The key ideas

The Total Money Makeover: A Proven Plan for Financial Fitness

Dave Ramsey, 2003

Why does a loan payment feel normal when it keeps you stuck for years? Dave Ramsey, who went through bankruptcy himself, offers a seven-step plan: from your first thousand dollars for a rainy day to a life with no debt at all. You will learn how the debt snowball works, which myths about borrowing Ramsey considers the most dangerous, and why you need gazelle intensity.

Who it is for

For anyone living paycheck to paycheck and tired of loan payments. And for anyone who wants a clear plan to get out of debt and start saving, without complicated financial jargon.

Most people don't change until the pain of where they are becomes greater than the pain of change.

The crib the sheriff was coming for

On September 23, 1988, the sheriff was due at the door of a young couple named Ramsey. Acting on one of the lawsuits against them, he was coming to take every piece of furniture in the house, the baby's crib included. That same day, the couple declared themselves bankrupt. Not long before, Dave Ramsey had been twenty-six, worth more than a million dollars on paper, driving a Jaguar and taking his wife on vacations to Hawaii.

All that wealth was built on debt, and when the banks wanted their money back, it fell apart within months. Ramsey started over. He began counseling people in debt, went on the air with a radio show about money in 1992, and in 2003 gathered what he had learned into this book. He calls it a plan for financial fitness: just like at the gym, there is no secret here, only a routine you have to stick to.

Ramsey's central idea sounds almost defiant. The debt everyone has grown used to is neither normal nor necessary. Success with money, he says, is eighty percent behavior and only twenty percent knowledge. That is why his plan is stubbornly simple: seven Baby Steps, taken strictly in order.

Ramsey writes bluntly, and many people find his views extreme. Here they are given as his views, without softening and without preaching. You will learn which myths about debt he considers the most dangerous, why he tells you to pay off the smallest debt first, and what to do once the debt is gone.

“I'm not that out of shape”

That is the title of the chapter where Ramsey starts talking about what stands in the way. A person carrying extra weight rarely tells himself he is unwell. He says things are not that bad. Money works the same way: the payments go out, the card still works, the neighbors are no better off. Ramsey sees this denial as the first enemy of any change.

To show how it works, he retells a story he once heard at a Zig Ziglar seminar. Drop a frog into boiling water and it jumps out. Put it in cool water and heat it slowly, and it stays in the pot. Mediocrity creeps up just as slowly: each new payment seems like nothing, until the water boils.

This leads to one of his best known ideas: the real threat is not disaster but the feeling that everything is pretty much fine. Disaster forces you to act. “Fine” lets you change nothing for years. Ramsey notes that people would rather talk about anything than their money, even with those closest to them, and the problem grows in silence.

The mistake is comparing yourself with the people around you instead of with where you could be. Ramsey suggests starting with an honest look at your numbers: how much you owe in total, and how much goes to whom each month. If just thinking about that figure makes you uneasy, you have already taken a step many people never take.

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About the author

Dave Ramsey is an American entrepreneur, a radio host who talks about money, and the author of books on personal finance. He went bankrupt in 1988 and has been teaching people to live without debt ever since.

All books by this author: Dave Ramsey

Terms from the book

  • Mortgage
  • Debit card
  • Mutual fund
  • FICO
  • Bankrupt: A person or company that a court has declared unable to pay their debts. Some of the debt is written off, but property may be sold to pay the creditors.
  • Ziglar: Zig Ziglar (1926 to 2012), an American motivational speaker and author of books on selling and success.
  • Mediocrity: Living at the level of “like everyone else” and “pretty much fine”, without reaching for anything better.
  • Book of Proverbs: One of the books of the Old Testament, a collection of short sayings about wisdom, work and money. Ramsey quotes it often.
  • Credit score: A rating of how reliably a person pays their debts. Banks look at it when deciding whether to lend.
  • Co-signer: A person who signs on to someone else's loan and promises to pay if the borrower cannot.
  • Baby Steps: The name of Ramsey's seven-step plan for a life without debt, not a standard financial term.
  • Murphy's Law: A joking rule: anything that can go wrong will go wrong.
  • Debt snowball: Ramsey's method of paying off debts from the smallest to the largest, rolling each freed-up payment into the next debt.
  • Gazelle intensity: An image from Ramsey's book, not a technical term: total focus on getting out of debt, like a gazelle running from a predator.
  • Maxwell: John Maxwell (born 1947), an American author of books on leadership and a preacher.
  • Emergency fund: Savings covering three to six months of expenses, kept within easy reach and spent only on a real emergency.
  • Fixed rate: An interest rate on a loan that stays the same for the whole term.

All terms

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