The Total Money Makeover, written by Dave Ramsey, is near the top of pretty much all “best personal finance book” lists.
And rightfully so. It’s sold over 4 million copies.
In this article, I’m going to summarize what The Total Money Makeover is all about and leave you with my review. By the end, you’ll have a good idea whether you should buy this book or not.
Before you read my Total Money Makeover review, you should know who Dave Ramsey is and his impact on people’s financial lives.
Who is Dave Ramsey?
Dave Ramsey is a popular radio show host and personality. His daily radio show and podcast boasts over 13 million listeners each week. Nearly five million people have taken his personal finance course, Financial Peace University.
But what makes him qualified to talk about finances?
Dave Ramsey has gone through what he prescribes in his books and courses.
By the time he was 26, he had a net worth of over a million dollars. But a few years later, after incurring much short-term debt (mostly from real estate), he went broke and lost it all.
Going broke forced him to learn everything he could about money and how to handle it. He started his radio show and his company Ramsey Solutions to help others get a grip on their personal finances.
Now, Dave Ramsey has an estimated net worth of $55 million dollars. The journey from rich to broke and back to wealthy gives him the authority to talk about money.
Now that we’re all on the same page on the author, Dave Ramsey, here’s my Total Money Makeover review.
Total Money Makeover Summary
Dave Ramsey’s Total Money Makeover is a no-BS approach to getting your financial health in order.
What makes this book stand out from a lot of other personal finance books is that it’s written in the “self-help book” style. An easy-to-read combination of motivation and basic personal finance.
Boiled down to a sentence, the money strategy laid out in the Total Money Makeover is: Save $1000 as an emergency fund, get out of all your debt, build up a 6 months emergency fund, and finally start investing and saving for future purchases and retirement.
Throughout Total Money Makeover are many real-life success stories of real people. They are very inspiring to read and show that Dave Ramsey’s methods actually worked. What I really like is that Dave Ramsey makes it clear that chasing money for money’s sake is not the goal. He teaches that the real reason for gaining wealth is to be able to help others.
If you’re familiar with Dave Ramsey’s radio show, you’ll know that he has has a “no debt” mentality and this philosophy shines through the pages of the entire book, especially in the first five chapters.
Total Money Makeover Review: Chapters 1-5
Before Dave Ramsey lays out his personal finance strategy, he talks about different money habits and mindsets that you need to overcome in order to become wealthy.
He makes us aware of the fact that our money problems are caused by ourselves, and nobody else. I wholeheartedly agree that accepting personal responsibility for our circumstances is crucial to solving our problems.
One of my favorite quotes from this section is:
Basically, if you make sacrifices now that most people don’t want to do, you’ll end up better off than most people in the long run.
In the next four chapters, he goes over 4 different psychological hurdles you need to get over in order to get a handle on your money.
1. Denial that nothing is wrong with your finances.
Accepting that you have financial problems is hard. It’s even harder than admitting that you have a weight or drug problem because it’s easier to hide.
Most people don’t fully accept that they have a money problem until it’s too late – when their home goes into foreclosure or they are forced to declare bankruptcy.
2. The myth that any debt is good or okay.
Dave Ramsey is very anti-debt of any kind. In this chapter, he talks about debt and the many misconceptions most people have around it. He believes you should never leverage debt for wealth.
He talks about how he believes that a “debt is normal” attitude is ingrained in the American culture.
He also claims that you don’t need credit cards to build credit. Personally, I don’t find his anti credit card views very compelling. While credit cards can be the cause of financial troubles for lots of people, they can also be used as a tool to save money if used responsibly.
This is a very important chapter for people who are struggling with debt or not sure why they’re always in debt.
For more sophisticated readers who debt-free, some of the language used may sound abrasive or extreme. For example, Dave Ramsey claims that people who adhere to his “no debt” principle are made fun of by relatives and friends – which is a little absurd.
3. The myth that money is the solution to all your problems.
In this section, Dave Ramsey talks about a few different money myths.
He talks about how there’s no “get-rich-quick” scheme. There are no short-cuts. There’s no secret sauce that only the wealthy know. All the information you need to get wealthy is freely available to everyone.
Money ignorance – people just don’t know how to handle money.
Dave Ramsey says financial freedom is 80% behavior and 20% knowledge which is so important, and he emphasizes this by pointing out there are a lot of broke finance professionals.
Ramsey believes it’s 100% your responsibility to educate yourself on money issues. I wholeheartedly agree.
4. That we need to keep up with the Joneses.
Ah yes, we nowadays call this “FOMO” – the fear of missing out.
In the Total Money Makeover, Ramsey continuously tells us not to judge ourselves based on the financial lives of our neighbors. We don’t know the inner workings of our neighbor’s finances, the only information we have is what we see. People like to look good, especially on social media. So people will put their best foot forward. All the ugly, messy stuff is never on social media.
Your friend who just bought a new Camaro, always wears designers clothing, and spends way too much money whenever you go out may be the richest person you know. Or they may be dead-broke and digging themselves into a bigger hole while trying to maintain the illusion of money they’ve built for themselves.
You don’t know, so it’s best not to compare ourselves with others.
Chapters 6+: Dave Ramsey’s Baby Steps
Once you understand the money hurdles that you need to overcome, Dave Ramsey goes on to explain his strategy for turning your finances around. If you read these chapters carefully, you’ll realize that he’s talking about his 7 baby steps.
After 5 chapters, this is where the actionable information starts.
I actually summarized all of Dave Ramsey’s baby steps already, but I’ll go over them quickly again.
1. Build yourself a baby emergency fund of $1000.
The value of having an emergency fund can’t be overstated. It’ll save you from getting into more debt when you have a money crisis – and you will have one.
While a $1000 emergency fund is not sufficient long-term, when first starting out, it’s the perfect amount to get the ball rolling towards financial freedom.
2. Pay off your debt with the Debt Snowball method
Next on his baby steps is paying off your debt.
For people in lots of debt, this will be the hardest but most important step.
Ramsey came up with his own debt reduction strategy called the debt snowball method. I’ve written about the debt snowball method before, but it boils down to paying off your lowest dollar-figure debt first and working your way to the largest dollar-figure amount last.
This goes against the conventional advice of paying off the highest-interest debt first in order to save money. Ramsey claims that his debt snowball method takes human psychology into account and that the motivation and momentum gained from paying off your smaller debts first outweighs the extra money you’ll be paying in interest.
Ramsey also recommends stopping all retirement contributions until your debt is paid off. This includes 401k match contributions.
I disagree. Your employer match on your 401k contributions is 100% free money. You should always be contributing enough to get your entire match.
Want to get started with the debt snowball method? Read this:
3. Create a 3-6 month emergency fund
Once you’re debt free, Ramsey suggests you revisit your baby emergency fund and make it a real one.
He suggests that you need at least 3 – 6 months of expenses saved in your emergency fund. I tend to agree. For some people, 3 months may not be enough. It depends on your risk tolerance. Anything less than 3 months of expenses is foolish though.
What happens if you lose your job?
You don’t want to go back into debt. A good emergency fund will keep you afloat while you search for a new job.
4. Start investing for retirement
This step is all about funding your retirement accounts.
Dave Ramsey suggests putting 15% of your income towards your retirement. While that number is a good number to start with, if you’re older than 25, you’ll probably want to be contributing more.
Since this book is aimed at people who are new(ish) to personal finance, his investing strategy may be a bit on the boring side. He recommends only investing in mutual funds and Roth IRA’s. Again, this is a great place to start investing, but there are many many other ways to grow your wealth.
5. Save for your children’s college tuition
One of the reasons Ramsey suggests only putting 15% of your income towards retirement is so you can save for your children’s college.
Being so anti-debt, it’s no surprise that he doesn’t approve of student loans. Ramsey believes you should be paying for college with cash. This is a nice thought and would be ideal, but it’s not realistic for lots of people.
If you had 4 children, you’d have to save up around $514,000 to send them all to private universities or around $160,000 to send them to an in-state public college.
Either way, that’s an unrealistic amount for lots of people.
Ramsey suggests, if you can’t save up enough for your children’s college tuition, things like a work-study program or joining the military.
6. Pay off your home mortgage
Once you’re investing 15% for your retirement and saving for your children’s college tuition, Ramsey suggests that you make extra payments towards your home mortgage.
Again, this goes to show how against debt Ramsey really is.
He claims it’s possible to buy your home with cash. While that may be true for certain parts of the country and with a certain amount of savings. But if the majority of people waited until they had the cash to buy a house, they’d be renting well into their 40’s and 50’s.
A home mortgage on a reasonably priced house can be “good” debt, even if Ramsey doesn’t believe so.
Before making extra payments towards your mortgage, you should weigh the benefits of saving more for retirement first.
Some of you will be surprised at the result.
7. Accumulate wealth and give back
The final step is to accumulate wealth and give back.
This is all about what Ramsey believes money is for. I like that he says that money just amplifies what you already are. If you were a jerk when you were broke, being wealthy will just make you a rich jerk. If you were kind and generous when you were poor, being wealthy gives you the ability be even more kind and generous.
Ramsey suggests that you should, once you reach this stage in your money journey, hire financial advisors. I’m not sure I agree. If you made it to this stage, you have all the skills required handle your own money.
My overall thoughts on The Total Money Makeover
When I first read The Total Money Makeover, it made quite the impact on me.
I thought it had all the answers and for the stage I was at in my financial life at the time – it did. However, the more I learned about personal finance the more I realized that some of Dave Ramsey’s advice was dogmatic and not necessarily true for everyone.
This book is great for people who aren’t financially-savvy and want a good primer on how to handle their finances.
My reservations on some of Dave Ramsey’s advice
While Total Money Makeover is mostly straightforward and useful advice, Dave Ramsey himself seems to be 100% against credit cards or debt of any kind.
I don’t agree with him.
While credit cards do have the potential to ruin your finances, if you’re smart about their use, credit cards can be a useful tool. Cash-back and point reward programs are nothing to sneeze at. In fact, I’ve funded many vacations from the points accumulated from my credit card purchases.
Dave Ramsey also says that having separate checking accounts is a sign of problems or ignorance.
Again, I disagree. There are many different ways for a couple to manage their finances together. If having separate checking accounts works for you, more power to you. As long as there is honest communication between a couple regarding their money, there is no right or wrong way to manage household finances.
He also mentions that you should pay your debts off before getting a 401k match from your employer.
This goes to show you how against debt Dave Ramsey really is. Getting even a 50% employee match on your contributions to your 401k is significantly better than using that money to pay off your debt. Always get your match – it’s the closest thing to free money you can get.
Should you buy Total Money Makeover?
While this book really helped me get my finances in order when I was first learning about personal finance, it’s not for everyone.
Are you debt-free? Are you saving for your retirement? Do you have an emergency fund?
If you answered yes to all three of those questions, you already have somewhat of a handle on your finances and would be better off reading something like A Random Walk Down Wall Street or The Millionaire Next Door.
If on the other hand, you’re living paycheck to paycheck, you’re struggling with debt, or you just need a swift kick of motivation, then Total Money Makeover is for you.
It’s a great starting point, especially if you’re drowning in debt.
The self-help nature of the book makes for great inspiration. Reading the book will get you excited to start getting your financial life in order.
Some words of caution:
Dave Ramsey is religious and it’s obvious in Total Money Makeover. If the occasional reference to God or the Bible bothers you, then you may want to avoid this book.
Other Dave Ramsey books and products
If you’re a big fan of Dave Ramsey’s or enjoyed the book, you’ll probably enjoy his other books and products.
- Financial Peace University
- Dave Ramsey’s Complete Guide to Money
- The Legacy Journey
- Smart Money Smart Kids
Have you read The Total Money Makeover? What are your thoughts on the book?