Name: The Total Money Makeover
Rating: 4.3 (249 reviews)
Author: Dave Ramsey

What’s in it for me? Learn how to revolutionize your financial health.

Seeking advice on how to be financially secure can be stressful; there is a glut of financial gurus telling you how you can follow a few simple steps and become a millionaire.

Most of this advice is hogwash, but some of it isn’t. These blinks present a simple and straightforward plan based on advice from distinguished financial expert Dave Ramsey. If you follow his plan, you’ll stand a greater chance of getting your finances in order and becoming financially secure – that is, reaching financial fitness – something we all dream of.

In these blinks, you’ll discover

why you aren’t as comfortable as you think you are;
why it might not be worth it to attend college; and
why you shouldn’t eat an elephant in just one sitting.

Your financial security is an illusion, and it’s time for you to take action.

Would you say you’re financially comfortable? Many of us feel secure enough in our finances, even though we all could use a few extra dollars. You probably have a job, and perhaps a car and house, and financial difficulties therefore seem far, far away.

But no matter how secure you may feel at this moment, financial insecurity may be closer than you think.

Imagine you suddenly lose your job: What would you do? Would you be able to pay your bills? Unlikely. Financial security is often more illusory than we think.

Take the author’s client Sarah, for example. After her marriage she and her husband calculated their joint annual income to be over $75,000, and they had only a few debt obligations between the two of them. Feeling comfortable with their earnings and their debt, they proceeded to take out a large mortgage on their house.

But that’s okay, right? They could afford it. Or could they?

One day Sarah discovered that she was losing her $45,000-per-year job. Suddenly, they faced foreclosure on the house.

As in Sarah’s case, sudden financial setbacks can put us quickly in dire straits. What can we do? One way to avoid unpleasant surprises is by taking action before it’s too late. Change things now.

It’s easy not to feel this sense of urgency, to think instead that you can simply carry on until things turn sour, and then change. But this is totally irresponsible. Financial difficulties sometimes creep up on you, and before you know it, you’re in trouble.

It’s like the proverbial frog in the pot of water: As the water slowly heats up, the frog doesn’t realize that it’s being boiled alive and will let itself die.

This is what is happening to you right now. Your financial security could be slowly collapsing around you, and you have no idea.

It’s time to make a change.

Debt is treated like a fact of life, but we need to recognize its constraints and dangers.

In our modern world, we are constantly encouraged to go out and buy stuff – a house, a car, a huge TV, you name it. And how exactly are we supposed to pay for all these things that we simply must have? With credit, of course.

Debt today is so ingrained in our lifestyle that it’s hard to imagine living without it. You probably have a decent amount of debt yourself, whether in the form of student loans, a mortgage, credit card debt or car payments.

Step one on the path to financial fitness involves creating an emergency starter fund.

So far, we’ve established one way not to establish financial security: trying to spend our way to success using credit. So what can we do?

You’ll need to start by creating a step-by-step plan that charts the route to financial fitness. Although you know you need to change the way you approach your finances, you must also realize that you can’t change everything at once. Instead, you should do yourself the favor of proceeding slowly, one small step at a time.

Steps two and three: Start paying off your debts one at a time and, when you’re ready, grow your emergency starter fund.

Once you have your emergency starter fund set up, you’re on your way to turning your finances around. Now it’s time to get your debts sorted out.

Step two of the Total Money Makeover is to create a debt snowball.

Step four: Invest 15 percent of your income in mutual funds to provide for yourself in retirement.

Everyone has big worries about the financial situation they’ll face after retirement. We ask ourselves: Will we have enough money to live comfortably in our golden years?

In order to overcome such fears, we turn to step four of the Total Money Makeover:

Step five: if you want your kid to go to college, plan for them to get there debt-free.

Nearly every parent dreams of sending their child to college, and many parents are prepared to let themselves and their children go into debt to fund this dream.

But as we’ve already discussed, debt is to be avoided at all costs. Funding college with debt should not be considered a tenable option.

Step six is becoming debt-free by paying off the biggest loan of them all: your mortgage.

So how long have you been paying off your mortgage? Often, they take decades to finally pay off.

Step six of the Total Money Makeover is about paying it off as soon as possible. For most people, this is the final hurdle on their path to financial fitness, and paying it off will leave them absolutely debt-free.

Step seven: follow your plan and spend (and give away) your money if you have it.

At this point, you’re right on the brink of financial fitness. You’re on the last leg of your journey, with just one final step to go.

Once you are debt-free and have begun to save for your future, it’s time to start building up your wealth.

The Total Money Makeover summary