Dave Ramsey – Get The Debt Free Advantage! 65k Eliminated
This is my book review of Dave Ramsey –
The Total Money Makeover.
Dave Ramsey, Changed our lives.
If you are in a lot of debt, don’t know where your money is going or just want to manage money better I think this book is a great start. This is my #1 recommended book for beginner’s.
Awhile back my sister and dad really got into Dave Ramsey and started to pay off their debt, then slowly they fell off the boat. The book collected dust for both of them. I started reading about money and my sister suggested I read Dave Ramsey’s financial books. Like me with a fresh 6 pack of butter tarts…….. I ate it up!
The book was a super easy read and full of real stories of people who did the system and are living it up now debt free. I think I read the book in 2 days and its no small book. It was time to start. I suggested to the wife to read it as well because we are going to do this! She read it in about a week and was on board as well.
I owe a lot credit of our financial position to this man. We were over 60k in debt when I read this book, with his system we paid that off in roughly 2 years. As Dave says We were sick and tired of being sick and tired…… I drank the juice, pushed the chips and went all in.
The start of the book is about his life, he went big when he was in his early 20’s and was really wealthy but it was built on debt. The bank eventually called him out on all his loans and he went bankrupt. He slowly increased his wealth again through hard work and old school common sense.
Dave Ramsey breaks down his system in 7 baby steps and urges everyone to go in order.
Baby Step 1
Put $1,000 in a emergency fund. This is the first step. Sell whatever you can, do whatever but get that thousand bucks! He wants you to have money so if anything comes up, you don’t need to go into debt for it.
Baby Step 2
Pay off debt using the debt snowball. Dave Ramsey recommends writing down all your debts (excluding your mortgage) smallest to largest in one column. The next column put the minimum payment beside each. Next column total payment – For first item it will be same as minimum payment but the one under add the top minimum payment to the second minimum payment. Do this for your whole list to see what you are currently paying monthly in just minimum payments…
It was a eye opener for us, we were paying approx $1700 per month in student loans, credit cards, car payments. Ignore interest rates we just want you to pay the lowest ones first and start this snowball. Make minimum payments on everything but the top item throw all extra money at it until its gone. Now on to the next one!
Baby Step 3
Woot! Congratulations you did it. Go spend a little money and celebrate. OK now save 3-6 months of expenses in savings. Mortgage payments, bills, food, life etc. I wasn’t a huge fan of this one cause I would rather invest it but he states that women love seeing a safe haven account. I can tell you from personal experience the wife loves having money in a account for safety if for some reason we fall short or a car repair pops up.
Invest 15% in a tax favoured account. Dave Ramsey recommends saving 15% before taxes, of your paycheque. Just put it away before you see it. If you can save more bonus! He believes in mutual funds but this is where I disagree. There are great index funds or etfs if you want diversity with lower fees than mutual funds. Or you can buy high quality dividend companies. Either way do your research but start investing!
We use Questrade to buy etf’s and stocks. The fees are lower than most Canadian Broker’s and buying etf’s are free. This is fantastic if your putting a portion of your pay away each week. Feel free to click my affiliate and get 50 bucks in free trades.
Fund College for your kids. Now that you are debt free and are saving for your own future, time to save for your kids schooling. College will only get more expensive and the government will help you out saving for it. In Canada we can throw $2500 per year per kid to a resp and the govt will throw us $500 per kid per year! sweet! Read More about that here on my page about RESP’s.
Baby Step 6
Pay off your home early. Dave Ramsey says that a paid for house, the grass is greener. I wouldn’t know =) Throw all extra money towards your mortgage and pay that house off early. I personally like the growth and dividends from my investments over this since current mortgage yields are so low. But when both our tfsa’s and rrsp’s are maxed, I will be focused on paying off the mortgage.
Baby Step 7
Build Wealth and Give A Lot. It truly is better to give than receive. You and now rich, enjoy it. Donate to whatever charities you like and help lots of people. Nice work, you did it. Financial Freedom.
The Dave Ramsey System Propelled Our Finances.
I highly Recommend this book to beginner’s. Dave Ramsey changed our life’s. Living a debt free life really creates more options for you. You can now afford more, and yet you didn’t even get a raise!
If you listen to podcasts, check him out there as well – The Dave Ramsey Show. I really enjoyed listening to others killing it, on my way to work. It will help get you motivated hearing other peoples stories.
If you are interested in the book and would like to check it out, feel free to click the amazon link below.
Cheers and Good Luck!
The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness
Hey I’m Rob, creator of Passive Canadian Income.
In 2011 me and my wife had almost $60,000 in debt and a negative $7,000 Net Worth. Through hard work and financial education we paid all that off. Now we are focusing on increasing our Passive Income Streams to make the money work for us. Feel Free to Follow along the Journey by clicking the Social Media links below or subscribing to get notified of new posts on the sidebar.
Great review PCI. I’m a huge fan of Dave Ramsey. I listen to his podcasts regularly. I read the Total Money Make Over. And, I even attend a couple of his Financial Peace University classes. However, I must say that I don’t follow him religiously either. As for baby step one, I completely agree. Right now, my starter emergency fund is about $400, and I might have to use it for something. So, I constantly have to rebuilt that starter emergency fund to $1000.
I love his approach to tackling debt, that is the smallest to the largest via the debt snowball method. Where I diverge though is that I still invest while paying down debt, which is not his approach. His approach is to focus everything on getting out of debt. I don’t disagree that his approach works and I recognize that it has probably helped millions of people get out of debt. But, for my personal situation, I’m really focused on investing in my retirement accounts and dividend portfolio. I have one student loan remaining and I recognize that it’s going to take me longer than necessary to get out of that debt, but I understand the cons and accept them.
For baby step three, I have no quarrels there. Although I agree that if you can save more than 15%, then even better. Finally, I’m torn between paying off your mortgage early which Dave Ramsey recommends, vs not paying off your mortgage early, which Ric Edelman recommends in his book, the Truth About Money. Perhaps you could review that one next.
All in all, I like Dave Ramsey. Thanks for the review of his book. I just choose what parts of his plan I want to follow based on the specifics of my life. As they say, personal finance is, after htt, personal.
Hey port nice writeup. I went all in with the debt snowball but i can see the argument to invest as well. Never read that book by Ric maybe i got to put it on the list to read! Cheers
I am currently on baby step #6. Although I am also working on step 4 and 5 continuously.
I would love to have a paid off house. However, I don’t have honk that it’s necessary. Look at it this way, if you have the financial discipline to pay off your mortgage, you will definitely have the discipline to save and grow your money.
The important thing to keep in mind is: save and invest often.
Hey nice work Leo. Yeah it is true, you would think you would be disciplined either way but it would definally be nice to be mortgage free.
Hi ! I just discovered Dave Ramsey and want to start the programme asap. Wondering if you bought the financial peace university online programme (since you can’t attend the course, they are all in the states). Did you work the programme just with the book? I’m older to be starting the clear my debt, but better late than never.
Congrats. I read the book in a day or 2 and got hooked. Got the wife to read it and we were sold. I didnt do the university.
Did the debt snowball and listened to his podcast for encouragement. (highly recommend those debt free screams!)
If you get hooked on being debt free, you will fly through it.
Best of luck Dani!
I follow Dave and pretty religiously and though we may disagree on certain details his methods have worked for the numbers. In Canada though certain differences make Some of his expectations a little inapplicable to Canadian context. Is there Canadian version or recommendation of Dave Ramsey solutions to wealth building
not that I know of. Gail vaz oxlade may be the closest one I can think of. She used to have a show helping people pay off their debt but I think it’s been discontinued.
Hi could you tell which Insurance company would be the best for us to have for Term Ins here in Ontario.
Have you heard of Enriched Academy on Instagram would like your thought on it thank you very much .
I think the best would be to shop around. Each person is different. We personally use London Life but setup our insurance years ago. I have no clue how they would fare at the moment.
I have not heard of them, if they are a life insurance company I would probably stay away personally. Id like to stick to the big companies that way if something happened to me or my wife I know the funds would be there.
Good luck, let me know how your search go’s
Thank you for your response that’s a good plan to go with a reputable & established Insurance c we will start looking.
The enriched Academy were seen on Dragons Den they seem to have similar standards as Dave Ramsey not hundred percent or how new they are in Canada .We’ll stay in touch thank you for your information appreciated.
Have a great day.
Hi Rob –
I’m wondering if you have more advice to give on Dave’s view on how to allocate investments. His recommendation is to divide investments equally among four categories: growth, growth and income, aggressive growth, and international.
What would be comparable for Canadians? Are there similar mutual funds in Canada or should we allocate our investments differently? Do you think trying to stick to Dave’s categories would be important?
This is one area I really can’t wrap my head around with Ramsey. Love the guy, his systems etc etc but why does he still recommend mutual funds? It makes 0 sense.
Etfs are the far better option as they cost way less fees. His 4 categories are good and that can be a big discussion. growth stocks or income stocks. I prefer to go the dividend growth stock route in North America vs etfs but am currently debating adding either zdi or xef (etfs) for international exposure.
Canadian Couch potato has a good post about etf or mutual fund investing in Canada and would know more in regards to those funds. Check out this post https://canadiancouchpotato.com/model-portfolios/
Wish you all the best on your journey Chris.