When I was just starting my financial journey to stop living paycheck to paycheck and get out of debt, a close friend of mine recommended “The Total Money Makeover” written by Dave Ramsey. This book was life-changing for me as it taught me important financial principles that I still use today.
The Total Money Makeover Book was so motivational for me in my journey. Dave Ramsey really knows how to get people pumped up about getting their finances in order! After reading this book, I was motivated to take control of my money and my future.
It’s important to realize, when recommendations are made, it’s important to use those as guides in your financial journey. With this in mind, I followed most of Dave’s strategy, but changed it to fit my personal finances. Need some extra motivation? Check out 11 motivational reasons to get out of debt and enjoy life!
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Baby Step 1
In the first place, Dave recommends saving up a $1,000 emergency fund. This may seem like a lot of money (and it did to me also) to save up, but it really gives you a nice cushion in case something unexpected comes up. As a matter of fact, as life happened, I relied on it! This is also the step where you need to create a Saving and Spending plan that Actually works.
Baby Step 2
Next, Dave recommends paying off all credit card & loan debt using the snowball method. I used Dave’s plan to pay off my credit cards and loans and used his recommended snowball method. It worked great! The snowball method is when you order your debts from smallest to largest, and focus on paying off the smallest one first. Once that is paid off, you take the money you were using to pay off the first debt and apply it to the second debt, essentially “snowballing” your payments.
Baby Step 3
In addition, Dave recommends saving 3-6 month worth of expenses. While this is a great strategy, I found this very difficult to do in reality. As a result, I would say I had 1 month of expenses saved up. In addition, I felt comfortable with knowing I had $1,000 saved up for emergencies. Ultimately, it really depends on your values, family situation and what’s most important to you.
Baby Step 4
Furthermore, Dave recommends investing 15% of your gross monthly income. The most I was comfortable with as a single mom, was 8% of my gross monthly income. Remember, it’s a great starting point and can always be increased in the future. It’s important to recognize your values and personal financial situation when implementing the plan. Personal finances are definitely not a one-size fits all guide – there just that – personal.
Baby step 5
As a matter of fact, Dave recommends saving for kids college. While I think this is a good strategy, the more I listen to people, they typically don’t appreciate gifts AS MUCH as earning it themselves. When people work hard for what they are passionate about, they gain an abundance of of confidence. With that being said, my strategy would for helping kids through college would be to match what they are investing in their future. It’s important to point out, not all people are the same and we all have different values, backgrounds and views which makes us all unique.
Baby Step 6 & 7
In addition, Baby step 6 Dave recommends paying off your home – we are still working diligently on this!
Furthermore, Baby step 7 Dave recommends building wealth & giving. We are still in the process of this step.
One last thing…
I do like most of Dave Ramsey’s strategy, however, he is apposed to credit where I am a firm believer of building excellent credit so you can keep MORE of your hard-earned money. The benefits of having excellent credit are on the home page of Smart Saving and Spending. Check out the “Best and Easiest way to establish credit”.
In conclusion, I would recommend Dave Ramsey’s “The Total Money Makeover” book as a great starting guide to getting your finances in order. It’s definitely not a one-size fits all solution, but it is motivational and a great place to start! And remember, you can always tailor his strategy to fit your unique financial journey.
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I hope you found this information helpful!
Any recommendations I make should be taken into consideration with your values and goals. You should make the best decision that aligns with your family’s values.
As a Financial Coach, my mission is to help families save more, spend less so they can buy and do the things most important to them and spend their time and energy focusing on their kids.
Spending quality time with your kids is more important than stressing about finances. Instead of going to friends and family and sharing your financial struggles, reach out to me. I love talking about money, values, assessments and strategies to make positive changes to your financial habits to live a life you love.
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