THE TOTAL MONEY MAKEOVER - DAVE RAMSEY

The total money makeover by Dave Ramsey is a helpful book on personal finance management and building wealth. This is a summary of what I have learned about total money makeover

A budget: In order to win with your money, you must set up a budget, a written budget, set up a new budget   every month.

Insurance: You must have insurance in some basic categories as part of a total money makeover

Auto and Homeowner Insurance: - Choose higher deductibles in order to save on premiums.   With high liability limits,   these are the best buys in the insurance world

Life Insurance—Purchase twenty-year  level  term  insurance  equal to  about  ten  times  your  income.   Term  insurance  is  cheap  and the  only  way  to  go;  never  use  life  insurance  as  a  place  to  save money

Long-Term Disability—If   you are thirty-two years old,   you are twelve  times  more  likely  to  become  disabled  than  to  die  by age  sixty-five.   The  best  place  to  buy  disability  insurance  is through  work  at  a  fraction  of   the  cost.   You  can  usually  get coverage  that  equals  from  50  to  70  percent  of   your  income.

Health Insurance

The Baby Steps

 “Baby Steps,” the premise of which is that we can do anything financially if we do it one little step at a time. “You  can  get   anywhere  if  you  simply  go  one  step  at   a  time”

Baby Step One: Save $1,000 Cash As A Starter Emergency Fund.

This   emergency fund is   not   for buying things   or for vacation; it is for emergencies only. No cheating. When you get the $1,000, hide it.  You can’t   keep the money handy, because it will get spent. Keep It Liquid

Baby Step Two: Start The Debt Snowball.

List   your debts   in order, with the smallest   payoff or balance first.  Do not   be concerned with interest rate or terms unless two debts  have similar payoff, then  list them with higher interest rate debt first. Paying the little debts   off first   gives   you quick feedback, and you are m ore likely to stay with the plan.

The Debt   Snowball method  requires   you  to  list   all   your debts   in  order  of  smallest   payoff  balance  to  larges t .  List   all your debts   except   your home;   List all of your debts —even loans   from   Mom   and Dad or medical   debts   that   have zero interest.

Use all nonretirement savings and investment to down your debt.

Baby Step Three: Finish The Emergency Fund.

A fully funded emergency fund covers   three to six   months   of expenses. You start the emergency fund with $1,000, but a fully funded emergency fund will usually range from $5,000 to$ 25,000. The typical family that can make it on 3,000 per month might have a $10,000 emergency fund as a minimum. Before using the emergency fund, back up from the situation and calm down.

Baby Step Four: Invest 15 Percent Of Your Income In Retirement.

Getting older is going to happen. You must invest now if you want to spend your golden years in dignity. Investing with the long-term goal of security is not a theory to ponder every few years; it is a necessity you must act now.

Baby Step Five: Save For College

In order to have enough for college, you must aim at something. Your assignment is to determine how much per month you should be saving at 12% interest in order to have enough for college.  

Baby Step Six: Pay Off Your Home Mortgage.

Never to take more than fifteen-year fixed-rate loan, and never have a payment of over 25 percent of your take-home pay. That is the most you should ever borrow.

Baby Step Seven: Build Wealth.

Money is   good for FUN.  Money is   good to INVEST, and Money is   good to GIVE. There are only three uses   for money:   FUN, INVESTING, and GIVING.  You cannot   claim   Total Money Makeover status   until you do all three.