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Synopsis
The Total Money Makeover isn’t theory. It works every single time. It works because it is simple. It works because it gets to the heart of the money problems: you.
Who is this book for?
- Readers who are interested in persuasive and leadership oriented books.
- People who need to use persuasion to generate sales or inspire change.
- Anyone interested to learn how to use why to get desired results.
Meet the author
David Ramsey (born September 3, 1960) is an American personal finance guru, businessman, and author.
The Total Money Makeover Summary
Step One: Begin the emergency fund
One of the things that make people financially disoriented is emergencies. It can be a source of frustrations especially when emergencies occur when you are not up financially. Dave Ramsey helps you understand the basics of becoming financially stable.
A fundamental way of being able to do so is by realizing the importance of having a basis to build your total money makeover. Ramsey gives you the opportunity to understand where to start.
The lack of sufficient funds to deal with emergencies leads to extra borrowing and may be a source of financially based frustrations. Ramsey considers the solution to this as the step 1 of becoming financially free. You must be decisive on placing a consistent way of depositing funds irrespective of the other needs. It will help in attaining the desired savings in the least time possible. The solution to handling unprecedented
incidences is suggested and proved to be the setting of a fund to deal with emergencies.
You should intentionally set a goal to save an emergency amount which should be above $1000 US dollars. It is a security for covering any crises that you may face under normal circumstances.
It is very discouraging to have an emergency and end up unable to raise amounts to deal with the crises. Another thing that you need to understand is discipline is essential in not allowing other needs to dig into the fund. The fund should not tamper with irrespective of the situation that you may be undergoing. It is critical to ensure that you gain the discipline to save by walking the talk and providing that you feed the account through regular deposits.
This kind of saving will help you manage other issues that you may face.
Step Two: Start the debt snowball
You have accumulated lots of debt in your life and not aware that you are still adding more to the list. You keep worrying about how you can be debt free, but you have never found a route to achieving this.
Whatever you save may end up becoming useless in case you accumulate debts on the other end. You, therefore, need to be cautious about how you handle other financial obligations.
Dave Ramsey provides you with an exceptional way of killing your current debts. You will get a direction on how to maneuver and overcome the habit of building more debts.
It must start by being aware of all your current liabilities and noting the areas where you may be generating avoidable obligations. The debt snowballing method is one of the unique suggestions that you may ever come across.
As suggested by Dave, this method helps you to kick debts out of your life in a gradual manner. It helps you in becoming a more reliable both in saving and controlling your liability.
Snowballing will assist you to eliminate your debt accumulation behaviors. It is one of the diseases that may lead you into huge financial deficit. It is only through snowballing that you will possibly get out or even evade getting into the unmanageable financial situation.
One of the suggested mechanisms under this includes the listing of all your debts and noting the balances. You should be able to consider the liabilities and have them well listed on a snowballing debt list. It will help you in identifying the urgent debts that you need to sort out with priority.
A high priority can apply to those that bear a high-interest rate. However, you need not worry about the interest rates unless there are debts with similar payoff times.
It makes you schedule the repayment of the debts. A proposal to have a strategic approach to paying debts is provided. That is by depositing vast amounts of the money towards settling the large loans and have small quantities set towards resolving the small debts.
Step Three(a): Finish the Emergency Fund
You must discipline yourself after snowballing for about 3 to 6 months so that you do not end up neglecting your commitment to service your emergency fund. Otherwise, this may trigger your drawing back, and you may end up not saving anything at all.
Also, you may fail to meet your set emergency fund target. It makes it essential to prepare a mechanism of ensuring that you complete your set goals.
The fundamental thing is to ensure that you set your mind that you will complete paying up to the emergency fund. Once you can realize the fund, Ramsey considers that you made a significant step towards a debt free life. It is because the emergency savings will act as protection for you. The surprise will not take you by the things you come across during your routine life.
To be able to attain the fund, one of the things you need to do is to set the emergency fund account as a separate account and not part of your regular financial transaction account. That is what is going to prevent you from touching the funds.
You should always remind yourself that money sent to the emergency fund account is not available for your regular use. The account should be a fixed one, and hence there should be no opportunity to access the money before the amount reaches the desired level.
Another key challenge that you may face is that you may sideline the account and only deposit when you have extra money with you. It is a significant error that if you are not careful, you may end up neglecting the emergency fund.
In avoiding this, it is advisable to connect the account to the regular account that you use to receive payments. It will enable an automatic check-off from the account to the emergency fund.
It is a recommended way of gaining disciplined saving.
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“We buy things we don’t need with money we don’t have to impress people we don’t like.”
― Dave Ramsey, The Total Money Makeover: A Proven Plan for Financial Fitness
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