Dave Ramsey’s Total Money Makeover Review
Posted by Cap in Reviews |
The Total Money Makeover:
A Proven Plan for Financial Fitness
Author: Dave Ramsey
Publisher: Nelson Books
ISBN: 0785263268 – Hardcover, 244 pages
Dave Ramsey hates debt.
If I was debt, Dave Ramsey will smite me down where I stand.
Just like the authors of the other book reviews I’ve done, I’ve had no prior experience with Dave Ramsey’s previous work (I was illiterate till recently). The only reason I picked the book up from the library was because I thought the guy on the cover was Steve Jobs (turns out he’s not).
As I’ve mentioned, Dave Ramsey doesn’t seem to be fond of debt. There’s a good reason for that – he use to be in the debt hole himself. In fact, he was bankrupted. He went from fairly rich at 26, to fairly poor within a few years. After declaring bankruptcy, he took a hard look at himself and how he handled his money.
Ramsey started the second chapter of the book discussing the effects of denial on those with debt. He challenges you to take a look at your own financial picture, and examine if you’re in the hole or not. The book continues on with two very important chapter, specifically, the chapter on Debt Myths and Money Myths.
In Debt and Money Myths, Dave Ramsey lays out many of the common myth that can be often associated with debt, or general money matters. The Debt Myth chapter is basically focused on tearing down the often sold debt ideas within our society, while the Money Myth chapter focused on the financial mentality of people.
Here are some noteworthy ones:
Debt Myth: Make sure your teenager gets a credit card so he or she will learn to responsible with money.
Truth: Getting your teen a credit card is an excellent way to teach him or her to be financially irresponsible.
Money Myth: I’ll just file for bankruptcy and start over, it seems so easy.
Truth: Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage.
Money Myth: I can’t afford insurance.
Truth: Some insurance you can’t afford to be without.
Many of the debt and money myth are pretty solid, although I do question some of his debt myths. Specifically the anti credit card platform. One of the debt myth Dave Ramsey argues against is the fact that debit cards do not have more risk than credit card. I agree with that point, but he also failed to mention the broader protection afforded by credit cards. Of course, the benefits of credit cards can easily be overshadow by irresponsible usage.
Continuing on, the rest of the chapters lays out Dave Ramsey’s plans for attacking debt and building wealth, which he calls the “Baby Steps.”
The Baby Steps can be lay out as this:
- Start an emergency fund of $1,000.
- Pay off all debt fast using the “debt snowball” method (except mortgage).
- Build emergency fund to cover 3-6 months of expenses.
- Invest 15% of household income into Roth IRAs and other pre-tax retirement accounts.
- Save for your child’s college fund
- Pay off home early
- Build wealth and give! (Mutual Funds & Real Estate)
Couple things about the baby steps. They’re pretty solid besides a few things. His college saving suggestions are all pretty dead-on, except for the out of place mention of serving in the National Guard as a means to pay for college. I have nothing against military service, but an important decision such as that should warrant more discussion, instead of a simple one sentence mention, as Dave Ramsey did in the book.
The methods to build wealth (or lack thereof) via mutual funds and real estate is also questionable. I understand that the book centers around debt reduction, so the wealth building portion of the book can be lacking – but suggesting mutual fund without providing more insight can be a bit misleading. If a person is not careful in his selection of funds, he can easily be losing money through fees. Not to mention the fact that many mutual funds have poor track records in beating the market.
The complaints (on Baby Steps) aside, Dave Ramsey’s method of debt reduction, although at times a bit aggressive, can be implementable. Each of the Baby Step he list are important aspect in a person’s financial life, and his emphasis on emergency funds are well appreciated. As you read through each of the chapter on the Baby Steps, Dave Ramsey explains the importance of each step and supplements his points with stories from real life families. This brings me to another problem with the book. Of the 244 pages, many of them are riddled with excerpts of stories after stories. In fact, the last few pages of the book contains even more Total Money Makeover stories. Showcasing result is fine and dandy, but too much of it can become unnecessary fluff.
My beef with the book doesn’t stop there, unfortunately. If you’ve read Dave Ramsey’s previous book Financial Peace before, you really don’t have to bother with this book. While I was reading The Total Money Makeover, I checked out some of his previous work so I can compare and contrast. It didn’t take me long to realize that The Total Money Makeover is simply Financial Peace repackaged, with plenty of fancy products supplementation. The Financial Peace University, My Total Money Makeover website, and the Total Money Makeover Workbook are all clear examples of excessive fluff.
It’s a bit silly to tell people to avoid buying into debt, and then have the last few pages of your book looking like a late night shop-at-home infomercial. The book’s tag-line of “If you will live like no one else, later you can live like no one else” didn’t really help in negating the infomercial feel too.
Still, some of the content in The Total Money Makeover aren’t total crap. Yeah, the extra product placement towards the end is a real turn-off. Sure, repackaging a previous written work as a new work is a bit shoddy, but within all the fluff and the “You can do it!” cheerleading, there are some meat to be found.
If you’ve already read his previous work, then The Total Money Makeover isn’t a necessary read. If you’re wallowing in debt and you haven’t read his work yet, The Total Money Makeover can be a helpful reference in adjusting to the right direction of debt mentality – but be careful to not rely on it (and its supplemental products) as a guide to building wealth.
Pros:
- Good at dispelling many debt and money myths
- Works well as a motivational tool in debt repayment
- A debt reduction method that looks to be solid
- Places emphasis on the importance of emergency funds
Cons:
- The anti-credit position is a bit overbearing
- Way too much stories making up the content
- Very similar to previous work
- Too many product placement & supplementing programs
- Careless mutual fund suggestions
- Depth-less wealth building content
20 Comments to “Dave Ramsey’s Total Money Makeover Review”
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February 28th, 2006 at 2:36 pm
I haven’t read his book, although it’s on my list to get to. I listen to his show on the radio once in a while. I like what I hear. As far as your “cons” go, I think DR would enjoy hearing that the anti-credit position is overbearing. He likes it that way.
I agree about the product placement. The commercials during his radio show are all him doing a pitch for this, that and the other.
I also agree about the Mutual Funds, he routinely says, “if you put that in a good growth stock fund earning 12% or better, and there are plenty that have done much better than that, you’ll have $xxx,xxx”
February 28th, 2006 at 6:24 pm
I’ve said it before but there is something about Dave Ramsey that just rubs me the wrong way. Perhaps it is the “makeover” he went through (cutting his hair differently, growing a beard and changing out his glasses) so that he could sell more books.
Overall, I agree with his message that we shouldn’t have consumer debt. Where I differ is that I think debt can be a tool as long as you know how to use it.
March 1st, 2006 at 12:15 am
Dave Ramsey is, to put it bluntly, another salesman with an effective pitch. His crutch is religion. Personally, I find that a big turn-off. It has nothing to do with MY religious beliefts, but he does use religion to make his statements sound more credible than they really are. The only reason the guy is rich now is that he knows how to B.S. with the best of ‘em and that he has good looks. Humans are no different than any other animal, in that they judge the cockiest and best-looking to be the best of the pack. Basically, save your money. Don’t buy Dave Ramsey’s junk. If you want real motivation go listen to Zig Zigler or a nationally-syndicated motivational speaker. Wait a second, that’s Dave Ramsey!
March 1st, 2006 at 5:09 am
I like most of what Dave has to SAY (except he’s a bit overboard on cutting up credit cards), but the WAY he says it is what bugs me. I think he adopts a “wild man” persona when he talks about money and it rubs me the wrong way (maybe that’s it for you too, JLP).
March 1st, 2006 at 7:58 am
I’m 100% with you on Dave’s hatred of credit. If you ask me, I don’t want to be the dumbass without the credit card and the ability to order things off the Internet and phone, get a hotel room, airfare, or rent a car.
I firmly believe that having a credit card/a loan is a necessity. How else would you become trustworthy enough to buy a home?
My father-in-law goes to The First Church of David Ramsey, figuratively speaking. He worships the guy. He hates credit, debt, AND spending money. Last year he put over $3,000 into repairing his daughter’s very rusty 1991 GMS Jimmy with 300,000 miles on it, all in the name of “I know where the car’s been” and “she doesn’t need a car loan”.
March 1st, 2006 at 12:02 pm
It’s tough for me to rag too much on Dave Ramsey, because in my personal financial life, he told me what I needed to hear … just when I needed to hear it.
Since then, though, my view of Dave has faded a bit. Yes, he’s bigtime and commercial. Yes, religion provides most of his audience. Yes, his assertions of 10%+ returns “in the market” are shaky. But I’ll take him over, say, David Bach, any freakin’ day.
Dave certainly helped me get where I am. He helped me “get my head straight” regarding debt and money. But his message isn’t the end-all, be-all in financial advice, by any means.
March 1st, 2006 at 2:22 pm
hmm I didn’t realize Dave Ramsey push the religion base that much till I read these comments and searched more on it.
now I see why I felt a bit weird as I read the book. if you couldn’t tell from the review, I semi-switched view half way as I wrote it.
but yeah, what everyone has mentioned so far about Dave Ramsey is pretty much dead on.
March 1st, 2006 at 2:37 pm
What’s funny is that I’m not religious, and the religion angle of things (especially in politics) usually bugs me a lot. I don’t mind it here. I think the bottom line, and why I like Dave Ramsey, is that, like Michael said, he tells people what they need to hear when they need to hear it. He is good at helping to kick someone in the butt and dig themselves out of a hole. If I had massive debt and didn’t know what to do I would seek out Dave Ramsey. The moment my net worth became $1, I would no longer have any need for him.
The religion may provide much of his audience, but it is also a way of saying things to people in a way that they will understand it.
March 14th, 2006 at 5:51 am
My husband bought the audio book so we could listen on the way to and from work. I like what it has to say but could have gotten the information off the internet without paying for the book…
Dave’s audience is Christian radio here in Atlanta – that’s how I first learned of him. He doesn’t push his religion, but does teach the principles of tithing (10% of gross) which I strongly believe in. God blesses those that honor him!
August 4th, 2006 at 11:23 am
Debit cards not any riskier than credit cards? I think not.
If you’ve ever bought gas with a debit card, and checked your bank balance right after, you may notice $100 or so missing, because it takes a while for the actual transaction to go through. When it’s authorized at the pump, they automatically take a high number, and fix it hours or days later.
If there’s any mistakes or fraud committed with your debit card, your money is GONE while you dispute it with the bank. With a credit card, you dispute it while not having to pay the disputed amount.
As for Dave Ramsey, he has become an industry and a cult. I find the whole Dave Ramsey experience leaves a bad taste in my mouth. His hatred of any debt is ridiculous. Debt for things that will accumulate in value, or help you earn extra income, is a good thing, provided you use it wisely and can easily afford the payments.
Unlike Michael, I’ll take David Bach any day of the week. At least he has simple, easy to initiate ideas, and best of all, he’s great at motivating you to start doing the basic things that will really make a difference. I’ll take a cheerleader over a butt-kicker any day of the week.
August 24th, 2006 at 12:43 pm
I have read the reviews up to this point and I disagree. We use most of Dave’s methods and it makes a huge difference. Tithing is honorable and is definitely a plus in our budget. We actually use a principle called 80/10/10… save at least 10, tithe/give at least 10, and live on no more more than 80. This will keep you out of the hole. If you are already in the hole, dig your way out with Dave’s methods. We have a credit card for emergencies and to get hotel rooms and such but living off them is a totally different story. His point is to not live off credit cards, live in the clear…pay for them. When we use a credit card, we generally pay the amount charged before the bill comes in. Our house is paid off and we are in our 30s. You may not like his approach but his methods work.
September 17th, 2006 at 5:53 am
I find Ramsey’s cult, and I do believe it to be a cult, very disturbing. My husband and I found the program several years ago and we started working it for a while. Well, that’s not exactly true, my husband screamed and yelled at me until I submitted and realized what a sinner I was for my debting ways and then relinquished all control over my finances so that he could bully his way to debt-free status. I’m not being overdramatic here. I lost all sense of self-esteem. For an educated woman who was bringing home half of the bacon, this was a devastating blow. I’ve spent the last few years with my head hung low because I have debt and according to Dave and my husband, I’m a sinner of the worst kind. I’ve confronted my husband about these feelings and told him that I blame Dave. Surprisingly, he said I should blame him, not Dave and he’s vowed not to yell or scream at me anymore about money. So far, so good, but now he’s got a subscription to Dave’s podcasts so that can listen to him 8 hours a day. I feel like I’m living in Dave Ramsey’s (think Karesh) compound against my will! Don’t fall into Ramsey’s cult…be smart with your money, don’t take on more than you can handle and work hard to pay your bills. The answer to money problems in a nutshell is be responsible. Good luck!
January 9th, 2007 at 2:40 pm
Only an educated woman with a anti-guilt complex (it couldn’t possibly be my fault) would respond the way you did. Nowhere in Dave Ramsey’s plan does it call for you to “relinquish(ed)all control over my finances” to your husband or anyone else.
It simple asks for you to finally take some responsibility for your financial status – personal stock in what you do (or don’t do) with your money. No wonder your husband is having to look somewhere for financial advice.
March 30th, 2007 at 10:48 pm
I read through most of the comments here, and for the biggest part of those who commented before me…you’ve missed it.
Call it a cult, call it ‘overbearing,” but hasn’t society done the same to us: Where you ‘have to have a credit card’ to get anywhere or do anything, or where using credit is our mantra, instant gratification has become our god. Hmm, sounds like general society could be deemed a ‘cult’ too.
Anyway, I’m not here to step up on my soapbox, but let’s look at a few items mentioned in the main story:
- “too many stories”, ever hear of MO-TI-VA-TION?
- “similar to previous works”, repetition is used as a process to learning.
- “product placement”, so the man created a service-oriented business? Cleaning houses, restaurant servers, cashiers. They earn a living by by performing a service.
- “careless mutual fund suggestions” – this I’ll agree with, somewhat. He does throw around ‘good growth mutual fund at 12%” but many times he’ll also retort, “What if I am half wrong?”
- “depthless wealth-building content” – well, when you get to that point where you have money to build wealth (instead of to make payments), hire someone to tell you what to do with your hard earned cash.
I like Dave Ramsey. He’s helped to bring a bit of sanity to unfocused finances. Dave offers as much if not more behavioral advice than mathematical, financial counsel.
Oh, and if you don’t like his style or methods, there’s always Suze Orman, Bob Brinker, and hundreds of other people who teach on personal finance. It’s not like he’s got a monopoly on YOUR money.
April 11th, 2007 at 4:01 pm
Some interesting comments in the article. I didn’t pay for any of Dave Ramsey’s stuff, but checked the book out of the library. My wife and I decided to follow the plan and it’s worked out well. Of course, we weren’t in bad shape to begin with, but it’s amazing what our disposable income looks like now that we follow a budget and have no debt except the mortgage.
The thing that really sold me on this was that my wife got on board right away and immediately raided our liquid savings (not retirement) to pay off our car and van. The thought of owning our home so quickly has lit a real fire under her, yet we still do save for vacations and other things to do.
We aren’t rigid followers, but a lot of what Ramsey says is common sense type stuff that I just hadn’t thought of. If and when we ever get to a real wealth building mode, I’ll probably seek professional help (and a tax accountant also).
I guess I’ll just say I like Ramsey and his approach. I think it is a good method for everyone to follow until they’ve changed their personal spending/saving habits and live on less than they earn (which seems to be where so many people land in trouble).
January 31st, 2009 at 8:05 am
Thank you for your review of “The Total Money Makeover”. We appreciate you sharing your opinion and doing the research needed to fairly evaluate the book. We have seen fit to link to this article in our independent Total Money Makeover reviews section. Anyhow, Keep up the good work spreading truth.
February 28th, 2010 at 9:45 am
Of course you have to have credit card debt and a mortgage. Those of you criticizing Dave Ramsey are 100% right. Nobody should ever own a home — not just have the bank own it and let you live in it.
Fight the good fight against the cult of owning your own stuff!
Someday you’ll show Ramsey who’s boss when you have more money than him thanks to your travel points and interest paid!
March 31st, 2010 at 5:23 am
Being on the road a lot, I occasionally hear Ramsey’s vile show on the am side. When you listen, note the number of times that he is calling someone stupid or calling names. Like a lot of people have noted already, Ramsey rubs me the wrong way. This guy is a blowhard.
April 7th, 2010 at 4:53 pm
I have a friend who absolutely loves Dave Ramsey so I read through his information. I saw some practical advice, but I also found some things to be a bit off base.
Example: You have that video game system at home you can sell for a fraction of the cost to pay off your credit card now only to go buy a new game system down the road at the full price when you’ve paid off your bank debt. I spent the entire evening trying to figure out why I would want to sell something that is paid for at a price that might be half of what I spent only to rebuy it in a few years at the full price again (if not more because the price has gone up).
Then I realized it was the BANKS that called in Dave’s mortgages and caused him to financially crash. The more I looked at his methods, he will recommend you give your money to anyone BUT the banks – retailers, service providers, the government…
Once I realized that, just about everything made sense.
August 11th, 2010 at 10:45 am
All I can say is $140,000 and a lot of risk before Dave. $0 debt, paid for house, a ton of peace, and on the road to millionaire status after Dave. Thanks Dave for reminding me of all that not-so-common common sense.
Bash him all you want, most of his critics are just too lazy for self control. To rebut some of the things said in the comments, we are getting along quite well with a zero credit score and zero credit cards. If I get laid off today I can whistle all the way home.
Also Jason R. Peters is the man.