Total Money Makeover … A Proven Plan for Financial Fitness

Dave Ramsey is an excellent source for practical steps to get out of debt and build wealth.

Summarized and adapted from Dave Ramsey’s book,  The Total Money Makeover,  available at www.DaveRamsey.com

Goals: To be out of debt, be wealthy enough to give, retire with dignity, leave an inheritance and have some expensive fun.

Step 1:  Get $1,000 in Emergency Savings for emergencies only.

• Get a zero based budget that allocates all of your income.  Don’t just know where your money is going.  Tell it where to go.
• Deal with denial and decide to change.
• Overcome debt myths and money myths – Debt is not a tool.  We buy things we don’t need with money we don’t have to impress people we don’t like.

Step 2: Use the Debt Snowball to pay off debts, except your home mortgage.

• Pay off loans starting with the smallest balance.  Budgeting, sacrifice and focused intensity make it successful.
• Identify the enemy:  The bottom line is that it is easy to become wealthy if you don’t have any payments.

Step 3: Finish the Emergency Fund

• A fully funded emergency fund covers three to six months of expenses.
• Beware not to rationalize the use of your emergency fund for something that you should save for and purchase.

Step 4: Invest 15 percent of your income in retirement.

• It is your job to take care of you and yours.

Step 5: College Funding

• College degrees do not ensure wealth.  Only if you mix knowledge with attitude, character, perseverance, vision, diligence, and extreme levels of work will your degree produce for you.

Step 6: Pay off your home mortgage

Step 7:  Build Wealth and Give.

• Money is good to have fun, invest and give.  Giving is the biggest reward of the entire workout.
• When your money makes more than you do, you are officially wealthy.
• The love of money, not money, is the root of all sorts of evil.  To use riches is to cause them to be consumed, to trust in riches is to count upon them for things they cannot provide, but to possess riches is to say how they will or will not be used.

www.DaveRamsey.com