Every Sunday, The Simple Dollar reviews a personal finance or other book of interest. Also available is a complete list of the hundreds of book reviews that have appeared on The Simple Dollar over the years.

I’ve written about 250 book reviews on The Simple Dollar since I started the site in late 2006. Along the way, I’ve found a few books that I just immediately recommend for certain topics. My general personal finance recommendation is Joe Dominguez and Vicki Robin’s Your Money or Your Life. My regular debt management recommendation is Dave Ramsey’s The Total Money Makeover. For investing, I usually recommend Larimore, Lindauer, and LeBoeuf’s The Bogleheads’ Guide to Investing. Time management? I’ll point to David Allen’s Getting Things Done.

Throughout all of those books, though, I’ve never really found a single book I could recommend about entrepreneurship. There’s not been one book that really talks about the process of taking an idea you have in your head, investing your spare time and effort into it, and building it into something sustainable that can earn you significant money over time. The closest book I’ve found to that goal is Michael Masterson’s Ready, Fire, Aim, which does a very good job covering the topic, but feels incredibly rushed in places.

That’s why I felt pretty optimistic about reading Dave Ramsey’s latest, EntreLeadership. Ramsey is very good at hammering home the basic ideas you’ll need on a topic and pairing it with enough motivation to get you to go out there and try it yourself.

EntreLeadership Defined
In order to be successful, an entrepreneur has to be a leader. Even at the very start, when a business is nothing more than a side gig or the germ of an idea, it will never get started if you don’t step up to the plate and say that things need to happen. Even then, you’ll have to communicate with people and likely delegate some of the tasks that have to be done. Without some leadership skills, it will never happen. Entrepreneurship and leadership are intrinsically connected, and the principles of leadership help even the nascent entrepreneur.

Start with a Dream, End with a Goal
A lot of us have dreams of what we’d like to do with our lives. I’ve made no secret of my dream to be a writer. Others dream of other things. The difference between a dreamer and an entrepreneur is whether or not they can convert that dream into a goal, particularly a goal with a plan to get there. A dream is a fun indulgence, but it doesn’t come true if you don’t set it as your destination and focus on how exactly to achieve it.

Flavor Your Day with Steak Sauce
A big key of entrepreneurship is good time management. In order to have the time each day you’re going to need to make your business work, you’ve got to have a great grip on your time. Ramsey advocates using to-do lists, but also reflecting on Covey’s four quadrants (important and urgent, not important and urgent, important and not urgent, and not important and not urgent), where, obviously, important should always trump urgent.

“Spineless Leader” Is an Oxymoron
The best thing you can do as a leader is to make decisions quickly based on the information you have and be able to explain why you made those decisions. “Leaders” who don’t make decisions tend to lead organizations that fall apart. Leaders who make decisions without basing them on information tend to make horrible decisions. Leaders who make decisions based on information but can’t explain them tend to sow mistrust with their team.

No Magic, No Mystery
This chapter is most of the key ideas of a “business 101″ class wrapped up into a single chapter. Ramsey covers the life cycle of a product (introduction, growth, peak, decline) and how to start over again. There’s also a deep look at marketing a product, with basic ideas such as scarcity and appeal covered in the discussion. Almost any business you get into will involve some level of marketing, so it’s important to understand the basics of it.

Don’t Flop Whoppers
Here, Ramsey discusses the process of turning a detailed idea or a small side business into a larger entity. There are two keys to this, in Ramsey’s eyes: passion and calling. Passion is something that gets you excited to get out of bed in the morning. You can’t wait to get started on the activities at hand. Calling is what you want to achieve in your life. I’m passionate about writing, but my calling is using my words to change people’s lives.

Business Is Easy… Until People Get Involved
One of the biggest challenges in growing a business beyond a solo gig is the people. I can speak to this from experience: it was dealing with employees (interviewing, training, cleaning up their mistakes, etc.) that was the single worst experience of running The Simple Dollar, in my eyes. Ramsey offers a lot of good material that covers the entire life cycle of an employee, from the hiring process to maintaining good work to letting go of problematic employees.

Death of a Salesman
The best thing a good salesman can do is to focus on the customer and come up with solutions for that customer in mind. Sometimes, that means doing things that aren’t directly beneficial for your business, such as helping with things that are outside of your business or suggesting products and services that you don’t sell. If a customer walks away from you happy with the exchange and in a better place because of it, you’ve succeeded in your goal.

Financial Peace for Business
Businesses need to manage their finances well and, yes, be frugal. Owning a business isn’t a ticket to spending like a madman. Here, Dave takes the personal finance advice from Financial Peace Revisited and applies the advice to small business management. It actually works quite well, because the basic principles of personal finance – spend less than you earn, avoid debt, etc. – work very well for small businesses.

The Map to the Party
When a business grows into a multi-person outfit, the key to success is communication. The more people feel that they’re able to communicate and that their ideas are of value, the more they actually do communicate, the more involved they are, and the better decisions you can make for the business as a whole. Good communication feeds on itself, as does bad, so the best thing a leader can do is be candid and open.

People Matter Most
The people in your business matter more than anything else. If you can’t do right by them, you can’t do right by the rest of your business, and if you can’t do right by that, your business will eventually fall apart. Treat the people who work for you well. Respect what they need and work with it. Listen to what they’re telling you and don’t brush it off. The more you do that, the more they’ll respect you (if they’re good people that you want working for your business).

Caught in the Act
One key way to build your business is to make sure your business is recognized, particularly when you’re doing good things. Little steps, such as your email signature or your stationery, makes a difference. Mentions in the media also help. The more little pieces of positive recognition you have floating around out there, the more likely it is you’re going to draw in a random customer off the street.

Three Things Successful People Never Skip
Contracts, collections, and vendors. Dealing with each of these is the kind of detail work that can drive a person mad, but it’s the details of these things that can make or break a small business. Being detail-oriented in these areas almost always pays off.

Show Me the Money!
Be generous to the people that cause you to win. There are a lot of ways to do this – bonuses, higher salary, and so forth. Keep in mind, however, that the reason to do this is to reward the people that are showing good performance – and good performance is demonstrated in the form of happy customers.

Mastering “the Rope”
At some point, you eventually have to start delegating decisions to others as your business grows. The key to that is to make sure you’re surrounded by people you trust who you know will make decisions that are good for the business as a whole, people who share your perspective on how the business should be run. Your immediate team should consist of these people.

Is EntreLeadership Worth Reading?
This is the best single book on entrepreneurship that I’ve yet read.

Most of my problem with other entrepreneurship books is that they give short shrift to the early growth of a business, when it grows from an idea to a side business to perhaps a full time solo endeavor or one with one or two employees. They skip this part and move on to the point where a business has a handful of employees.

While that latter part is important to understand, so is the infancy of the business. It’s often that infancy that makes or breaks potential entrepreneurs, and Ramsey spends a good half of the book talking about issues at that level before moving on to growth issues.

Ramsey maintains the friendly tone that has worked well for him in personal finance books, and it works well here with entrepreneurship. There’s just the right level of detail in the information, mixed with great anecdotes.

If you’ve ever thought about launching your own business, this is a great book to start with.

Check out additional reviews and notes of EntreLeadership on Amazon.com.

Every Sunday, The Simple Dollar reviews a personal finance or other book of interest. Also available is a complete list of the hundreds of book reviews that have appeared on The Simple Dollar over the years.

One of the first books I reviewed on The Simple Dollar was Dave Ramsey’s More Than Enough. I found it to be an interesting take on personal finance, as it ties together personal finance and character and personal growth into a single package. While I didn’t think that it was the first book you should read if you were in personal finance panic mode, I did recommend it as a worthwhile read.

A few weeks ago, a reader emailed me and suggested that I read what my reader described as a “companion” to More Than Enough, entitled How to Have More Than Enough. My reader suggested that it was a much better read than the first book.

Store Manager, to Aisle One, Please!
Many people feel unhappy with big aspects of their life, but they also find change to be stressful. The key thing to remember about any change that you take on in your life is that the end goal of it is to put you in a place where you are no longer unhappy with some aspect of your life. For example, choosing to live a life that involves less spending can be really stressful, but the end goal of it is actually a stress-reducer: freedom from debt and financial worry.

Foundation Failure
Why do people get into situations where they’re unhappy with some aspect of their life? Ramsey’s argument is that some basic foundation of their life has failed in some fashion. Ramsey argues that most lives are held up by a series of posts, and when one or more of those posts begin to rot and fall away, the entire structure of our lives begins to fall apart. Thus, the best thing we can do is to constantly shore up those things that we rely on. This chapter focuses a lot on values – the immediate things that we hold true and hold dear in our lives. What are we doing to reinforce those things? Most of the rest of the book focuses on nine more of these “poles” that hold up everyone’s life.

Vision – Binoculars Looking at Your Future
Vision refers to knowing where you want to go in life. This ranges from something as simple as what you want to accomplish this week to what you hope to accomplish over your entire life. If you focus on nothing but today, you’re going to walk in a rut in your life and never get to any of the places you’d like to go someday. The big key is to just start thinking about it and writing it down. What would you like to have people say about you at your funeral? What has your life meant? What can you do to get there?

Unity – A Tangled Rope Is Just Loops
Unity simply means doing things with respect to the people around you. So often, it’s easy to just do what we want and ignore what others need or want. However, if you focus on listening to the needs of others and incorporating those needs into your daily actions and choices, you’re going to find that your entire life flows much better. This goes from things like cleaning out the dishwasher to big things like how to spend a big windfall. The more you listen to the key people in your life and involve them in your major decisions, the easier your life will flow and the more they’ll involve you.

Hope – Fuel for the Explosion!
Is the future awash with possibilities or is it something to dread? If you look at the future as something to avoid and to fear, then you’ll find that your future is indeed a darker place. A much better approach is to look at one’s future as a place for hope and optimism, where the things you want in life are destined to happen. A key part of this equation is to look for the good “what-if”s and chart a path to them, and also look for paths away from the bad “what-if”s.

People Who Need People – Support and Accountability
You need other people in your life. For many people, though, it’s a surprise to learn that others need them in their lives. There are people out there who need you to be at your best. At the same time, those people are often the ones who can be there for you when you need help. It’s a two way street of support and accountability that can constantly push you on to better things if you let it happen.

Intensity – Move the Rock
Many people are willing to give up at the first obstacle. If you come at your goals with a low intensity, it’s going to be very easy to derail you, and any goal that’s worth achieving is going to have some obstacles along the path. Instead of letting those challenges derail you, you’ve got to focus hard on those challenges and overcome them. For example, if you’re watching your weight, instead of eating that delicious piece of pie, you’ve got to have the intensity and content of character to push it aside.

Diligence – That Dirty Little Secret
On the flip side of intensity is diligence – the ability to stick with something through thick and thin. It’s easy to ramp up the intensity in challenging moments, but it is diligence that will get you through the plateaus and the valleys where success seems far off. For example, intensity will get you through Thanksgiving dinner without gaining five pounds, but diligence will keep you from eating 500 calories a day more than you should and slowly gaining weight. It’s a focus for the long term.

Patience Is Power
Hand in hand with diligence is patience. Most goals don’t happen overnight. Many goals don’t happen in a year. In the society we live in today, it’s easy to have a mindset that you need results now and if they don’t immediately happen, something’s wrong. That mindset will keep you from achieving great things because it will cause you to abandon goals before you can possibly achieve them. Patience is an essential key for building a great life.

Contentment
It’s easy to fall into a mindset where you want what others have. It can be a very pernicious mindset to crawl out of, too. The key to success is to simply be happy with the things you have, even when you could have other things if you were willing to sacrifice some of your goals. Without goals, it’s easy to fall into a trap of keeping up with the Joneses and never being truly content with what you have.

Giving – The Great Misunderstanding
When we are scared or when we don’t feel confident about our lives, we tend to clench our fists and hold on to what we have. A big step towards being happy with our lives is a willingness to let go of that tight grip and give of ourselves to others, not just in the form of money, but in the form of time and talent and energy. By doing this, we can begin to see that the bounty of gifts we have is actually more than enough.

Is How to Have More Than Enough Worth Reading?
This book is actually very much like More Than Enough except with some additional workbook elements added in. I compared the two books side by side and found that there really wasn’t very much material at all cut from the original book. Instead, this version mostly just benefits from the direct addition of workbook materials.

If you’re just looking for a book that focuses on character and personal growth and how it relates to personal finance, either How to Have More Than Enough or More Than Enough will suffice. However, I think I would give this one the edge because, due to the workbook elements, it provides just a little bit more push for you to actually start evaluating your life and making positive changes and some more food for thought about living a values-oriented life.

Check out additional reviews and notes of How to Have More Than Enough on Amazon.com.

Every Sunday, The Simple Dollar reviews a personal finance or other book of interest. Also available is a complete list of the hundreds of book reviews that have appeared on The Simple Dollar over the years.

Ronald writes in:

I really loved your series of posts on The Total Money Makeover. I decided to pick it up for myself but when I went to the store they had The Total Money Makeover and The Total Money Makeover Workbook. Which one should I get?

I think the best way to answer that is to review the workbook, since I’ve already thoroughly covered the original book.

The Total Money Makeover Workbook is essentially the content of The Total Money Makeover presented in a workbook format, with lots of blanks in the text for the reader to fill in with their own information as they go through the book.

The biggest difference I’ve found in the content of the two books is that the original book offers up more detail while still being readable.

Since Dave’s message is fairly simple and straightforward, does that really matter?

1 – The Total Money Makeover Challenge
The book opens with a section on evaluating your relationship with money and your knowledge of how it works. I find such sections to be most useful in a book like this one, where people are likely coming in the door with a poor understanding of money. If that weren’t the case, why would they be in a desperate debt situation? The exercises in the chapter focus heavily on self-evaluation, forcing people to look at why they got into the situation they’re in.

2 – I’m Not That Out of Shape: DENIAL
The theme of looking at the current situation continues here, but the focus is on how bad the situation really is. People who hit some sort of financial bottom are often coming out of a big state of denial about how bad things are, and the best recipe for curing that state of denial is to simply look at all of the numbers in black and white, which is the guidance that this chapter provides.

3 – Debt Is (Not) a Tool: DEBT MYTHS
So many people are used to the treadmill of buying cars with a loan, buying homes with a loan, buying furniture with a loan, and so on. That treadmill does not help you get ahead. It only helps the banks in the long run. To succeed financially, you have to break out of that treadmill running.

4 – The (Non)Secrets of the Rich: MONEY MYTHS
Getting into a financially secure position doesn’t involve being a genius and it doesn’t involve a bunch of secrets. It involves following some pretty simple principles all the time. Spend less than you earn. Pay yourself first. Don’t put all of your money in one place. The principles are really simple, but it’s hard for many people to follow them.

5 – Ignorance and Keeping Up with the Joneses: TWO MORE HURDLES
People fall for the pictures they see in advertisements and believe products will make their lives better. All it does is hurt their financial future. People see their neighbors buying things (often bought on credit) and think they deserve these items for themselves. Again, all that’s happening is damage to their financial future. Don’t fall into these traps.

6 – Walk Before You Run: SAVE $1,000 FAST
The first step is a small emergency fund. You can get there several different ways. One effective way is to “clean out your closet” and sell off a lot of the items that you don’t often use, like rarely-watched DVDs and unused exercise equipment. Another big step is to buckle down tightly on your unnecessary spending.

7 – Lose Weight Fast, Really: THE DEBT SNOWBALL
A while back, I wrote a detailed article about creating a debt repayment plan. The basics of this plan and the one presented in this book are very similar, with the biggest difference being that Dave encourages people to order their debts by size so that you get the “psychological win” of paying off a debt quickly, while I usually encourage the mathematically superior method of ordering debts by interest rate (highest to lowest). Focus on paying off the worst debts first – the really high interest ones are usually credit card debts, which often have manageable balances.

8 – Kick Murphy Out: FINISH THE EMERGENCY FUND
Dave encourages people to build an emergency fund that equals six months’ worth of living expenses. This money should sit in a savings account and be left untouched until a genuine emergency comes along, and if you use it for such an emergency, your focus should immediately be on replenishing that debt.

9 – Be Financially Healthy for Life: MAXIMIZE RETIREMENT INVESTING
Dave suggests putting 15% of your annual income into retirement savings. Doing this will help secure a very healthy retirement for you, particularly if you start before the age of 35 or so. The younger you start, the healthier your retirement will be and the younger you can be when you walk away from your current job. Remember, retirement doesn’t have to mean sitting around doing nothing. It can be a chance to start a second career.

10 – Make Sure the Kids Are Fit Too: COLLEGE FUNDING
The best gift you can give your child is help with the costs of their college education. So many students leave college with a big hole of student loan debt already dug out for them. If you have children, start saving something for their college education as early as possible. It’s vital, though, that you not look at your emergency fund as college savings or vice versa. College is not an emergency. It’s something you plan for.

11 – Be Ultrafit: PAY OFF THE HOME MORTGAGE
If everything else is taken care of, start hammering away at your home mortgage with extra payments (this happens to be where we’re at with regards to the future). The sooner you get your home paid off, the better. Having a paid-off home lowers your monthly living expenses substantially, giving you a lot more room to breathe.

12 – Arnold Schwarzedollar, Mr. Universe of Money: BUILD WEALTH LIKE CRAZY
Once you’re debt-free, your focus should be on wealth building. Here’s where I diverge from Dave a bit, as I think his views on investment returns are a bit inflated. However, we both agree that the best thing you can do is diversify and not fall back into spending unnecessarily. You want to build a future without worry, right?

13 – Live Like No One Else: REACH THE PINNACLE POINT
The “pinnacle point” that Dave describes comes when you’re able to live off your investments and do whatever you’d like. Dave describes it as being possible when you can live off 8% of your investments each year, but that again assumes a very healthy annual investment return. I’d shoot for being able to live off of about 4% of your investments each year. For example, if you can actually live off of $40,000 a year, you need $1 million in investments locked up.

Is The Total Money Makeover Workbook Worth Reading?
The Total Money Makeover Workbook covers the exact same ground as The Total Money Makeover. They’re both fantastic books for dealing with a mountain of debt. They both have some Christian undertones, but not overwhelmingly so. They both present an extremely straightforward plan for getting out of a debt situation.

So, what’s the difference? The original book, The Total Money Makeover, is more detailed. This workbook, in many places, felt as though content was ripped from the original book in order to make space for fill-in-the-blank spots.

If you really desire a one-single-book journal of your money recovery, The Total Money Makeover Workbook will do that for you. However, I’d strongly recommend going through The Total Money Makeover along with a notebook and a pen. Virtually all of the ideas from the workbook are found in the original book along with a lot more detail, motivation, and useful information.

In my eyes, The Total Money Makeover Workbook is trumped by simply reading The Total Money Makeover with a notebook and a pen at your side. I’d only pick up the workbook if having all of it in a single book really appeals to you.

Check out additional reviews and notes of The Total Money Makeover Workbook on Amazon.com.

A few days ago, I met an employee of a local Christian talk radio station. We had a nice conversation about a variety of things, ranging from the programming on the station he manages, people we both knew, and so on.

At the end of the conversation, this person gave me a pamphlet describing a local business that offers personal finance counseling locally. This business uses a lot of Christian material in the advice they offer – in fact, I could count twelve different direct quotes from scripture in the pamphlet I had in my hand.

When I took the pamphlet, the person I was talking to immediately compared the people at the business to Dave Ramsey and implied that their advice had an additional strength due to it being Biblically based.

This business – and people like Dave Ramsey and Lary Burkett that mix Christianity and personal finance – ties Christian beliefs and strong personal finance ideas together in ways that reinforce each other.

Let’s see if I can spell it out a bit more clearly. You have a person who is in personal finance trouble and they’re also a devout Christian. Their Christian faith attracts them to a person like Ramsey or Burkett, a person who ties some very solid pieces of personal finance to Christian themes. These tactics work, reinforcing to the person not only that the personal finance ideas work, but that their Christian faith is true as well.

I see absolutely nothing wrong with that. In fact, I think it’s a very good thing.

In fact, I think a lot of books try similar approaches, tying personal beliefs to personal finance. Your Money or Your Life spends at least some of the pages appealing to community-oriented people and environmentalists. A lot of books focus heavily on women’s issues, mixing some feminism in with the personal finance message.

Here’s the thing, though. The personal finance information provided by these books work without the other material. It’s because of the strength of that personal finance material that it’s able to be coupled sensibly with religious views and secular views, with liberal views and conservative views.

I often look at such material as being something of a candy coating around a bitter pill. To a person who really hasn’t evaluated their personal finances and their future, the things you have to do to find great money success seems really difficult. However, if you can tie the principles to other core values that already exist in your life, the ideas become a lot more palatable.

In fact, as micropublishing begins to take off, the door is open to this type of theming to ever-smaller groups. Personal finance for atheists? Personal finance for liberals? Personal finance for Christian conservatives (well, we already have that to an extent)? Personal finance for Democrats or Tea Party members?

Sure, why not? As long as the personal finance principles are true (and aren’t twisted into an advertisement for buying overpriced gold or other such nonsense), it’s a great idea to tie the core beliefs of someone to good personal finance practices. Why? Good personal finance practices work hand in hand with most human beliefs, and good personal finance practices allow people to be more effective at following those beliefs.

A Christian with good personal finance habits can support a mission. A liberal with good personal finance habits can run for office or financially support candidates they believe in.

Personal finance works. It can support you no matter what your other beliefs are. If you’re finding it difficult, there are almost always powerful ties between your other beliefs and personal finance. Never be afraid to bring them together.

During the month of July, I conducted a very detailed discussion of Dave Ramsey’s The Total Money Makeover. During the process, I realized that on most issues, I agreed fully with Dave.

To a degree, this put a damper on the book club. It’s always interesting when there’s disagreement, after all, if everyone conducts themselves in a mature fashion.

(Perhaps this means I should have a book club on Rich Dad, Poor Dad…)

Anyway, after the book club finished, a reader wrote in and asked me that very question. You agree with Dave Ramsey so much. Where do you disagree with him?

I spent some time thinking about that question and came up with five strong principles where my perspective on personal finance disagrees with Dave’s. It’s worth nothing that these are merely five points in comparison to dozens where I do agree with him – there’s a lot more that he says that’s spot on than things I disagree with.

Let’s dig in.

A 12% annual rate of return in stocks is not realistic.
If you look at the amazing run of the stock market from 1980 to 2000 – the years when Dave was actually figuring out his financial state – it’s easy to see where his concept of a 12% annual rate of return comes from. The stock market actually did return 12% or so a year.

During that timeframe, the baby boomers were putting tons of money into the stock market – an unprecedented flood of new investors. And as with any market, if demand goes up, so do prices.

Today, though, boomers are starting to retire and many others have moved – or are moving – their investments into something more conservative than stocks. The demand is slipping a little bit, so prices are adjusting accordingly. They’ll still go up (because more investors all over the globe are getting in than getting out), but the people getting out is going from a trickle to a big stream – and will gradually become a flood.

The 1980 to 2000 bull market is gone and is not going to return any time soon. Sure, you can still earn a nice, healthy return in stocks, but a much more reasonable estimate is Warren Buffett’s long term prediction that stocks will return about 7% annually.

So what’s the big deal? Much of Ramsey’s investing advice revolves around the idea that investing in stocks will return you 12% annually. It won’t. You can still build up the kind of nest egg he talks about, but you have to invest more yourself. The market won’t do that much work for you any more – and if you expect the market to return 12% for you on average over a very long period, you’re in for a very nasty surprise down the road.

Personal responsibility is the problem, not credit cards.
Dave is pretty much a credit card absolutist – cut ‘em up and get rid of ‘em. For people who have problems with credit cards, it’s not bad advice.

However, he goes too far, stating unequivocally that credit cards are bad and that people should live without them. This flies in the face of his usual message, which is that personal responsibility is what really matters.

A personally responsible person – one who does not carry a balance on their cards – can use credit cards as tools. Over the past three years, my wife and I have saved about $500 using our Target Visa without buying a frivolous thing with it – just food and household supplies, which we could easily buy with cash. Instead, each month the statement comes in and we just send out a check. Then, every few months, we get a 10% off card, which enables us to take a shopping trip at Target and get 10% off our total bill. We make an effort to save larger purchases until we have such a discount.

I could tell a very similar story about our Citi Driver’s Edge card, which provided us with about $700 cash to help with a recent auto repair. All we did is use the card on gas and minor auto expenses and pay off the balance each month.

If you’re personally responsible, you can handle your urges and keep the spending on such cards down to the staples. That means you’re never carrying a balance – no interest payments – while also building up a strong credit rating, which helps with your insurance rates.

Credit cards aren’t the problem when it comes to credit card debt – personal responsibility is.

A $1,000 emergency fund is enough if you’re paying off credit card debt.
One of the big parts of the Dave Ramsey plan is that one should save up a $1,000 emergency fund, then turn all extra money towards paying off debts. This is a great way to get rid of those debts as fast as possible, of course.

Dave’s argument is that the $1,000 emergency fund is more than enough to take care of most of life’s problems and that you can negotiate your way out of the rest. I disagree with that – many events that would require me to turn to my emergency fund would go far beyond that $1,000 level.

How exactly, pray tell, can one negotiate themselves out of a job loss in a tight job market, or barter when it comes to a broken arm?

Instead of just stopping when hitting that $1,000 emergency fund, I suggest setting up an automatic savings plan, dumping $25 a week into the emergency fund (or $50 if you can swing it), then forgetting about it. Use everything else that’s left to hit the debt hard and let that emergency fund slowly build.

Why do this? Here’s an example. Let’s say you set up that savings plan to sock away $50 a week, then you start whacking at your debt as hard as you can. Six months later, you lose your job. You turn to your emergency fund. Thanks to your savings, you have $2,300 there, enough to keep the bills paid for two months or so. Without that plan, you only have $1,000 – things aren’t going to go nearly as well.

If everything goes perfectly, Dave’s plan is better.

But when in life does everything go perfectly? That’s the point of an emergency fund. Fund it appropriately, and you’ll always be glad you did.

“Growth” mutual funds are not the be-all end-all of investments.
Whenever Dave talks about specific stock investments, he always mentions putting his money into a “growth” mutual fund. There are two problems with this.

One, it’s not diversified. Buying nothing but growth stocks makes your investments less diverse. Quite often, growth stock funds are very heavy into a few specific “hot” sectors – and when those sectors go cold, ouch. Growth mutual funds didn’t do very well in 2001 after the dot-com bubble burst, for example.

Two, an ordinary “mutual fund” charges a lot of fees. Invest instead in a low-cost index fund. An index fund is basically an automatically-managed mutual fund, one that operates according to some publicly-defined easy-to-follow rules instead of relying on the research of a team of fund managers. You can get similar returns with an index fund without the huge fees (which many mutual funds take to pay the salaries of the fund managers and pay for advertising).

What’s a better solution? If you’re investing in stocks, buy a very broadly based low cost index fund. You won’t ride the bull markets quite as strongly, but you won’t fall nearly as far during down markets or changing market conditions. More importantly, you won’t be paying huge fees to ride the roller coaster – index funds are pretty cost-effective.

Before you put big money into the stock market, at the very least, read more than one voice on stock investing. In fact, read as many voices as possible. You’ll find that diversity is good and low costs are even better.

Do not cut your retirement savings during the initial push to pay off debt.
One final piece of Dave’s advice that really bothers me is that he suggests people trim their retirement savings during their initial push to pay off their debt, even if it means foregoing matching from employers.

To me, this is simply throwing money away. No matter how bad your situation, refusing to get an immediate 50% or 100% return on your money – risk free – is a bad idea.

No matter what, if your employer offers matching funds on your retirement accounts, invest at least enough to get all of the matching they’re offering. You’ll never, ever regret it – it’s basically free money that enables your retirement savings to grow much more quickly than if you turned away.

Sure, it means that you’ll pay off debt a little more slowly. What you’ll gain, though, is a lot of free money for retirement from your employer. Never turn that down, no matter what.

This is the twelfth of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the thirteenth chapter, finishing on page 218.

The Total Money Makeover ends with a very brief chapter that includes a few thoughts about what comes next once your finances are rolling along. Since this chapter is just a very brief coda, I’m also tying in my thoughts as a whole on the book, as well as links back to the older entries in the series.

Wealth As a Prison
On page 219, Dave hits upon the idea that it’s not a good idea to let wealth control your life:

The wealthy person who is ruled by his stuff is no more free than the debt-ridden consumer we have picked on throughout the book. Antoine Rivaroli said, “There are men who gain from their wealth only the fear of losing it.”

I think that anything in your life that fills you with more negative feelings than positive ones is a prison. It might be debt. It might be your job. It might be your wealth. It might be anything.

Whatever those things are, you need to eliminate them. If it’s your wealth, you need to give some of it away. Seriously. If it’s your debt, you need to get hard core about repaying it. If it’s your job, you need to focus intensely on a career change. If it’s your marriage, you need to face it and work hard on it.

If you don’t, it’s just another prison. People wonder how I can feel sympathy for famous people – I often do – when they have all of this wealth and stuff. What they don’t have is the freedom to go on a walk in the park. Is it their choice? Sometimes it is, but sometimes they’re trapped by their own fame and their only choice is to completely drop out of their career – and for some, that isn’t even enough (a la Britney Spears, circa 2007, when she was obviously trying to take a time out but kept getting hounded nonstop).

If it’s causing you more hurt than happiness, you need to do something to change it.

A Few Thoughts on the Book in General
Here are a few general thoughts I had on The Total Money Makeover from reading through it again in detail.

First, there’s more than a little “marketing flavor” in this book. Dave makes a lot of references to his other media properties – other books, his DVDs, his radio show, and so on. While I don’t mind it when those other resources are free (like the radio show), it seems a bit disingenuous to talk a lot about saving money while pitching other books and DVDs. I didn’t like this part at all.

Second, some pieces of the book have surprising depth. It’s easy to come away from this book just remembering the big points, like the “baby steps,” and Dave’s folksy tone often disguises things. However, if you peel away that stuff, you find lots of interesting things under the surface, ideas that, if you let them, guide you to reflect deeply on your life in ways you may not expect.

Third, the Christian overtones aren’t as strong as I remembered. On my original reading of the book, I had a perception that it was very full of Christian overtones. Reading it again, I realize the Christian themes are actually pretty sparse. He hits upon a Biblical idea perhaps once a chapter and spends maybe two sentences on it.

Of course, it’s not hard to see the connection between many of the other ideas and general Christian teachings, but if you study religions, you’ll find that many moral teachings are common from religion to religion. Why? I think they’re part of a moral code that exists in most humans, religious or otherwise. Dave’s book calls to the good side of our morals.

Finally, the central theme of this book is obviously “intensity.” If you’re going to do something big in your life, you have to hit it hard. You can’t do it half way. I find this really true in my own life: the things I’ve been successful with (getting my money in order, getting a writing career launched) were things I did with a deep passion and focus.

Do You Want to Know More?
Here are the previous eleven entries in this “book club” series on The Total Money Makeover. Please, dig back into the earlier entries – there are tons of good ideas and comments there.
1. The Challenge … and Denial
2. Debt Myths
3. Money Myths
4. Two More Hurdles
5. Save $1,000 Fast
6. The Debt Snowball
7. Finish the Emergency Fund
8. Maximize Retirement Investing
9. College Funding
10. Pay Off the Home Mortgage
11. Build Wealth Like Crazy

Do you have any other thoughts on this chapter of The Total Money Makeover, the book as a whole, or on how this book club went? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!

This is the eleventh of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the twelfth chapter, finishing on page 218. The final entry, covering the thirteenth chapter, will appear on Saturday.

A financial recovery plan reminds me of a well-thought-out video game. The first levels are fairly easy – get a $1,000 emergency fund, build the snowball, and so on. The middle levels get harder – saving big for retirement and college. The final level is very hard – getting completely debt free.

So now we’ve beat the game. The princess is no longer in another castle.

But where do we go next? Anywhere you want.

Three Good Uses for Money
On page 204, Dave argues that there are really only three:

After years of studying, teaching, and even preaching on this subject across America, I can find only three good uses for money. Money is good for FUN. Money is good to INVEST. And money is good to GIVE. Most anything else you find to do with it doesn’t represent good mental and spiritual health on your part.

I agree for the most part with what’s being said here. Pretty much everything worthwhile that one could do with money revolves around fun, investing, or giving – or some combination thereof.

I spent some time asking myself what sorts of things I would do if money were no object. I’d probably give a serious crack at writing a great novel. I’d move out in the country somewhere with a lot of trees and a pasture. I’d probably spend two or three months a year living in another country. I’d consider homeschooling, but not without a lot of research.

In short, I’d do a lot of things that are just extensions of my values. I wouldn’t really become a different person even if I had limitless money.

When Dave says that things you would find to do that aren’t fun, investing, or giving would constitute poor mental or spiritual health, I think what he’s getting at is that some of the spending choices made by people who suddenly have plenty of money go away from the core values that get them there. Stick with what’s really important to you, and you’ll be fine.

Winning
On page 207:

The grown-up inside us likes the INVESTING of money because that is part of what makes you wealthy. Also, the growing dollars are a way of keeping score in our Total Money Makeover game.

I like the idea of keeping score, because I think it’s important no matter where you are in your financial turnaround. I’ve kept careful track of my family’s net worth since 2006 on a monthly basis (I even did it weekly for a while) and I found that watching the progress of it is incredibly motivating.

It’s pretty simple. Each month, I calculate my net worth, adding up all of my debts compared to all of my assets (my assets are the balances of my investment accounts and the tax assessed value of my home, nothing else) and see where I stand compared to previous months. Almost every month, my net worth goes up – it only takes a hit when I do something major, like buying a car.

This is a good sign. Your overall balance of assets and debts should improve every single month unless there is a very big, very significant purchase in the way.

Keeping score is a huge psychological motivator, no matter what you’re doing. Personal finance is no different.

Simple Investing
Many people get obsessed with perfect portfolios and the like – I admit that I find it personally interesting, too. But is it necessary? On page 208:

You can choose to be a little more sophisticated, but until you have over $10 million, I would keep your investing pretty simple. You can clutter your life with a bunch of unnecessary stress by getting into extremely complex investments. I use simple mutual funds and debt-free real estate as my investment mix – very clean, simple investments with some basic tax advantages.

In other words, if you own less than $10 million in investments and things are so complicated you’re using a financial planner, it’s time to simplify. Unless you have a huge bankroll, the advantages of getting too complex are eaten up completely by the complexity itself.

I agree with this, with one caveat: if you actually enjoy managing your investments yourself, by all means, jump into the deep end of the pool. To put it frankly, I enjoy it to a certain extent, but I’m nowhere near as interested in it as I am in other areas of my life. Investments are a tool to get me to where I want to be, in my eyes.

If things are so complicated that you need a financial planner and you’re not exorbitantly rich, you’re paying that planner for a service you don’t really need. You’re far better off learning a little bit about investing and taking care of it yourself using the countless services out there. Don’t pay a salesman to be the middle man – it’s not that hard.

The “Pinnacle Point”
Dave gets really into the concept of the “pinnacle point,” going on about it for several pages. I’ll pick out a money quote, on page 211:

It is hard to describe reaching the “Pinnacle Point” without some emotion. This Baby Step takes us to the point at which your money works harder than you do, the “Pinnacle Point.” It is the instant in time where focused gazelle intensity has reached critical mass, and your money takes on a life of its own.

I’ve had inklings of this feeling here and there. I noticed it most strongly during the handful of months just before we moved from the apartment to our home, when I had very little debt at all and the vast majority of my income was going straight into savings for it. It was amazing watching the savings grow at that rate. I was living my life happily and the money was just racking up.

Over the last two years, with my job change (resulting in a loss of income but an increase in personal happiness), the stock market downturn, and our home mortgage, I’ve lost some of that sense of the “pinnacle point” – and I miss it. I want back there pretty badly at times and I’m currently evaluating my income and other choices to figure out how exactly to get myself back there as efficiently as possible without sacrificing what we have.

I don’t think there is a strict dollar amount that matches up with the “pinnacle point” – it varies a lot between people and situations. I think it happens when you don’t have any debt, have a real, adult income, and aren’t spending most of it – the savings just rolls along.

Giving?
One of the big things I look forward to in the future is more giving. I have some plans for charitable giving and a lot of volunteer work once I reach that “pinnacle point” and I know that my family is safe and my children are protected from whatever may happen to me.

Dave gives several impassioned examples of the personal power of giving, but one sentence on page 215 sums it up:

The givers often report having more fun than the receivers.

The ability to do something that makes a positive change in someone else’s life is incredible. I’ve been able to see that in things I’ve done already in my life, and every time I’ve perhaps received more joy from it than the person receiving the gift.

If you don’t know what I’m talking about, try it sometime. Help out someone who really needs it in a pinch. If you hear about someone who is really in trouble, give them $100, no questions asked, and see how they react. Spend a day working for a volunteer project. The impact on you is amazing.

Sure, there are some people out there who don’t see any value in this. Personally, I think I’ll avoid such people.

Do Something
I think there is some danger of becoming a miser if you watch every penny for too long. As Dave says on page 217:

Someone who never has fun with money misses the point. Someone who never invests money will never have any. Someone who never gives is a monkey with his hand in a bottle.

In other words, if you have a lot of money and your bases are all covered, do something with it. If you’re not, what is the point?

I know of a person who lives in what I would describe as shocking poverty. This person lives in a trailer on the verge of falling apart, rarely does anything outside of the home, eats an awful lot of bologna and cheese, and counts every single penny. This person is bitter and unhappy most of the time, wondering why others have fun when this person does not.

That person I mention has over a million dollars in the bank.

What’s the point of having that money if you don’t enjoy your life? Sure, there’s no reason to just throw money out the window, but making your life miserable in exchange for a few more dollars in the bank – particularly when your bases are covered – isn’t a good trade at all.

Do you have any other thoughts on this chapter of The Total Money Makeover? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!

On Saturday, we’ll tackle the thirteenth chapter – Live Like No One Else.

This is the tenth of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the eleventh chapter, finishing on page 202. The next entry, covering the twelfth chapter, will appear on Wednesday.

This is a stage that I see us approaching as time goes on. We’re not quite there yet, but we’re close. Right now, I’m trying to knock out my final student loan (it’s a doozy), and then start focusing on my home mortgage.

Our home mortgage payment is just shy of $1,100 – that doesn’t include homeowners’ insurance and taxes, so when we get the house paid off, we now have $1,100 more a month to spend on whatever we choose.

I, for one, would roll that extra amount directly into savings. I’d simply change the automatic payment to be an automatic transfer into a savings account of some sort – perhaps an index fund. Then I just keep living life as normal until one day that account is full of cash for something great. For us, that “something great” is our long-dreamed-of house in the country, with a small barn out back, a big garden, and a chicken coop.

Is It A Crazy Goal?
My parents recently finished off their home mortgage after paying on it for thirty years. They’re pretty much debt free at this point for the first time in their marriage. So, for me, I have a great example in front of me that you can get rid of all of your debt. However, many people don’t have that example and it seems like an impossible goal. On page 186:

Anytime I speak about paying off mortgages, people give me that special look. They think I’m crazy for two reasons. One, most people have lost their hope, and they don’t really believe there is any chance for them. Two, most people believe all the mortgage myths that have been spread.

The “hope” factor is something I see popping up over and over again whenever I talk to people about money. Many people I talk to view their mortgage as simply a fact of life. If they were ever in a position that their mortgage became really easy to pay, it wouldn’t be time to double-up on the payments – no, no, it would be time to upgrade their homes.

I think this points to a prevalent mindset out there when it comes to debt. Many people simply view debt as a way to leverage the lifestyle they want now. It comes from a lack of patience – people don’t want to live in a small apartment watching their savings grow slowly when they could just get this loan and be in that house now – even if it costs them hundreds of thousands of dollars.

I think patience is one of the biggest tools a young professional can have when it comes to his/her money. Just wait for a while – you’ll be way better off over the long run.

The Tax Deduction Myth
Owning a mortgage just to get a tax deduction is something of a fool’s game, as outlined on page 187:

If you have a home with a payment of around $900, and the interest portion is $830 per month, you have paid around $10,000 in interest that year, which creates a tax deduction. If, instead, you have a debt-free home, you would, in fact, lose the tax deduction, so they myth says to keep your home mortgaged because of tax advantages. [...] If you do not have a $10,000 tax deduction and you are in a 30 percent tax bracket, you will have to pay $3,000 in taxes [...] According to the myth, we should send $10,000 in interest to the bank so that we don’t have to send $3,000 in taxes to the IRS.

All the tax deduction does is lower the effective interest rate you’re paying on your home loan a little bit.

In fact, Dave doesn’t even make the case as well as he could. If you’re using your mortgage interest on your tax return, that means you’re foregoing your standard deductions because you have other things to deduct. So, take our situation – we have two adults in our home. Our standard deduction in 2009 is $11,400. If we choose to itemize our taxes (which we’d have to do to deduct our home interest), we have to have more than $11,400 in interest on our home mortgage (or other deductible expenses) to beat what we would already get.

So, if your only significant deductible expense is your home mortgage – and your mortgage isn’t gigantic – you’re not actually gaining much of anything at all in terms of taxes.

The Risk of Having a Mortgage
Another disadvantage of holding on to a mortgage is the risk – if something goes wrong in your life, it’s a lot better to not have a mortgage payment than it is to have one. On page 189:

If I own the home next to you and have no debt, and you (because of your investment adviser guy) borrowed $100,000 on your home, who has taken more risk? When the economy moves south, when there is war or rumors of war, when you get sick or have a car wreck or are downsized, you will run into major problems with a $100,000 mortgage that I will never have. So debt causes risk to increase.

I think this is a vital, overlooked point. Having a mortgage – or any debt – is a type of risk. You’re gambling that your future will be stable, no different than putting cash down at the roulette wheel. With a mortgage, your life is simply more at risk than it was before.

I have two young children at home. Risk stares me in the face every day. I encourage our children to push their limits a little, but I still stand very close by when my three year old grabs onto playground gymnastics rings and hangs there. Having a mortgage is something like telling my three year old to grab the rings for the first time while I stand far away. Sure, he might hold the rings for a while and then drop without a problem, but my distance increases the chance of a hurt elbow or a broken arm.

The risk of owning a fat mortgage is much like the risk of putting your child on a bike for the first time and shoving them down the sidewalk. Sure, they might ride like the wind, but they might also fall flat on the pavement. Instead, it’s better to do a bit of planning (like saving for a home) and then let go when they’re ready (like when you have enough saved up for a house). No broken bones, no broken lives.

Thirty Years Versus Fifteen Years
Many people advised me to get a thirty year mortgage instead of a fifteen year mortgage, arguing that I could make an extra payment each month and get the same speed benefit of a fifteen year without the risk of the larger minimum payments. That’s a bad idea because something will often come up, as is spelled out on page 190:

A big part of being strong financially is that you know where you are weak and take action to make sure you don’t fall prey to the weakness. And we ALL are weak. Sick children, bad transmissions, prom dresses, high heat bills, and dog vaccinations come up, and you won’t make the extra payment. Then we extend the lie by saying, “Oh, I will next month.”

A higher minimum payment is actually a good idea, because it forces us to work with what we have left over. A lower minimum payment means that we just have more to work with – if that extra payment isn’t required, it’s easier to argue that something else is more important for the moment.

With expenses like prom dresses, heat bills, bad transmissions, and dog vaccinations, you can always find ways to make it work. If you have a decent emergency fund, it shouldn’t be too tough at all.

What do you get in exchange for these little sacrifices? Your mortgage goes away in half the time. You find yourself free of that load much, much faster. Plus, the interest rate on a fifteen year loan is lower, meaning your payments won’t actually be anywhere close to double what they would be for a thirty year mortgage.

Home Equity Loans Make Poor Emergency Funds
One common question I get from readers is whether or not they should take out a home equity loan to deal with some problem in their lives. My feeling is that if you’re in that situation, you need to rethink about your emergency fund. Sure, the home equity loan might be the right solution for right now, but if you’re living your life in such a way that it has to be used, you might want to rethink how you’re managing your money.

On page 197, Dave dips his toes into this idea:

Even a conservative person who doesn’t have credit card debt and pays cash for vacations can make the mistake of the HEL by setting up a loan or a “line of credit” just for emergencies. That seems reasonable until you have walked through an emergency or two, and you realize very plainly that an emergency is the last time you need to be borrowing money. If you have a car wreck or lose your job and then borrow $30,000 against your home to live in while you make a comeback, you will likely lose your home. Most HELs are renewable annually, meaning they requalify you for the loan once a year.

Think of it this way. You’re using your home equity loan as an emergency fund. You lose your job, so you take out $30,000 to live on – it’s fine, since you have tons of equity in your home, right? Well, the end of the year comes and you still don’t have a job. The bank says, “Sorry, we’re not renewing your loan,” and they call in the $30,000. You don’t have it. They repossess your house. Any equity you built up is gone.

An emergency fund needs to be cash, period. If it’s not liquid or it puts you at risk to get it, then it’s not an emergency fund.

Our local credit union has hinted to us that we should have a home equity line of credit. I have torn up every single offer they have sent to us. I’m not interested in that kind of risk.

Paying Cash for a Home Is Impossible
I agree with Dave that it is indeed possible to pay for your home with cash. So why don’t people ever do it? It’s not easy. It’s a lot harder to go this way than it is to just go get a mortgage. On page 198:

Paying cash for a home is possible, very possible. What’s hard to find is people willing to pay the price in sacrificed lifestyle.

I think the problem is that many people view their home as more than just living quarters. They view it as a status symbol – they need a house they can show off to family and friends. It’s more impressive to live in a house than an apartment, isn’t it? So, if you back up and think about it, you pay hundreds of thousands of dollars in interest, home maintenance, and other costs – not to mention time – in order to impress others.

Again, the only people impressed with such things are people that you never speak to, who don’t matter in your life. They look at you and admire your home, but they don’t build a relationship with you. The people you build lasting relationships with like you, not your house.

We chose to buy a home with a mortgage. I don’t regret it, but if I had to do it all over again, I would have looked intensely for a great rental situation instead (since we originally lived in an apartment too small for two toddlers and two adults – we had to move) and kept saving.

Do you have any other thoughts on this chapter of The Total Money Makeover? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!

On Wednesday, we’ll tackle the twelfth chapter – Build Wealth Like Crazy.