Book Recommendation: The Total Money Makeover – Dave Ramsey

Hi everyone! How are you doing today?

Today is going to be all about money! Specifically, getting your finances in order – my favourite subject.

Dave’s book, The Total Money Makeover is a perfect book to set up, improve or expand your financial foundation. If you are not familiar with Dave Ramsey, he helps people overcome financial obstacles and build wealth. He uses a method called the “7 Baby Steps” to break down his formula. His teachings surround the idea that “debt is dumb and cash is king”. This basically means don’t buy what you cant afford to pay for in cash.

Debt is a big problem in Canada and America. So many people are living paycheque to paycheque. If you are one of these people, please read this book because it will change your life for the better. Dave also suggests to have an emergency fund. I cannot tell you how useful this is. There will be times when you need this (for emergencies ONLY) and you will be so grateful that you put some money aside.

The core teachings of his book are as follows:

  1. Start your emergency fund with $1,000.00
    – This will be kept some place safe. The purpose of this money is not to grow it, but to have it in case of an emergency. Do not invest it as you want it to be liquid.
  2. Pay off all of your debt starting from the smallest to the largest (no matter the interest charge, minus your mortgage)
    – Pay off the smallest first debt first in order to get that satisfaction from your accomplishment. This feeling will help us stay motivated. Emotion plays a big part in this.
  3. Bump up your emergency fund to 3-6 months worth of your expenses
    -Doing this will ensure that what ever the emergency, you won’t be impacted by it.
  4. Invest 15% of your income into a retirement account
    -This is where I stopped following Dave’s formula to the T. I didn’t want to invest in mutual funds out of personal preference so I went with index funds instead. There is a “workshop” out there which is great for beginner investors in Canada. Go check out this Investment Workshop. Once again, I did not follow this exactly. I invested in different index funds – ones with a long inception date of either 5 or 10 years and with a good rate of return. You can also invest in like a bunch of different index funds for more diversification. Lastly, I made sure that I invested in my age worth of bonds. Example would be 20% (rounded down).
  5. Invest into your kids’ college funds
    – This is not applicable for me.
  6. Pay off your mortgage
    -Housing is not affordable in the Vancouver area so I don’t own a home.
  7. Build wealth and give
    – Forever ongoing.

Overall, I think virtually everyone can and should read this book. Before you buy this book, make sure you check out your local library to see if they have it available for borrowing.

Have any of you read this book? If so, what Baby Step are you on? Let me know down in the comments section. Also, if you have any questions about how to apply the Baby Steps, please feel free to contact me: I am not a financial expert, but I would love to help!

Note: Dave does use some biblical references in his book, so if you are very sensitive to that type of topic, then maybe you should not read this book.

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