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Dave Ramsey’s Total Money Makeover Review
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Dave Ramsey is a polarizing figure. Some people love him and swear by his advice and others think he’s a hack. Which one is he? Unfortunately that’s a question only you can answer but hopefully I will provide you with enough information about his flagship book to make your own decision.
The problem with personal finance is that there are multiple solutions to any one problem. If you think it’s simply about math, you’re wrong. Someone in credit card debt understands that when you use your credit card and don’t pay your entire bill, you’ll go into debt. They aren’t stupid, they know how interest works, but there is a non-math reason why they’re in debt.
If you had to boil down the book into a single sentence, then I’d say that Dave Ramsey’s Total Money Makeover is a book that gives you a good framework to get yourself out of debt and back on solid financial footing.
Dave Ramsey’s “Baby Steps” to Financial Freedom
At the core of Dave Ramsey’s advice is his “baby steps” towards financial freedom:
- Save $1,000 cash as a starter emergency fund
- Start the debt snowball
- Finish the emergency fund – accumulate 3-6 months of expenses
- Invest 15% of your income in retirement
- Save for college
- Pay off your home mortgage
- Build wealth – Invest, donate, enjoy life (without going into debt)
Debt Snowball Strategy
The debt snowball strategy is one that has received a lot of ink throughout the years. The strategy states that you should list all of your debts and their monthly payments. If you have extra cash to put towards debt, put it towards your smallest amounts first. When that debt has been repaid, take the amount you would’ve sent them and add it to the payment you make to the second smallest debt. This way, as you pay off your debts, your monthly payments to the other debts increases like a snowball.
Why does this strategy work? It comes down to motivation and celebrating successes. It makes more financial sense, mathematically, to put your extra cash into the debt with the highest interest rate. However, by paying off the smaller debts, the number of debts you do have decreases. These successes give you the motivation to continue your payments and put you back on the right path.
The brilliance in this methodology, specifically the much maligned debt snowball strategy, is that it takes into account human psychology. That’s the non-math part of personal finance. Like I wrote earlier, people don’t get themselves into debt because they don’t understand math. No matter what you say about the inefficiencies in his strategy, the reality is that it works. I’d venture to guess that thousands of people have pulled themselves out of debt with the advice he’s given in just this one book.
Summary
The book is routinely in the top three in Amazon’s Personal Finance category, so if you’re struggling with debt, I think you might want to give this book a try. The book also contains a lot of motivational stories of people who probably were in more dire straits than you and were still able to pull themselves out.
One final recommendation, if you are in debt, borrow this book from the library and put that cash towards your smallest debt. 
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Dave Ramsey claims to have “a proven plan with all the tools you need to win with money.”
Unfortunately, his tool kit lacks the one thing many PF bloggers say is the most important component of winning with money – tools to build your income.
So I would say that the Total Money Makeover works splendidly IF you have at least a reasonable income.
If you have a poverty-level income like I do, Dave’s Plan won’t help much, if at all.
On his website he has a Financial Reality Check. I tried it, plugged in the numbers requested, and it said that with or without Dave’s Plan, I would end up with zero dollars. Which to me is good evidence that there is some minimum income required for Dave’s Plan to work.,
Terry–well, I’m convinced! Let’s not try at all; let’s be victims.
The one thing he does mention for individuals who are struggling is to “get a second job” if needed. If your primary income is insufficient, then get a second/part time job, even if its delivering Pizza. Most people are to proud, but we weren’t to proud when we were getting into debt were we?
Terry, Dave says get a second or third job. Sell the car and drive a paid for beater. Stop doing all of the extra activities until the debt is gone then take the money you’ve been paying into debt and save it for a while.
This plan works but you have to WORK it!
Dude, I did this successfully with a total family income of <$22K… quite whining and work on your finances!
@Terry – That’s not true. Dave Ramsey constantly encourages people to deliver pizzas, cut grass, work extra jobs, or do whatever their skilled at to generate extra income while they climb their way out of debt.
Many people already make enough money to pay off their debt. They just don’t take the actions necessary to get their financial lives on track.
I used Dave Ramsey’s plan to get out of debt. It’s important to be “gazelle intense.” Some pf bloggers maintain that drastic lifestyle changes don’t work. I disagree. People don’t magically find themselves out of debt.
Financial freedom requires a well executed plan.
I wish I had found Dave when I was getting out of debt! He does have a great approach that does work.
The one step I still cannot come to terms with is paying off your mortgage. I agree “the grass would feel different” but with 5% interest and the long-term opportunity of investments I just can’t pull that trigger.
I believe this is also due in part to my late start on financial management and conclusion that a 15% savings rate is not enough based on my 4th principle of financial management: You can’t rely on anyone by yourself, if you want it when you retire you have to make it and save it now.
I agree that folks are often in debt for “non-math” reasons. If emotion-driven behavior gets you in debt, it often is emotion-driven behavior (of a different sort) that gets you out.
Great post
so true I didn’t even face the fact that i was in debt till I got mad at the bank for increasing my interest rate. (by the way, I was never late on a payment and they did it anyway)
I concur … get the book and any other book at the library. There are very few books I’ve read cover to cover and wanted to do so again!
Not sure you read his book, but he strongly recommends increasing your income. Most famously by preaching about getting pizza delivery job. If you have “poverty-level income”, go fix that.
Um, I have neither a car (can’t afford one and couldn’t afford to operate a car if I had one) nor a license (financial issues – tickets in my own driveway for expired tags while I was in hospital for two months and didn’t know about the tickets until it was too late to contest them).
This makes it pretty unlikely I could deliver pizzas, or get hired to deliver pizzas.
I’ve delivered tens of thousands of pizzas in my lifetime, and was extremely good at it, but nobody in their right mind weould hire me to deliver pizzas now.
Here’s the rub; I have no car, no license, no marketable skills, no career-related experience, and I am over 50. I don’t know how to fix my poverty-level income.
Ter-You’re right…no sense making any effort, except to make excuses. We can let obamacare fix it…and we’ll all live happily after…
You could turn to crime.
Your story dosen’t wash.First off, a ticket for expired tags is not a moving violation so it wouldn’t keep you from getting a pizza delivery job. As for not having a car, probably one of your relatives would loan you a car just to get you off thier couch. If you were extremly good at delivering pizza you should be able to get hired again, although in today’s economy you may have to wait for a position to come open. You can also start working as a manager or insider until you can get up enough money to buy a car.
Right why not work at a convience store, grocery store, walmart? Etc.
Just hang in there and wait for Obama to give you some money someone else earned…
Then change your situation. Go to the library and learn something and then go try and do it as a Job. I was living at the poverty level several years ago until I checked out DOS for Dummies and went from there.
The “pizza delivery job” was a metaphor. Can we think of a similar type of job that doesn’t need a car?
Of all the PF books that I have read, this is what allowed me to get it all together. What I like about his approach is to stop the whining and get to work. Get the extra job, sell your junk and stop feeling sorry for yourself. It is no one’s fault but your own. Do something about it and end the pity party. I needed a no nonsense talking to to get motivated. It seems as if everyone is on his plan…When the pizza delivery guy told me he was better than he deserved, I realized he too was on the plan and it felt good to help him on his debt snowball with an extra $10 tip.
I have no opinion of the man personally; never met him. But as far as the book goes, it’s okay-decent at best. It’s a proven formula, but not the proven formula everyone is looking for. A great book if you need tips or discipline, but 7/10 times I’d much rather have a PF blog like Get Rich Slowly, or Bargaineering.
This may be a very good book, but I’ll never truly know, because I’ll never read it. You (and a million other bloggers who’ve reviewed it) share:
“At the core of Dave Ramsey’s advice is his “baby steps” towards financial freedom:
1. Save $1,000 cash as a starter emergency fund
2 . Start the debt snowball
3. Finish the emergency fund – accumulate 3-6 months of expenses
4. Invest 15% of your income in retirement
5. Save for college
6. Pay off your home mortgage
7. Build wealth – Invest, donate, enjoy life (without going into debt)”
There’s absolutely no more reason for me to read this book after reading those bullet points. They are perfectly clear, and I don’t need a chapter or two to explain each. The entire book has been distilled down to a paragraph. More books, especially books that essentially give advice, should be done this way — no filler, just the core tenets of what they’re trying to tell you.
Thank you for the excellent summarization.
I agree with you, the steps are very clear, but for some they need examples, motivation, and other intangibles that Ramsey is very good at providing.
Paying off a mortgage that pays under 5% is silly when you can invest that money and make more, if you’re willing to take some risk. But then, I’m a math guy, so none of Ramsey’s advice would probably work for me.
My friend started me on this. She had debt snoball and budget software. This helped me so much see the who, what, & where of the plan. I have them hanging in my office to keep me reminded of the path.
Pretty awesome!
While I think Ramsey’s philosophy works for some people, it falls under my theory regarding cookie cutter practices. I strongly believe that if you fall on the edges of the bell curve, it probably won’t work for you. I have taken some of the steps into consideration, but I customize it for us. $1000 is a ridiculous “baby” emergency fund for us, so we maintain at least $2000. While using the debt snowball, we utilize balance transfers on cards we already have (not taking on new debt) to keep our interest rates low and reduce the total amount we will pay over time. And we will not be saving for university, even if we do have kids. Our rule is we will pay for community college or the equivalent towards vocational school, and the remaining university will be the child’s responsibility if it is something they would really like to do. It’s never too early to teach the value of saving for what’s important, instead of having it paid for you.
That’s ridiculous. If your kids want to go to a top school, there’s no way they can afford it on their own. And the top-dollar jobs are typically available only to those who went to the top schools and built the right networks. If your kids want to earn $50K/year for the rest of their lives, a community college or state university will do just fine. Are you really willing to doom them to that?
I think it’s rather elitist to assume that the only way to a six figure salary is through a college degree to start with, as most of the top entrepreneurs will prove you wrong. I would rather teach my children life skills and entrepreneurship so that they aren’t doomed to get laid off from a six figure salary with no way to recover, finding out that life has passed them by and the entry level standard for their field would require them to go back to school. FYI, you call your M.D. “Doctor” whether they went to Harvard or state school. I’d rather doom my children to a life of hard work and common sense, silly me.
While some people in “top jobs” have ivy-league degrees, it is not an automatic ticket to success. I know plenty of people with better degrees than mine who have worse jobs; some have no job at all, as they don’t want to work.
Many parents sacrifice their retirement to give their kid an education, only to find that said kid never does anything with it because they have an entitlement mentality.
Bottom line: A degree gets you to the first job. After that, it’s all down to experience.
Your bottom line is on point but I’d add a little caveat, your degree + your performance gets you the first job. Having a piece of paper isn’t enough.
I wonder why it always has to to be either/or. Can you not send your kids to get a great education AND teach them life skills. What if you had life skills and a degree, then you would definitely be ahead of any curve. It’s amazing how many topics have to be OR topics, but if you think a little bit, I plan to teach my son about hard work and discipline, and if he wants an education at a top school. Just something to think about……..
I liked Dave Ramsey’s book. I found the bit about being “gazelle intense” was a bit contrived and is not a way I would ever feel comfortable labelling myself as, but the underlying principles are sound. I certainly can connect with an emotional victory over money than a purely mathematical one. If I was purely mathematical in the first place, I would never have ended up in debt!
I can’t say the book was pivotal for me personally, but I did find a lot of good in it. I did like how it laid out in simple terms various concepts that I’ve learned over a year reading PF blogs. I think if I had read this book earlier in my debt-reduction plan, it would have been much more helpful and have helped me cut through the crap and junk info and hop onto a plan faster. As it was, I just implemented some of the techniques into my existing plan, building a debt-reduction-wealth-building plan that’s personal to me.
Dave’s no b.s. approach to getting started and quit making excuses was just what we needed to get motivated and get out of debt (which we’ve done). I’ve since read countless PF books from other authors because I enjoy different perspectives and approaches. As a result, I have tailored Dave’s approach to one that more closely aligns with our goals, but I’d have never reached this point without a starting point and a plan – which is what you get with Dave’s book. For this reason, I consider Dave’s TMMO the most important PF book I’ve ever read.
As far as checking out a library copy vs. buying, I have to say I’ve seen a significant benefit to having my own copy. I’ve revisited the book several times throughout the last two years, whether to refresh my motivation or to actually re-read a specific piece of Dave’s plan, and having my own copy readily available at the moment was well worth the cost (to me). I highly recommend finding a personal copy if at all possible, maybe try PaperBackSwap.com or a similar service.
I can attest to the fact that the Dave’s plan works at getting you motivated and keeping you on the right track. Looking back now that we are dept free, I may have tweaked the plan to better fit our circumstances, but that is easy to say when you are looking back. When you are fighting to keep your head above water, Dave’s teachings are proven to get you to the prize.
As far as borrowing vs buying? We are having a $10 discussion, because the book is constantly on sale on Dave’s site. Personally I have purchased countless copies throughout the years and given them away, but I have kept my original copy and still reference it to this day. I would buy the book and then when you are dept free, give it to someone you think it would help.
Which is what just happened to me.
A person who has become debt free gave me the book and I’m working on it. I will “pay it forward” when I’m debt free.
This plan works and I’m only in month number one. I can sleep at night knowing that I’m not lost in the dark and have a plan.
There’s no doubt that Dave’s advice is pretty simple and seems like common sense (what financial advice isn’t common sense?). His sweet spot is debt reduction, building an emergency fund, and motivating people through his radio, TV shows and personal appearances to take action and change their financial lives. His gimmick is the debt snowball. But if you want good investment advice once you get out of debt, better look elsewhere.
I know his plan works because frankly I used it PRIOR to ever reading it. Not all the steps, but the “important” ones to me at the time, which was putting money into savings for a rainy day and then using the debt snowball. At the time my friends would laugh at me for the way I tackled the debt, but within a year or so I was debt free. Then they weren’t laughing so much.
And I would agree with others…buy the book. It’s $10 when on-sale! Or go to a used book store and find a copy there. Even if you paid $20 and took the information and started applying I believe it would be the best $20 you ever invested in YOURSELF!
I know his plan works because frankly I used it PRIOR to ever reading it. Not all the steps, but the “important” ones to me at the time, which was putting money into savings for a rainy day and then using the debt snowball. At the time my friends would laugh at me for the way I tackled the debt, but within a year or so I was debt free. Then they weren’t laughing so much.
And I would agree with others…buy the book. It’s $10 when on-sale! Or go to a used book store and find a copy there. Even if you paid $20 and took the information and started applying I believe it would be the best $20 you ever invested in YOURSELF!
Dave’s plan is excellent. The tools he provides you work and if you follow the plan, it and you will be successful. I just wish I fund it sooner…. :\
My wife and I started Dave Ramsey’s plan last March 2009 with $42000 in debt between A HELOC, 5 credit cards, medical bills, auto Loan, and a student loan. Currently we are down to $15000 and no longer have the HELOC, student loan. We are down to 1 credit card. Our car will be paid off by the end of November. I got a second job at a retail store for extra cash. People make fun of me but I don’t care because I feel so much freedom knowing that I will soon be debt free. We got radical, we sold our house I sold my toys that I didn’t need. Cut the cable tv. Got back to the basics. Communication with my wife is now better than ever because there are so few distractions around now. Without Dave’s plan I wouldn’t be living like no one else someday. By the way I have a baby on the way so my child will know that debt is dumb. Thank You Dave.
This was the book that got my wife and I on track also. Had $61,000 in debt in July 2008, now have $16,000. Scheduled to be debt free March 2010 (5-6 months away).
The part that helped us the most was his budget template. His advice about budgeting is right on and has been our key to digging out of our hole.