Total Money Makeover by Dave Ramsey (Audio Book) - Disk2
I finished listening to the 2nd of 3 CDs in the audio-book Total Money Makeover today. On this CD Dave Ramsey gives an overview of the first couple steps in his “Baby Steps” program which is designed to getting your finances under control. He begins by emphasizing the necessity of creating and living by a written budget.
The problem I have is that he really gives no details on how to set up a budget or how to follow one. He definitely tells you that you must have one, he just forgets to tell you how to do it - or at least in this book. I suppose he has another book that teaches this pre-step.
Once the budget is put into action, Ramsey says we need to start taking the “Baby Steps” required to get our finances in order.
The first (or was the budget the first?) step to getting financially fit is to start building an emergency fund of at least $1,000 as quickly as you can. This means paying minimum payments on credit cards and nothing into your retirement plan until this first $1,000 has been set aside. The primary reason this is so important is that otherwise any emergency that comes while paying off your accumulated debt would force you to break stride and most probably put the emergency expense on a credit card.
The second step is to pay off all debt (except the home) as quickly as possible using a process he calls the “debt snowball.” Rather than paying off high interest rate debts first, Ramsey suggests paying debts with the smallest balance first. You pay the minimums on all the other debts and keep them current. Every other dollar you can possibly scrounge is used to pay off your smallest-balance debt. When that debt is gone, you move to the next debt on your list, so that the amount you are able to pay “snowballs” as debts disappear.
“All the money from old debts and all the money you can find anywhere goes on the smallest debt until it is gone,” advises Ramsey. “Every time the Snowball rolls over, it picks up more snow and gets larger, until by the time you get to the bottom, you have an avalanche.”
Ramsey then began discussing step #3, building your emergency fund up to at least three months of living expenses. Paying off your credit cards and loans is about getting yourself out of debt now, building your emergency fund is about staying out of debt forever.
“You start the emergency fund with $1,000, but a fully-funded emergency fund will usually range from $5,000 to $25,000. The typical family that can make it on $3,000 per month might have a $10,000 emergency fund as a minimum. What would it feel like to have no payments but the house, and $10,000 in savings for when it rains?
And it will rain… The emergency fund, Ramsey says, is not to be used to pay for things like Christmas (“Christmas is NOT an emergency!”) and clothing. You should have budgeted for these predictable items in advance. (He just doesn’t go into how this might be done.)
Well, I have one more CD to listen to on this audio-book. So far it seems that the information given is from the 10,000 foot level - great view but no detail. I want to have someone answer the nuts and bolt questions. Hopefully this product is not simply an infomercial for his other products.
Article Series - Ramsey TMM
- Total Money Makeover by Dave Ramsey (Audio Book) - Disk1
- Total Money Makeover by Dave Ramsey (Audio Book) - Disk2
- Total Money Makeover by Dave Ramsey (Audio Book) - Disk3
Occassionally Matt and I say we should make a budget, and sometimes list a few things at the beginning of the month…and say, “Yup, we can pay our bills and eat and save some; well, that’s good.” So I checked out the TMM Workbook from the library and it has all kinds of forms in it for figuring it all out. How to balance your checkbook, how to figure out what your take-home pay is, a “quickie” budget sheet, planning for lump-sum payments, a full “cash-flow plan” budget, how to plan what to do with money from each paycheck during the month, planning budgets for irregular incomes, and several forms for figuring out your debt snowball, too. Most of the rest of the book is summary of the TMM and silly T/F exercises, but the actual budget sheets, debt payment worksheets, and some info on retirement plans seems like it was worth the checkout from the library. :)
For the close-up view I guess you have to listen to the radio show. :) Matt says he listens a half-hour in the car a few times a week and can accurately predict exactly how he’ll answer almost every caller….but people still call in. I think he’s fun to listen to; he’s a solid Christian, in-your-face, Dr. Laura for money. :) It’s pretty refreshing simply to hear a Christian on the radio whose not a dork or [very] cheesy, but solid and not afraid to apply Scripture to situations.
An hour of the show is downloadable as a podcast every day! :) LoL! If I don’t stop listening, Hans will be saying more than “I’m DEBT FREE!” He’s already working on copying “This is the Dave Ramsey show, where debt is dumb, cash is king, and the paid off home mortgage has taken the place of the BMW as the status symbol of choice.” Sigh…he can copy all that and we can’t get the fourth catachism answer out of him yet?!
Comment by Mystie — March 2, 2006 @ 8:14 am
I have placed a reserve on the workbook and a couple of other of Dave Ramsey’s books at the library. I also did some internet searching last night (which will show up as an automated del.icio.us post here tonight). Many of the sites had what appeared to be direct budgetting tools from Ramseys books or very similar.
From what I have listened to on the podcast I don’t know if that would be more of the close-up view or not. What I meant by close-up would be more along the lines of the David Allen - Getting Things Done (GTD) book. Very nuts and bolts, down to earth, step by step. (I just realized I have not put a review of that book here, guess it is time to re-read it).
Comment by YeOleImposter — March 2, 2006 @ 10:45 am
Indeed, as Mystie says, I believe I have Dave’s answer to putting together a budget even from my limited listening experience. To make a budget, one follows these steps:
First, list the four things that must always be paid for, in this order:
Then, list all the other things you want to do with your money, in the order you want to do them - e.g. giving, paying off debts, saving for a new car, going out to dinner twice a month, etc. Then assign your dollars to each item on down the list until you run out of dollars. Done. Now all you have to do is never spend a dollar that’s not allocated on the list.
Beyond that, it seems to me like there aren’t many nuts and bolts because most of what he’s preaching is just common sense. He does have his “baby step” plan to follow, but he (frequently) says that the actual budget is something for the couple to decide upon together, and depends on how badly they want to be out of debt. His preference is to sacrifice a lot for a little amount of time and get out of debt quickly, but some prefer to sacrifice a little for a long period of time and reach the same goal.
Or maybe there are no nuts and bolts because he sells his 13-week “Total Money Makeover” course that allegedly goes through all that.
Lastly, to Mystie: Really, now, I think it’s highly offensive to refer to him as a “Dr. Laura for money” - at least Dave Ramsey’s answers are worthwhile and generally edifying, and he doesn’t have a thoroughly annoying voice.
Comment by Matt Winckler — March 2, 2006 @ 12:10 pm
OK, but using this budgeting strategy then I will not have any money saved for things like Christmas and birthdays when they come or a new fridge or the big screen TV I always wanted. Probably the difference between starting out with his ‘baby steps’ and when you are able to ‘walk like a man?’ (my term not his).
I know he has some kind of ‘envelope’ system that has not been discussed yet (and may not be in this book or maybe just not in the audio-book. His envelope system is probably where this is addressed. I am just surprised that it was not dealt with first - but then again budgeting is grunt work - nobody wants to do it - but getting out of debt hits the emotions - and emotions are what motivate (and sell books).
Comment by YeOleImposter — March 2, 2006 @ 12:54 pm
To Matt: Ok, so maybe he’s not like Dr. Laura at all (except he’ll get in your face), but the callers are similar — if you’d just listen, you’d know the answer, but everyone listens because we like to hear other people’s problems. :)
Comment by Mystie — March 2, 2006 @ 1:04 pm
Also, the envelope system is Larry Burkett’s, and something Ramsey and his wife followed before he was a financial guru and he says they still use it for groceries, clothes, and “blow money.” I’m not sure I’m personally comfortable carrying around that much cash in my purse, though…
Comment by Mystie — March 2, 2006 @ 1:07 pm
Why not? Possible budget line items for December:
\12. Gifts: $200 … \16. Saving for big screen TV: $300
The trick is you won’t be able to simply go out and buy the big screen TV you always wanted without thinking it through in advance. And likewise you won’t be able to simply go out and buy a thousand dollars’ worth of gifts without some prior planning. Both of these facts seem like advantages, not disadvantages, to me.
And as Mystie pointed out to me last night, Ramsey argues that a budget is not a “write it out once and set it in stone” sort of deal, but something that should be reviewed by husband and wife every month. In addition to that, I like the idea of a budget being an enabling device, rather than some overlord (Mystie’s catchphrase: “The budget was made for man, not man for the budget”) - by budgeting, I get to assign however many of my dollars I want to buy Wee Heavy Scottish ale, and then I never have to feel funny about buying it, because “it says so right there in the budget!”
Woly mokes, all this talk of budgeting is going to motivate me to go write one up!
Comment by Matt Winckler — March 3, 2006 @ 8:48 am
I have used a ’sinking’ fund to budget for items before, and I do believe that is what is being suggested in the audio-book. And that right there is probably where the problem lies. I am listening to the audio-book version and it is abridged - so he is only hitting those things that made the cut for a 3 CD abridged audio-book.
The ‘real’ book probably goes into much more detail and there is a companion workbook. I have both reserved from the library, or if I don’t get them soon enough I will have to go over to the other library (Barnes and Noble) and buy a cup of coffee and check them out there.
BTW, how much a month do you have to set aside to be able to afford some Wee Heavy Scottish ale?
Comment by Gary Paulson — March 3, 2006 @ 9:36 am
Now we’re getting into the nuts and bolts! I haven’t seen Yokes’ pricing yet, but if they’re consistent with Larry’s Markets, the stuff will cost about $4.50 per 500ml bottle. I figure that on a few nights I may want to drink wine instead, so I’m guessing that around $120 a month (some margin included for the occasional guest or wife drinking one) ought to cover all my Wee Heavy needs.
Comment by Matt Winckler — March 3, 2006 @ 11:17 am
My wife and I attended a full course of this guy 9 weeks I believeback last year. All of the concepts we were instructed in were old hat to us as we had been observing those same strategies for at least 25 years. We really were way ahead of the ongoing instruction before starting in the seminar, but we took the course to try to learn a little about investing the considerable amount we had accumulated in “emergency fund”. To make a long story short, we took his advice and “invested” about $120,000.00 with a local financial advisor specifically and highly recommended by him. (after getting their commission they have not talked to me since)That was in November 07, to date 7/08 I am down $20,000.00. At the same time I had been contemplating a purchase of gold with those funds, if I had acted on my own instincts, I would have over $200,000.00 now from that one investment in gold. It’s a good thing I didn’t invest all of my savings in that one venture. He may have all the common sense basics right but I don’t believe he knows his butt from a hole in the ground about investments. Just my 2 cents….(er…$20,000.00)
Comment by Scott Haycox — August 5, 2008 @ 1:35 pm
I feel your loss. Although anyone who put 120k into the market recently will have probably had a loss. Especially if it was put into the market using an
advisorsalesman who uses load funds.Wishing you bought gold is also nice in hindsight but could have been just as devestating if the market swung the other way.
If I did not feel comfortable investing my own money I would find a fee-only advisor who is able to represent dimentional funds. Check out FundAdvice.com to get an idea of their theory of investing using no-load funds. They show you how you can do it yourself too, if so inclined, using other no-load funds.
Comment by YeOleImposter — August 5, 2008 @ 6:34 pm