Dave Ramsey – author of The Total Money Make Over

Dave Ramsey

Dave Ramsey

Dave Ramsey – author of The Total Money Make Over

I am still relatively new in the world of personal finances and have always been questioning whose advice should I be following.  I am sure many people out there are facing the same issues so I am going to try compile information about different financial gurus.  Today I will be covering on Dave Ramsey. 😀

 

Background

Dave Ramsey needs no introduction to the folks interested in finance.  He is notorious for his loud and emotional speeches which is both motivating a tad bit funny plus scary at times.  Dave was born and raised in Antioch, Tennessee and graduated from the College of Business Administration at University of Tennessee, Knoxville with a degree in Finance and Real Estate.  He was once one of the youngest brokers to be admitted to the Graduate Realtors Institute and had a portfolio worth more than $4 million.  That was before he filed for bankruptcy and picked himself up afterwards.  Dave is now a businessman, motivational speaker, author, radio host, and a “financial guru”.

Advocates

General

  • Invest in stock mutual funds
  • Buy term life insurance
  • Everyone can retire a millionaire – most millionaires are unsung ones, they work and invest part of their income and retire a millionaire
  • Invest 15% of your household income
  • Saving for your children’s college fund
  • Act of giving generously
  • Track your budget
  • Give every dollar a job

Paying off debts

  • Use the debt snowball method to pay off debt – it will keep you motivated and you will pay off all your debts faster
    • Debt snowball: debtors pay off debt from smallest to largest disregarding interest rate
    • This method is criticised by many and generally work best for people with lesser control over their finances
  • Pay off your debt with gazelle intensity
    • According to Dave he saw a documentary where gazelles were running (frantically) away from a cheetah – this is how we should treat our debts, we RUN THE F***ING HELL AWAY FROM IT!!! (I typed this in caps to imitate Dave’s dramatic way of speech)

Summary

Dave recommends people to follow his 7 baby step formula.

  1. $1000 cash in a beginner emergency fund – *Note: this is in USD
    1. This is essentially a tiny cushion for unexpected events – example medical bills
  2. Use debt snowball to pay off all your debt (except for the house)
    1. List all debts from the smallest to largest and start paying off the smaller first
    2. Paying off the smallest one should give you the push to pay off the next one
  3. A fully funded emergency fund of 3 to 6 months of expenses
    1. This is to protect against bigger surprises – example job loss
    2. This should ensure you will never be in debt again
  4. Invest 15% of your household income into retirement
    1. Now with no debts and a cushion to fall on, it is time to invest
    2. Dave advocates spreading the money into 4 types of mutual funds – note that I am unsure about the differences, do let me know if you know
      1. Growth
      2. Aggressive growth
      3. Growth and income
      4. International
  5. Start saving for your child’s college
    1. Do not let college tuitions sneak up on you, save up in advance
  6. Pay off your home early
    1. Consider refinancing to a shorter fixed rate mortgage – not sure if this is applicable in Singapore
  7. Build wealth and give generously
    1. It is time to live and give like no one else
    2. Build wealth and be insanely generous
    3. Dave recommends leaving an inheritance for future generations
    4. You can now do anything you want!

Extra

For more information on Dave, visit his site here: https://www.daveramsey.com/

Or purchase one of this books.  If you are in debt, I highly recommend Total Money Make Over, for a simple step-by-step guide, try Financial Peace, for people with kids, you can’t go wrong with Smart Money Smart Kids.

For other articles from this series, please visit here and here.

 

Ms. Finding Money

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