Dave Ramsey is a popular radio talk show host and author and his latest book, The Total Money Makeover has generated quite a bit of excitement. He claims that money management is 80% behavior and 20% knowledge, and there is a lot of truth to that. While the book covers a lot of interesting tips and techniques for managing your finances, there were a few things that we just couldn’t get behind.
The main principle of the book is that in order to manage your money you’ve got to get rid of all of your debts, put aside enough money into an emergency fund and start saving for school tuition and retirement right now. There’s nothing wrong with that, but the author also advocates paying cash for everything. There are two ways to look at that.
Yes, spending only what you have is only intelligent. However, if you want to build up your credit so that you can buy a house or get a loan in the future, this method may actually hinder you. While we certainly advocate paying cash, the author could have discussed how good debt is actually beneficial, both in terms of growing your money and in developing a solid credit rating.
We did however appreciate the baby-step approach that Ramsey advocates. For those that are looking at a mountain of bad debt or just getting started with in their personal finance journey, this is sound advice. It is a lot easier to get started when you handle the small things first and in that, we do give the author credit.
There is a lot to be learned here, but we still feel that Ramsey could have taken it to the next level simply by adding one additional chapter on making your money work for you. It’s perfectly fine to sock away extra money, but it’s a lot easier to have more money when you find ways to increase it while you are planning for the future.
If you need help getting out of bad debt and getting your finances back on track, this book is probably a pretty good resource for that. However, for long term financial planning, it’s very difficult to recommend it. It is a great read and many complex financial steps are broken down for the reader, so that it is easier to get your finances back on track, but when it comes to growing your money, the book falls down.
Overall, if you are having a very difficult time managing your finances and cannot seem to get out of the debt trap, there is some very good advice in this book for you. However, if you are looking to grow your money and secure your future quickly, you would most likely be disappointed. We give the author high marks for his advice on emergency funds and putting aside money, but when it comes to paying cash for everything, we just can’t agree with his methods.
Originally posted 2008-10-17 05:20:10. Republished by Blog Post Promoter
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3 comments ↓
I think you should research a little more about what Dave Ramsey says about credit ratings. He addresses this issue many times on his radio show. If you are debt free you will have more money to save for things like cars and houses. Dave would say that ALL debt is bad. You don’t need a credit rating to buy anything, you just need cash. Cash can get you better deals than any amount of money you financed with your credit rate.
Previous post is correct! Credit Score is “I love debt score” and Dave is essentially teaching people to flat-out get out of the game…you don’t need it to be successful. Banks can look at other factors in order to offer you a loan for your house. Aside from that, you shouldn’t be borrowing anyway. Think about this…Dave Ramsey could buy an entire apartment complex by writing a check for the whole amount, yet his credit score (he doesn’t have one at all) wouldn’t allow him to rent an apartment! It’s an “I love debt score.”
I’m amazed at how many people have their little websites and even get paid to write articles and give financial advice, and yet don’t understand so many essentials about personal finance. Dave and his team, which is a phenomenal team by the way, are the best you can find in our nation today. If you want success, listen to this guy and just do it!
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