"The Total Money Makeover: A Proven Plan for Financial Fitness" by Dave Ramsey

This book is actually the November choice for my Relief Society's book club! That's kind of cool!

So, this was an excellent book. I really enjoyed reading it. I wonder if I would have liked it as much if our finances were different. We are very, very fortunate to not have debt (besides our house) due to wonderful parents and grandparents. I think probably I would have enjoyed reading the book if we had other kinds of debt, but most likely it would have felt a little bit like reading a book about losing weight from the point of view of someone who needs to, instead of someone who feels they are on track, i.e. it would probably have induced a major guilt trip. But I suppose that's a good thing if it motivates you to get your finances straight.

Although, the book does have lots and lots of motivational success stories from a wiiiide variety of people, sandwiched here and there. One of the pictures had an LDS family; we could tell (even though it was cropped) because the photo was in front of a temple. That was cool.

The book is not a method book, it's a process book. As in, there was not a lot about the specifics of what you need to do to balance a budget. Instead, it focused on why you should do certain things with your finances, and in what order. Not surprisingly, most of his "baby steps" follow counsel that the LDS Church gives. Actually, the guidance is also pretty much the same as what my non-LDS grandparents would say, too. They are simple, but difficult. It is not a "get rich quick" scheme.

I really like Dave Ramsey. Yesterday I kind of went on a "Dave Ramsey Binge" when I downloaded his "Ask Dave Ramsey" iPhone app, and listened to the calls nearly all day while doing chores or quilting. It was really fun. He's a fiscal conservative, as well as a political conservative, but I kind of think he's more libertarian than republican. Anyway, his talk show style is strikingly similar to Sean Hannity's, so why is it that I find him hilarious and fun to listen to while Sean I find obnoxious and rude? I think it's because the topic of finances is not nearly as controversial. For example, Dave Ramsey sometimes says things like, "You're acting like a FREAKING FOUR YEAR OLD! You need to get off your BUTT and DIG SOME DITCHES!" I dunno, there's something very gratifying hearing the truth told like that, as applied to an individual. I think it gets fuzzier when it comes to politics, though. Like, it sounds more like complaining when a citizen says the same kind of thing about his country. But I digress.

You can learn more about Dave Ramsey's baby steps here.

In brief, they are:
1. Save and maintain a $1,000 Emergency Fund
2. Get out of debt via the Debt Snowball method (pay your debts in order of smallest to largest)
3. Save and maintain a 3-6 month Emergency Fund
4. Save 15% of your annual income towards Retirement
5. Save for college tuition
6. Pay off the home mortgage
7. Build wealth, have fun, invest, and GIVE.

I think the main thing that I learned from reading this book is the advantage of a psychological boost when you focus all of your energy in one sector. I mean, that is pretty much the only "new" "breakthrough" thing. And even then, once you get to steps 4-6, you do them all at once.

The psychology is also applicable to baby step 2, the Debt Snowball. I mean, technically, you would save more money if you paid it off via the highest interest rate to lowest. But you definitely feel better as you accomplish something. I'm glad that he factors the psychology into the plan.

We pay extra on our mortgage now and always have. It's something both my parents and Danny's parents taught us to do. According to Dave Ramsey's plan, we should wait to do this until we have a fully funded Emergency Fund. I'm not sure that we're going to do it his way now, or what, but I can see the advantage of tackling one thing at a time. Either way we go, I checked out an amortization schedule for our mortgage earlier this morning. It was pretty much the most depressing thing I have ever seen in my life.

This book brought up some really great things for discussion between me and Danny, like:
- What constitutes and "emergency"? Are all car repairs an "emergency", or just the really big ones? Does Christmas count as an "emergency"?
First, Christmas does not count as an emergency. It comes around every year at the same time. We have to budget for it. We basically decided that we should start budgeting for some bigger one time expenses that we know will come up. Car maintenance and small repairs that will obviously continue to happen just from owning a car, those are not "emergencies". If suddenly the transmission went out? That would be an emergency. Although we'd probably just sell my car if that happened, because it's not really worth it to replace the transmission!

Does a baby count as an "emergency"? Yes and no, I guess. I mean, we're budgeting for more than what we think the baby will cost, and on top of that we've got some extra insurance. But if the baby were to be born via emergency c-section two months early? I think that would definitely count as an "emergency". Too bad you can't really plan with that!

- If Danny lost his job, how much money would we need to keep us alive for a month?
This was kind of difficult to figure out, especially factoring in private health insurance. It was also kind of emotional to think about, but I'm glad we did. Personally, the thought of Danny losing his job is probably the most terrifying thing to think about ever. It's a LOT less scary now that we have a plan in place, even though it meant having to think about a terrible situation. We should also write a will. One of the funnier myths that Dave Ramsey debunks in the books is this: "Myth: if you write a will, you will die. Truth: you will die, so you should leave a will." Haha.

- According to the recommended category percentages (based on Dave Ramsey and his team's vast knowledge and experience), how does our budget compare?
As in, if he recommends to spend between 5-15% of your monthly income on food, what percentage of our monthly income is spent on food? In looking at this, we discovered that we are doing great. That felt good. Oh yeah, Dave Ramsey totally pays tithing and recommends that everybody else pay it, too, no matter what step you are on! Isn't that so good???

- Does the 15% Dave Ramsey recommends you pay towards retirement include company matches?
The answer is no, you just count it as gravy.

- What are we going to do with our credit cards?
We decided to keep them and not use them. Our limits are pathetically low (which is a GREAT thing!), so much that if we did "max" them both out, we would still be able to pay them off each month. I think Danny's is like $200. We had been using them for routine purchases, but we're probably not going to do that anymore. I learned that you spend 18-20% more if you use credit, and I believe it. But they would come in handy if I'm stranded with Jane in an airport and need to buy a plane ticket home or something like that. Or if a situation arose where we didn't have access to a computer. Or if for some reason our credit union's website were down and we HAD to buy something right away. That last scenario has actually happened, so there you go.

The thing is, the plastic factor is not a temptation. I've used a debit card since the age of 15. They feel the same. To me, cash feels like "play" money, because usually when I have cash, it doesn't get accounted for in the budget (due to online banking). I don't think credit cards are inherently evil, but I don't really want to use one regularly. It's not been a temptation yet, and I don't want it to start being one any time soon.

I will say that I think the marketing of credit cards is evil. They prey upon the young, who are usually naive and ignorant. I'm glad that congress finally passed a "duh!" law that says you should verify if a teenager has a job before approving them for a credit card. Side note: I've gotten a credit card offer in the mail pretty much every day for the past two weeks. They just go in the trash.

One final thing about the book, and probably the number one reason I liked it: the Allocated Spending Plan. So, the book doesn't focus on the how, but it does include some budgeting forms in the end. I was super excited when I learned that one of the main forms was something I had already just intuitively started doing. Basically, it's a spreadsheet that helps you "spend" your paycheck before you get it it. But I really like that he has it set up to where each column is a paycheck, which is great because there are lots of one-time bills each month.

I would recommend this book to anyone, but especially to single or newly married people who haven't thought much about their financial future. I would also recommend Dave's talk show; it's funny and good.