Dave Ramsey – Total Money Makeover. We paid off $65,000
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 book. 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 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. He 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. He recommends saving 15% before taxes, of your paycheque. Just put it away before you see it. If you can save more bonus! Dave 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. They say 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. 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!
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.