This is our last day to look at Dave Ramsey's Total Money Makeover. Let's look at his overall process for revising our finances.
1. Be sure you are really going to make the change...that's the hardest part. Do not add ANY debt from this point on and shred all credit cards.
2. Create an emergency fund of $1000 to use ONLY for emergencies
3. Take all extra money you have to pay off your debt. Pay off as much as possible toward the smallest debt first, with minimal payments to everything else. As soon as the smallest debt is paid off, devote all the monthly money you were paying on that to the next smallest debt, working it off as quickly as possible. This is called the Debt Snowball, and it will allow you to see progress quickly as you become debt free.
4. Expand the emergency fund until it is big enough to cover 3 - 6 months of your regular expenses.
5. Save for retirement
6. Save for college for the kids (yes, this is AFTER retirement saving...Dave believes that we do not owe our children a college education, but we do owe them freedom from the burden of our debt in our old age!).
7. When all these things are under control, start paying off your home mortgage(s).
8. When you are totally debt free, build wealth so you can have fun, invest, and give!
I know that people who follow Dave's advice will get out of debt and will be able to find financial freedom if they keep at it. I've seen people pay off huge debts in record time, and I've seen the stress just drain from them.
I've also seen people who have taken Financial Peace University or read Total Money Makeover. They agreed with Dave in theory, but refused to act in the difficult ways he recommends. Each and every one of them has ended up worse than before they started the course.
Like any other improvement program, this won't work if you don't do it!
We don't follow all of Dave's principles (we have one credit card which we have paid off in full each month for over 25 years, so we feel we don't have a problem with credit card debt). That said, we are very careful not to spend more with plastic than we would with cash. We do almost all of our in-person store transactions with cash, and it has worked very well for us.
If you are in financial difficulty and you REALLY want to change, this is a fabulous book/program to use.
Purchase the book and find out more about Dave Ramsey at his website, www.daveramsey.com
In addition, there are a lot of tools, techniques, forms, and testimonials at the site.