking down the first barriers to financial health: overcoming denial and social pressure

To change one's financial situation takes about 20% knowledge and 80% action. The Total Money Makeover is a program that allows you to free yourself from debt and financial worry by making small steps to change your behaviour, and is based on one basic principle: if, today, you make the sacrifices that most people don't, in the future, you will be able to live in a way that most people cannot: he says “If you will live like no one else, later you can live like no one else.” This means that in order to live a better life than most people, you have to act like most people wouldn't: make sacrifices now in exchange for financial security later.

The program is built on a series of small sequential steps, called "Baby Steps", each of which acts as a building block for the next step. No matter how big your financial challenges are, you can overcome them by facing them one step at a time. The foundation of the approach involves maintaining a focus on each single step. But to successfully embrace the Total Money Makeover, you must first overcome some mental and emotional obstacles that stand between you and your financial health. Once you have removed these barriers, it will be much easier to completely change your relationship with money, without falling back into old habits and thinking patterns.

First, you need to overcome denial, face your financial reality, and take 100% responsibility for your money and your life. You can't deal with a problem without first recognising that you have one. To understand why you have money problems, why you are heavily in debt and cannot make ends meet, or why you find yourself unprepared for emergencies, just look in the mirror: your financial situation is the result of your behaviour. The solution to a bad financial situation is not a higher salary, a godsend, or a better job, but the realisation that your bad financial decisions are your fault, and that you therefore need to change your behaviour.

Then, you have to overcome social pressure - there is no point in buying things you can't afford and living a luxurious life beyond your means just to impress others. Learn to prioritise your financial goals over other people’s opinions, and get rich instead of looking rich.


The key ideas of "The Total Money Makeover"

Breaking down the first barriers to financial health: overcoming denial and social pressure
Breaking the myths about debt and money: to get your finances under control you must reject the idea that debt is normal
Two key steps to get started: make a written monthly zero-based budget and catch up on loan and credit card payments
Baby Step 1: set up a small emergency fund of $1000 in cash
Baby Step 2: begin your “debt snowball”, starting with your smallest debt
Baby step 3: grow your emergency fund until it can cover at least three month’s expenses
Baby step 4: invest 15% of your income in your pension fund
Baby step 5: getting into debt is not the only way to send your kids to college
Baby step 6: pay off your mortgage, which should never be more than 15 years and 25% of your your salary
Baby step 7: build wealth by investing, enjoy your money, and give to those less fortunate
Take-home message
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