Total Money Makeover

"If you will live like no one else, later you can live like no one else." Dave Ramsey has built a very successful business teaching money management. He has books, a radio show and computer software all designed to help people get out of debt and stay there. At first, I thought it might be a scam, like those TV infomercials since he uses a lot a catchy phrases and sounds like a motivational speaker. When you really break it down though, what he is teaching is common sense. Debt is not a tool. Only spend what you have. Make a budget and stick to it. Pay down debt before you save. We know that these things are true, but how many of us actually do them? The real benefit of this book, is that it can give you the jump start you need to really look at your finances. He doesn't promise that it will be easy, but he does promise that if you will follow what he says,  you can be debt free. That sounds good to me!
First he recommends saving one thousand dollars in a emergency fund. Since you will not be using credit ever again, you might need this for emergencies. Next, write a budget and begin a "debt snowball". The idea here is to begin by paying off the smallest debt first. Even if you have others with higher interest rates, the satisfaction of crossing off that first debt will be motivating and will encourage you to continue. Then you take the amount that you had been paying toward the first debt and add it to your payment on the next lowest debt, creating a snowball of debt payment. Once all debt has been payed, then pay yourself! Build up a larger emergency fund and a retirement fund. Now you can take a vacation (payed in cash)!
It seems so logical. We have been trained to believe that we need debt to function, but the truth is the debt needs us. Banks need borrowers. They aren't doing us any favors and wouldn't it be amazing to buy your next car with cash?

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