This is the fifth 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 sixth chapter, finishing on page 108. The next entry, covering the seventh chapter, will appear on Saturday.

One thing that Ramsey excels at is urgency. His entire persona, from his written words in the book to the things he says on the radio, practically demand urgency. “You have to do this now.”

He’s right, though. If you’ve found yourself in a personal finance situation where everything falls apart if you lose your job tomorrow, fixing the problem is urgent. You’re being utterly held hostage by your job and by Lady Luck. Too many people find themselves in this situation and view it as normal.

If you lost your job tomorrow and had the engine fall out of your car the day after that, could you survive for three months without work and still hit all of your bills and get that car on the road? If the answer’s no, it is urgent. You’ve got to change something.

Baby Steps?
Dave lays out the importance of baby steps for pretty much any major life initiative, on page 93:

They way you eat an elephant is one bite at a time. Find something to do and do that with vigor until it is complete; then and only then do you move to the next step. If you try to do everything at once, you will fail. If you woke up this morning and realized you needed to lose 100 pounds, build your cardiovascular system, and tone your muscles, what would you do? If on the first day of your new plan you quit eating, run three miles, and lift all the weight you can lift with every muscle group, you will collapse. If you don’t collapse the first day, wait forty-eight hours for the muscle groups to lock up and the cardio to go crazy, and you will be bingeing on food shortly thereafter.

I’ve written about this phenomenon on my personal blog, where I sometimes write about the challenges I face getting in shape. It’s absolutely true: you’re far better off taking steps that are too small than steps that are too big, because those giant steps are the ones that are likely to make you trip and fall.

This basic idea applies to anything you want to do in life. Want to be a writer? If you get up and start in on a schedule of pumping out 4,000 words a day, you’re going to burn out quickly. Instead, just practice the craft and write short things. My writing practice, to tell the truth, is often on Twitter – can I get across an interesting idea in 140 characters? Doing so improves me as a writer.

Want to be a golfer? If you start playing 72 holes a day, you’re going to get sick of it fast (and probably tear something). Instead, just focus on smaller tasks – go to the driving range for two buckets. Build your skills slowly and don’t burn out.

It’s true over and over again: baby steps work. I think the big reason people don’t do this is that they want results now and then they way overdo it, undoing any good they might have done.

The Power of Clear, Written Goals
Written goals are vital at every stage and in every aspect in life. From page 98:

Brian Tracy, motivational speaker, says, “What does it take to succeed on a big scale? A tremendous God-given talent? Inherited wealth? A decade of postgraduate education? Connections? Fortunately for most of us, what it takes is something very simple and accessible: clear, written goals.” According to Brian Tracy, a study of Harvard graduates found that after two years, the 3 percent who had written goals achieved more financially than the other 97 percent combined!

Writing down your goals makes them real – and makes them powerful.

I’m going to admit something here, something fairly goofy. I usually have somewhere between five and ten personal goals going at any one time. Each of them are very action-specific: “I am going to run a 5K by the end of the year.” “I’m going to write a truly great book.” … and so on.

Each day, I write down each of those goals, pen on paper. Seriously. Doing this every day hammers those goals into my mind and I see those goals in every action I do. Three of my goals are health-related right now and I can’t help but see them when I make a decision about what to eat or what to drink. I look in the fridge, the goals float through my mind, and I choose a spinach salad for lunch instead of a grease-filed choice.

It works. Without this, I wouldn’t have made The Simple Dollar work. I wouldn’t have written a book last year, and I wouldn’t have been well into writing another book this year. I wouldn’t be able to read two challenging books a week. I wouldn’t be a good father – or at least not as involved as I am.

Get Current
There’s a big baby step before you dive in on the $1,000. On page 101:

Before we get to Baby Step One, you will have to do one other thing. You will have to be current with all your creditors. If you are behind on payments, the first goal will be to become current. If you are far behind, do necessities first, which are basic food, shelter, utilities, clothing, and transportation.

If you’re behind on your bills, you have to get caught up before doing anything else. Doing anything else puts the cart completely before the horse.

Many people think it’s “impossible” to get current once they reach a certain disastrous level. That’s usually not true, but you’ve got to be proactive. Call up the people you owe that you’re late with and start negotiating. They’re going to listen because it’s in their best interest to listen – if they don’t, they’re not going to get anything out of the money they owe you if you run away or declare bankruptcy.

No situation is impossible, particularly if you’re willing to step up to the plate and try to take things on head first.

Baby Step One: Save $1,000 Cash As a Starter Emergency Fund
Why $1,000? Why not dive into paying off debts? Dave makes a good case for emergency funds on page 102:

It is going to rain. You need a rainy-day fund. You need an umbrella. Money magazine says that 78% of us will have a major negative event in a given ten-year period of time. The job is downsized, rightsized, reorganized, or you just plain get fired. There’s an unexpected pregnancy [...] Car blows up. Transmission goes out. You bury a loved one. Grown kids move home again. Life happens, so be ready. [...] Now, obviously, $1,000 isn’t going to catch all these big things, but it will catch the little ones until the emergency fund is fully funded.

One of the most frequent things I hear from readers is that they don’t see any reason to not use their credit card as an emergency fund. “I have tons of credit left, so that’s my emergency fund,” they’ll say.

Here’s the problem with that: credit is not cash. Your credit line is completely at the mercy of the credit card company. Sometimes they slash credit limits. Sometimes they outright cancel cards. These things often happen right at the moment when you’re in trouble and most “need” that limit.

On the other hand, cash is constant. A big company can’t take your savings away from you on a numerical whim. If everything goes bad, your credit cards can go poof – but if you’ve saved up an emergency fund, it’s there for you.

What Isn’t an Emergency?
Another “problem” is that people substitute irregular bills for emergencies. On page 104:

Most of America uses credit cards to catch all of life’s “emergencies.” Some of these so-called emergencies are events like Christmas. Christmas is not an emergency; it doesn’t sneak up on you. [...] Your car will need repairs, and your kids will outgrow their clothes. These are not emergencies; they are items that belong in your budget. If you don’t budget for them, they will feel like emergencies.

An expense that you know is coming isn’t an emergency. You know that your car will need maintenance, so an oil change or a minor repair isn’t an emergency. You know your father’s birthday is coming up, so a gift isn’t an emergency.

The real problem here is information management. I think many people wind up treating expected things as emergencies because they simply lose track of that information. They forget that their father’s birthday is coming up, so they don’t put aside cash for it. They forget that their car needs regular maintenance.

What’s the solution to that? Dave points to a budget, but I don’t think that’s really enough for many people. I suggest using a calendar – if an irregular bill is coming up, write it on the calendar. Even better, write a reminder a few weeks ahead of it on the calendar, too. This way, you can see that irregular expense coming and can plan for it instead of going “OH NO!” on the day of the event and just throwing plastic at it.

Get It Fast
On page 105:

Twist and wring out the budget, work extra hours, sell something, or have a garage sale, but quickly get your $1,000. Most of you should hit this step in less than a month. If it looks as though it’s going to take longer, do something radical. Deliver pizzas, work part time, or sell something else. Get crazy. You are way too close to the edge of falling over a major money cliff here.

You’ve got to get hardcore, in other words. I think this works well for a short-term burst – like getting that $1,000 – but it’s not sustainable because to do it you have to upset the apple cart on a lot of behaviors and routines in your life – and that runs completely contrary to the idea of taking little steps.

For me, selling things worked well for this step. I had a big, fat DVD collection full of movies that I rarely watched, so I sold most of them off. I had a ton of video games that I either didn’t enjoy or had already defeated, so I sold them all off. I had a lot of CDs that I knew I’d never listen to again – off they went!

Those moves not only gave me that emergency fund, but it also kicked out some of the debt that was floating around. Even better, it freed up a lot of room in our tiny apartment – eliminating a bunch of non-decorative stuff that just caught dust did wonders for things!

On Saturday, we’ll tackle the seventh chapter – The Debt Snowball.

This is the fourth 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 fifth chapter, finishing on page 92. The next entry, covering the sixth chapter, will appear on Wednesday.

The first five chapters of The Total Money Makeover don’t actually address Ramsey’s plan at all. Instead, it’s mostly an argument against culture, mostly the idea that the easy availability of debt in our modern life is a serious problem.

I agree with Ramsey in that regard, but I usually find that the root of it is deeper: a lack of personal finance education mixed with a prevalence of awful messages about ourselves delivered by the media. Think about it: did you learn anything about personal finance in school? Also, think about the ads you see – don’t they portray the people in those ads as being somehow better than you?

Together, that’s some awful medicine. Dave, in his own way, takes on both of those factors in this chapter.

Ignorance Isn’t a Four Letter Word
We live in a culture that rewards intelligence and knowledge, and often ignorance is seriously derided when it shouldn’t be. Dave spells it out pretty well on page 78:

In a culture that worships knowledge, to say ignorance about money is an issue makes some people defensive. Don’t be defensive. Ignorance is not a lack of intelligence; it is a lack of know-how.

The idea that ignorance is not a lack of knowledge is vital. Intelligence is the ability to take the knowledge that you have and put it together in interesting ways. Intelligence shines when you read two articles on only vaguely related subjects and are able to put together a completely new idea from those two articles. Intelligence does not mean that you’ve got tons of knowledge in your head. In fact, I’d often make the opposite observation – many of the most intelligent people I know continually respect how little they know and how much they do not know.

I’ll use myself for an example. I don’t know much about world history. I don’t know much about physics. I don’t know much about high-level athletic training. I don’t know much about fixing cars. I don’t know much about plumbing. I don’t know much about complex mathematics. There are countless other areas that I’m willing to admit ignorance in.

Ignorance can be overcome, though. If I so chose, I could spend some time educating myself on plumbing with a good do-it-yourself book or two and some time around the pipes. I could learn more about physics by reading up on the subject and perhaps taking some coursework on it. I could learn more about working on cars by simply trying it. Hard work overcomes ignorance every time.

It’s not shameful to admit you do not know everything – no one does. In fact, I’d argue the opposite – pretending you know everything when you do not is dangerous and harmful to yourself and to others. This same exact logic applies to personal finance – it’s fine to admit that you’re ignorant about money. What’s dangerous is when you choose not to admit it – or you delude yourself into thinking that you truly aren’t ignorant about it.

Overcoming Ignorance About Money (or Anything Else)
Dave’s recipe for overcoming ignorance matches up well with my own feelings on the topic. On page 79:

Overcoming ignorance is easy. First, with no shame, admit that you are not a financial expert because you were never taught. Second, finish this book. Third, go on a lifetime quest to learn more about money. You don’t need to apply to Harvard to get an MBA with a specialization in finance; you don’t have to watch the financial channel instead of a great movie. You do need to read something about money at least once a year. Your actions should show that you care about money by learning something about it.

This really is a strong formula for overcoming general ignorance on a subject. It will not make you a world-beating expert, but it will give you the background you need to actually make that topic work in your everyday life.

Let’s translate it a bit. Pick a topic you’d like to not be ignorant on, then do as follows.

First, with no shame, admit that you are not an expert on that topic because you were never taught or were taught poorly. Second, read a general book on the topic. Third, go on a quest to learn more about the topic. You don’t need to apply to Harvard to get an advanced degree in the topic; you don’t have to watch documentaries or read piles of dry books instead of watching a great movie or reading a fun book. You do need to read something about the topic at least once a year. Your actions should show that you care about the topic by learning something about it.

Sounds like a recipe for getting up to speed to me!

What’s Expected of Us
On pages 81-82:

Peer pressure, cultural expectations, “reasonable standard of living” – I don’t care how you say it, we all need to be accepted by our crowd and our families. The need for approval and respect drives us to do some really insane things. One of the paradoxically dumb things we do is to destroy our finances by buying garbage we can’t afford to try to make ourselves appear wealthy to others.

I fell into this trap big time before my financial turnaround. I constantly tried to buy things to impress others. I’d pay for a huge group to go out to eat. I’d buy gadgets I didn’t even really want simply because it was impressive to have an amazing item. I had to always have the “latest” of everything.

Now? I realized that people didn’t like me because I had the latest things or because I bought dinner. They liked me because I was me. Sure, there were a few hangers-on who didn’t want to hang out with me any more because I wasn’t engaged in whatever activity they were obsessed with, but what was that friendship, really, if that happens?

In fact, it became easier to relate to people once I realized this. I was no longer worried about saying the right thing, having the right thing, or keeping up appearances. People wanted to be around because I was me – and that’s all I needed.

Who cares what the Joneses have? I can either be me, or I can be me with a car I don’t really want and a debt burden making me sad.

What’s Your Jaguar?
I really liked the tale Dave told about owning a Jaguar, starting on page 86:

I had the eye of my heart set on a Jaguar. I “needed” a Jaguar. What I needed was for people to be impressed with my success. What I needed was family raising an eyebrow of approval based on my ability to win. What I yearned for was respect. What I was so shallow to believe was that the car I drove gave me these things.

My Jaguar was food. I felt a constant desire to take people out to eat at my favorite restaurants – often very expensive ones. I’d take my parents out. I’d take my friends out. I’d seek out really expensive amazing places and tell the waiter to just give the whole bill straight to me. I’d tip really big right in front of everyone.

Doing this made me feel like I was important and that I was earning respect. What I found was that mostly I was just making the other people feel sort of awkward. They weren’t there to be shocked by my largesse – they were there because they wanted to go out for a nice evening with someone whose company they enjoyed.

Guess what? I stopped paying for meals for others. Guess what else? Whenever I ask any of my family or friends to actually go out to eat – something I don’t do too often any more – they’re still quite happy to accept and quite happy to fit the bill. In fact, they may be happier – they don’t have that vague sense of discomfort they used to get when I’d grab the bill and throw down the plastic.

The American Nightmare
If you’re jealous of what others have, put yourself in their shoes for a moment. Do you think they are actually able to afford what they have? On page 83:

They present the perfect picture of the American dream that has turned into a nightmare. Behind the perfect hair and the French manicure, there was deep desperation, a sense of futility, an unraveling marriage, and disgust with themselves.

The people that you’re jealous of often have had to make huge sacrifices to get the things you want. The fancy car? It’s often paid for with a huge pile of debt. The amazing career? That person spent a lot of sleepless nights cutting their teeth to get there – and likely has sacrificed a strong relationship with the people around them to get it. That perfect marriage? It’s likely either the result of a lot of maintenance or it’s a facade.

There is no such thing as a free lunch in life. The people that have those things that you’re jealous of have often paid dearly for those things. When you peek behind the mirror a bit, you’ll see the cost they paid – and are likely still paying – to get there. And, quite often, when you look at things as a whole, you find a balance of affairs that you don’t want yourself.

That’s why I gave up so much spending. I once thought I couldn’t imagine life without lots of trips to bookstores and game stores and coffee shops. At the same time, though, I was up at night sick with worry about my debts and leashed to a paperwork-filled career. I had those little oases of seeming happiness, but they were surrounded by lots of unhappiness. If you saw me out and about at the bookstore or at the coffee shop, you might have been jealous – look at that guy with the armload of books and the smile on his face?

But if you saw the worried guy, sitting there writing computer code at eleven at night, then not sleeping at two in the morning because he was worried about the bills… then you might get a different picture of things.

A Useful Lesson from Twelve-Step Programs
On page 91, Ramsey points out a worthwhile lesson from twelve step programs:

The Twelve Steppers have it right. They say, “Continuing to do the same thing over and over again and expecting a different result is the definition of insanity.”

If you’re trying to succeed in life – or in some specific aspect of life – and you keep failing at it or never getting anywhere, you probably need to change your approach.

Obviously, Dave is referring to money issues here. If you keep doing the same things you’re doing and you’re not getting ahead financially, you need to make some changes.

But it’s true for everything. Let’s say you’re a writer and you’ve finished a book. You’re trying to get it published but you’ve received twenty rejection letters. You need to change something. Why not give away the book in bite-sized increments? Why not chunk it down into 1,000 word segments and blog the entire book? Why not put that book aside for a while, write something new, and look at it later? The key here is that what you’re doing isn’t working, so you need to try something else. Getting a steady stream of rejection is never the road to success.

On Wednesday, we’ll tackle the sixth chapter – Save $1,000 Fast.

The idea of debt snowballing is a popular one: it pushes you to get rid of your debts and get on a financially stable playing field, plus it encourages you to behave in a frugal fashion because you’re setting aside such a large, steady block of money each month to eliminate those debts.

What’s a debt snowball? From an earlier post:

A debt snowball (or similar arrangement) is simply a debt repayment plan that specifies the order in which you should pay off your debts. Typically, there is some logic in the order – in Dave Ramsey’s original debt snowball, the debts were ordered from smallest to largest, for example. You then add up the minimum payments for this snowball, add an additional amount to that total, and then treat that dollar amount as your “debt bill” for the month.

From this “debt bill,” you make the minimum payments on all of your debts, then use the remainder to make extra payment on whichever debt is on top of the list. When that one is paid off, you don’t reduce the total of your “debt bill” – instead, you just have a larger remainder to tackle whatever debt is now on top of the list. Eventually, you’ll be using the whole “debt bill” amount to tackle that final debt – and it will melt away quite quickly.

The concept of the “debt snowball” was first popularized by the radio host Dave Ramsey, and his plan is probably best described in his excellent book The Total Money Makeover.

But, as I mentioned before, there’s a big problem with the whole debt snowballing idea and that’s security.

Debt snowballing requires you to roll a large amount of your income each month into debt repayment, and if you get through the entire plan without any problems, it works like a charm. But life rarely works that way. People lose their jobs. People switch careers. People have children unexpectedly. People fall in love and get married. People get hit by trucks. Things happen, in other words, and if you’ve tied up all of your money in getting out of debt and left almost nothing liquid for yourself, those things can really derail your dreams.

So here’s my alternate plan, one I’ve been using for the last two years to handle larger debts. Instead of paying extra debt payments each month, I instead roll a certain amount each month into my emergency fund savings account. When I have enough in that emergency fund account to pay off my next debt and leave enough in the emergency fund so that I’m comfortable (six months’ worth of living expenses), I pull that cash out and pay off the debt. I’m actually pretty close to doing this right now to pay off one of our outstanding debts.

I tried other plans for a while because this plan does have flaws, but the benefits of doing it this way kept bringing me back. Here’s how both sides of the coin look.

A debt snowball savings account offers more security Instead of having your cash wrapped up in extra debt payments, it’s easily available in cash form from your savings account if you need it for an emergency. Lose your job? It’ll be much easier to survive with cash in the account than with lower debts. The same goes for almost every kind of emergency you can think of – having the cash is much better than having lower debt.

A debt snowball savings account offers more life possibilities Similarly, with the money available to you, you have much more freedom when it comes to making choices about your life. Want to switch careers or have a child? You’re not lashed to the debt snowball routine, giving you room to make these choices without sweating it.

A debt snowball savings account slows your net worth improvement Financially, this method isn’t nearly as effective as actually paying down the debts. The 3% you might earn in a savings account is far lower than the 7% or more you’d get from eliminating debts. That difference adds up to a lot of money over time.

A debt snowball savings account makes it easier to spend If you have a big wad of cash just sitting there, it’s easier to talk yourself into spending a little bit more. The debt snowball savings account requires you to have plenty of diligence and discipline; if you don’t, it won’t be very effective.

For me, the net balance is a positive for the savings account. It enabled me to switch careers and have a second child without sweating every dime. Since I have some degree of discipline (I’m far from perfect, but we are spending far less than we earn), I’m not tempted to tap into the money. The only part that itches at me is the loss in net worth growth, but I view it as almost being a form of insurance, and that slower growth is the fee I’m paying for this insurance against whatever may come.

The balance on the whole may be different for you. Give it some thought and come to your own conclusions based on your own situation. For example, if you’re single and are more concerned about financial independence than anything else, a normal debt snowball may be the highly preferred choice.

In a recent discussion about why I’m looking at paying off debt in the short term over investing, a reader mentioned Dave Ramsey’s book The Total Money Makeover, which basically encourages everyone to follow these seven steps to financial freedom:

1. $1,000 to start an emergency fund
2. Pay off all debt (except the home) using a debt snowball
3. 3 to 6 months of expenses in savings
4. Invest 15% of household income into Roth IRAs and pre-tax retirement
5. College funding for children
6. Pay off home early
7. Build wealth by investing

These steps were debated rather vigorously in the comments, with some people thinking that these were a great idea and others discarding them as rubbish. I thought I would give my general thoughts on them, especially as they apply to our personal situation.

First of all, in April 2006 we were at step zero on this plan. We hadn’t done any of these, a few of our bills were late, and we were feeling rather desperate. The culprit? Overspending.

Since then, we built up our $1,000 emergency fund, paid off all of our debts except our student loans and our mortgage, moved into a house, got four months’ worth of living expenses built up, started putting more than 15% into our retirement plans, and started a well-funded 529 for both of our kids. In other words, we completed steps one, three, four, and five of Dave’s plan, and largely completed step two (we still have a few student loans, but no consumer debt).

Thus, my real decision was between jumping ahead to Dave’s seventh step or going back and finishing up step two and working on step six. I think that most people would agree that steps one through five make a lot of sense – build an emergency fund, get rid of all of your high-interest debt, build a strong retirement plan, and fund college for your children. After that, it gets a little bit hairy.

For the long term, it usually makes sense to jump into investing at that point, if your only debt is your mortgage (in our case, we lumped student loans in with the mortgage because they’re fixed rate loans below 8%). With a time horizon of better than ten years, making minimum payments on your loans and investing for the long term will net you more money.

However, investing first assumes that you are not considering any significant lifestyle changes and are planning on steady income. The rules change in our case, because we are strongly leaning toward a stay-at-home option for one or the other of us. Thus, even though we have a long time horizon, our shorter-term goals (being a stay-at-home parent for a short period) have more urgency than our longer-term goals – our children are only young once, and when they’re in school, we both plan on working again. We still plan on looking for that country estate, but it’s worth it to us to push it off for a few years so we can provide a strong personal foundation for life for our children.

Because of that, focusing on debt reduction, as per Dave’s plan, makes more sense to us. It reduces our monthly bills by a significant factor (eliminating all of the student loans before one of us stays at home will reduce our bill load quite a bit) and our “investment” in debt repayment does pay 7-8% guaranteed (depending on the interest rate of the student loan).

So what about Dave? Dave Ramsey’s plan is a brilliant starting point, particularly if you’re completely unsure about what to do with your financial situation, but it is not gospel. Different situations require different plans – there is no “one size fits all” financial planning solution. If someone tries to sell you one, run away fast.

The debt turnaround that my wife and I experienced over the last year and a half opened this door for us. Without really discovering frugal living and the value and need to get out of debt, we would never be in a situation where we could realistically consider one of us making a major life change. Regardless of the decision we make here, our foundation is far, far more solid than it was eighteen months ago.

In the past, I’ve reviewed Dave Ramsey’s other books, The Total Money Makeover (which I really liked) and Financial Peace Revisited (which I felt was so-so). They both have a similar tack, however, in that they’re both all about Dave Ramsey’s personal finance philosophy – get out of debt before doing anything else.

More Than Enough is a bit different, however. From the back cover, “In More Than Enough, he gives us the keys to building wealth while also creating a successful, united family.” This is an interesting tack to take, one that has me interested as I’m watching both my family and finances bloom.

Does the book offer any interesting and concrete advice, or is it a mere repeat of Dave’s personal finance information? Let’s find out!

Looking Deeply At More Than Enough

Right off the bat, I get a slight negative vibe from the paperback version of the book – the typeface is enormous. This means that each page has maybe a third as many words on it as other books, which means that if this book were printed like other books, it would maybe be eighty pages long. His other books did this as well, but not as obviously as More Than Enough.

The book centers around ten principles that will change your financial destiny, as touted on the cover. The ten principles are rather psychological in nature, but Dave’s style is very clear-cut and grounded, so he does a good job of tying them to life experiences. These ten principles are addressed in chapters two through eleven in the book.

1 – More Than Enough What?
This chapter basically reveals the meaning of the title – it’s not more than enough stuff, but instead more than enough of a sense of fulfillment and purpose in life. The book uses a metaphor that a life is like a mansion with many rooms and some of them are locked, and it’s only through a journey of self-examination that we are unable to lock more rooms. Thus, he ends each chapter with a “key” or two to unlock rooms. It’s an interesting metaphor, at least.

2 – The Missing Link
The first principle is values. In other words, what’s the intrinsic right and wrong inside of you? What things do you do that seem right, and which things seem less so? He goes through a series of exercises and examples, but the real key part is his simple exercise of sitting down and thinking of those right things and those wrong things. Then, spend time minmizing the wrong things and maximizing the right ones.

3 – Victory Through Vision
The second principle is vision, which directly leads to goals. What do you imagine for your future? Can you describe it in detail? Spend some time trying to do just that, imagining what you would like to see at various points in your future and your family’s future. Then, take those visions and try to describe them in terms of concrete goals. What do you have to do in order to get there?

4 – The “You” In “Unity” Is Silent
The third principle is unity. Basically, it’s making sure that the goals you define for yourself are in sync with the goals that your spouse and other family members may hold. Especially your spouse. I found that sitting down with my wife a few times to talk about goals has been incredibly valuable in regards to putting us both on the same page and authentically feeling like we are really working together in many aspects of life.

5 – Hope: Balm For The Soul
The fourth principle is hope, which is basically the outgrowth of the meeting of goals and unity. A goal lets you envision the future, and unity gives you support as you move towards the goal. Together, they give you hope that you’ll get there, a true belief that things will get better.

6 – Accountability: How To Get An A In Conduct
The fifth principle is accountability. Once you have a goal in mind, support in getting there, and hope for accomplishing it, you’re much more capable of taking on responsibility and holding yourself accountable for the financial moves that you make. I find this to be powerfully true – it’s much easier to pass the buck on small mistakes if you’re not working towards a larger goal.

7 – Intensity: Feeling The Fervor
The sixth principle is intensity, and this is something I really, really agree with. Intensity is something that happens when you have goals and unity and accountability, a triumvirate that occurred inside of me after the birth of my first son. Reading this chapter rang a real bell inside of me because it reminded me of almost going bankrupt after his birth and feeling everything start to come together after that. It was intense – I finally felt like everything was in alignment and it was a real rush.

8 – Good, Better, Best: Work, Discipline, Diligence
The seventh principle is work, discipline, and diligence. Again, this struck home for me – once that rush of intensity happened, I began to see that there was a lot of work to be done and that I needed to be diligent about it. It’s not enough just to decide not to spend money for a day – you’ve got to stick with it over the long haul.

9 – Patience Is Golden
The eighth principle is patience. Once the routine of work and discipline and diligence becomes entrenched, it can often feel like a slog. Be patient. Realize that success won’t happen in one day – it takes time to eliminate all of those debts and put yourself in a better place. Something that requires work and diligence but that also has a timeframe in years absolutely requires patience – thankfully, you have that unity and support to rely on.

10 – Looking For Love In All The Wrong Places
The ninth principle is contentment. Mostly, it’s a discovery along the path of life of the things that really matter in life, much like the “center” idea I mentioned earlier. For me, it was my family. They bring me contentment – I feel much less of a need to spend frivolous money when my son is making faces at me out of the door of his cardboard castle.

11 – The Great Misunderstanding
The tenth and final principle is giving. What’s the titular “great misunderstanding”? It’s that the road to personal finance success is all about personal gain and wealth. In fact, it’s about giving you the tools to improve the world by giving to others and helping society out. Take the fruits of your success and give some of them to others so that many may benefit from your journey.

12 – The More Than Enough Road
So what’s at the end of this road? Wisdom. The life experiences along this path make you wise, and you also now have appropriate financial tools to make healthy choices with.

Buy or Don’t Buy?

This is a tough one to recommend, so let me put it to you very clearly: if you want to read a Dave Ramsey book, skip this one and just read The Total Money Makeover. That one is clearly his best book and very much worth reading – it’s definitely the one to read if you want to get a healthy dose of the Dave Ramsey personal finance philosophy.

More Than Enough is a very different sort of book. It focuses entirely on internal issues, tying together personal character development and personal finance. The problem is that Dave’s skill is in bringing across the more tangible parts of personal finance and this book focuses largely on more intangible issues.

More Than Enough is not a bad book, and it is definitely the second one you should read by Dave after The Total Money Makeover, particularly if you have a family. Just be aware that it’s much lighter on the personal finance aspects and heavier on the character aspects, making it an interesting companion to Ramsey’s other books but perhaps not particularly strong on its own.

More Than Enough is the forty-first of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.

This week, my morning roundups are going to focus exclusively on specific personal finance writers. I’ve searched around the blogosphere researching these writers and the takes that others have on them and found a number of good ones.

Today I’m taking a peek at Dave Ramsey, author of several personal finance books and the host of a popular radio show. His advice is very direct, simple, and easy to follow and it’s won him a ton of followers.

Dave Ramsey Resources And Links Want a plethora of stuff to read about Ramsey? This is an astounding collection of links about the man and his personal finance ideas. (@ getting finances done)

Dave Ramsey Is Bad At Math and Dave Ramsey Is Good At Psychology I actually agree with both; Dave’s plan works, but it’s not mathematically optimal. Why does it work? It has a lot of psychology hooks embedded in it. (@ five cent nickel)

Dave Ramsey’s Baby Steps A list of and discussion of Dave’s “baby steps” and how you can apply them to your own financial life. (@ it’s your money)

Dave Ramsey Retro: Extra Income… Should We Invest It? This is a perfect sample of the type of advice Dave dishes out. I wasn’t even actually aware until recently that he has an online column with extensive archives.

The Simple Dollar Retro: Review: The Total Money Makeover This book really surprised me – it laid out a very clear financial plan for getting out of debt and getting on the right path without too much filler and hubris. If you’re looking for a good basic personal finance book, this is an excellent one to start with.

Brad’s looking at his debt and wondering where to start:

My wife and I are trying to decide what to do with our “extra” income each month: pay down our home equity ($18K at 9.13%), pay down our other debt (student loans of $6K at 7.14% and $13K at 3.75%; car loan of $8K at 4.2%); or put the money into our savings account (at 5.05%).

First of all, let’s ask ourselves about tax deductibility. The only loans here likely to be tax deductible are the student loans (I’m assuming the home equity loan is a HELOC, not just a funny term for a mortgage). Also, you’ll have to pay taxes on the savings account. So, let’s figure you’re in the 28% tax bracket and re-figure the true percentages on each one:

$18K home equity loan – 9.13%
$6K student loan – 5.14% (after the tax benefit)
$8K car loan – 4.2%
savings account – 3.94% (after taxes)
$13K student loan – 2.7% (after the tax benefit)

Assuming that you are actually going to make strong contributions to your savings account, you should pay down the debts that are of a percentage higher than the savings account first. In this case, that means starting with the home equity loan, then following with the small student loan, then the car loan. At that point, you’re better off stocking up in the savings account – but the key is that you’re actually stocking up here and judging by the debt, it’s likely that you will find other uses for the money.

In that case, I recommend largely subscribing to Dave Ramsey’s “debt snowball” philosophy, except that instead of ranking the debts by the amount owed, you rank them by interest rate. That means you should do the following:

Get $1,000 in the savings account as an emergency fund. If you have children, you may want more than that, but have at least $1,000 in there for a car emergency, etc. This way, a bad situation won’t build additional debt.

Pay off the $18K home equity loan at 9.13%. That’s an imposing debt and you need to pay that one off as soon as possible. As long as you have $1,000 in the emergency fund, focus on paying this debt until it’s gone; if you have to tap the emergency fund, focus on replenishing that back to $1,000 before paying down this debt.

Pay off the $6K student loan at an adjusted 5.14%. This is the next debt to go. Again, if your emergency fund goes below $1,000, slow down the overpayments here and build that fund back up. Now that the home equity loan is gone, you should be able to make very big payments here and knock this debt off quickly.

Pay off the $8K car loan at 4.2%. Keep rolling the debt payments forward – you should pay this one off next, paying as much as you possibly can on the principal. Again, remember the emergency fund and replenish it if you use it.

Pay off the $13K student loan at 2.7%. Even though this is a very low interest loan, I’d still recommend paying it off before building more savings. This is mostly due to it being a debt, and any debt is simply a bet that your future self can take care of it. That’s not a bet that I like. There is an argument about not paying this one off immediately, but I would get myself debt free ASAP.

Then, build a 3-6 month emergency fund in that savings account. Shoot for building up six months’ worth of living expenses in that account so that, in the event of a major crisis or a job loss, you’re fine.

When you’re there, suddenly life becomes a lot less stressful.

In the past, I reviewed Dave Ramsey’s The Total Money Makeover and, surprisingly to me, I quite liked it. It laid out a simple, straightforward plan for getting people on a reasonably strong financial path, and it’s wonderfully constructed to give the person following the plan a lot of psychological reward for following through.

To follow up, I decided to go back and read the latest version of Dave’s earlier book, Financial Peace Revisited, to see if it is as good as The Total Money Makeover. Financial Peace Revisited, along with the radio show, really put Dave on the map as a personal finance guru. Let’s walk through the book and see what we can find.

37 Footsteps (Dave Calls Them “Peace Puppies”)

Most of the book revolves around a list of thirty seven basic principles that Dave refers to as “peace puppies.” What follows is a list of these principles, coupled with my thoughts on it codified into one sentence.

1. Avoid “stuffitis” – the worship of “stuff” In other words, don’t buy stuff you don’t need and soon you’ll find yourself breaking free of the desire to buy lots of unnecessary stuff.

2. Plant seeds – give money away to worthy causes Dave is very much into charity and it comes through strongly here; I find that I agree with his viewpoint on charitable giving, though.

3. Develop your own “power over purchase” Develop some willpower when you go shopping and simply don’t buy stuff that you don’t need or that you didn’t intend to buy when you went into the store.

4. Find where you are naturally gifted – enjoy your work and work hard I agree with this; even if your main job is not suited to your natural talents, find time to follow them and build them up into something you can enjoy while working hard at it – success always follows this.

5. Live substantially below your income This is the key to financial success summed up in five words.

6. Sacrifice now so you can have peace later The same sentiment is worded better by Dave when he says, “Live like no one else so you can live like no one else,” which basically means spend some time living as cheaply as possible so you can build a truly strong financial base.

7. You can always spend more than you make Spending on credit is extremely dangerous over the long haul.

8. The borrower is the servant to the lender, so beware! Debt is also extremely dangerous.

9. Check your credit report at least once every two years Doing this ensures that there aren’t any nasty surprises if you ever need to use your credit report to secure a loan, or even something as mundane as securing lower insurance rates.

10. Handle credit report corrections yourself If you find a mistake, call up the credit reporting bureau yourself and find out what you need to do to get it fixed; you’re the one with the interest in getting it right here, not anyone else.

11. Realized that the best way for delinquent debt to be paid is for you, not collectors, to control your financial destiny This means that if collectors are calling you, it’s time to get a backbone and get some debt paid, even if it means selling off a lot of your stuff and trimming things down to the bare minimum.

12. You must save money (the power of compound interest) Compound interest is an incredibly powerful thing, and you can easily harness that power by investing and saving money now rather than later.

13. Use the “keep it simple, stupid” rule of investing Don’t invest in anything complicated unless you have a serious amount of time to learn about it and maintain that investment.

14. Only people who like dog food don’t save for retirement Start saving for retirement as early as possible, because this lets the power of compound interest do most of the work.

15. Always save with pretax dollars – it is the best deal the government gives you For most people, this statement is the gospel truth – it reduces your tax bill now and gives you a steady income later.

16. Learn basic negotiating skills for great buys Don’t hesitate to make low offers, ask for add-ons, and so forth when buying anything of significant value.

17. Learn where to find great buys (the treasure hunt) Dave doesn’t directly list places; instead, he encourages comparison shopping and asking around for places to find good buys on specific items.

18. You must have patience to get great buys Comparison shopping takes time, but over the long run it can save you substantial money.

19. Singles get self-accountability from the written plan If you’re single, you likely don’t have anyone that you’re accountable to for your own money, so create a written plan and make yourself accountable to it.

20. Singles should look for a money mentor for advice and accountability This is often difficult for single people to do – in a way, this is why I started this site – but if you have someone that you can ask financial questions, don’t be afraid to tap that resource.

21. Singles beware of the impulse monster; he will eat you alive Impulse buying can quickly undo even the best-laid financial plans; instead, make shopping lists and stick to them, and don’t let yourself get caught up in a momentary desire.

22. Men and women view money differently, so be sensitive to differences When you’re in a couple, be aware that the other person likely has very different perspectives on finances.

23. Opposites attract in marriage, so work together for maximum wisdom When you have different money perspectives, use them in concert to maximize your gains – spend the time and talk about money and plan your finances together.

24. When you agree on spending, you will experience fabulous unity in your marriage Again, work together to determine your spending and saving goals.

25. Teach children to work, spend wisely, save, and give Dave seems to think an allowance directly tied to work tasks is a good idea.

26. The most powerful legacy you can leave is wise, competent children Spend time with your children – guide them and teach them all that you know.

27. Giving loved ones all the money they request may not be best for them Don’t mix adult relationships and money outside of marriage – all money does is damage relationships.

28. Making decisions based on fear of reprisal can be a sign of codependence Codependence is a very bad thing – if you feel that you can’t make a decision based on your worry of how someone else will act, there’s a fundamental relationship problem at work.

29. Be strong enough to help others and strong enough not to Help others by giving them advice and support – don’t help them by giving them money.

30. Listen to your spouse’s counsel (women’s intuition) When you don’t know what to do, talk to your spouse about it in detail – he/she will often have a perspective that never occurred to you.

31. There are few “old” fools – seek experienced counsel I agree with this very strongly; I often use parents and grandparents for advice on what to do.

32. You must keep your checkbook on a timely basis This shows the age of the book a bit, as many people do many financial transactions without a checkbook; however, the principle still stands – keep track of every red cent that comes in and goes out, no matter your system.

33. Lay out the written details of a cash management plan This means make a budget, in not so many words – it doesn’t have to dominate your life, but it needs to be done so you can see where you’re at and where you need to improve.

34. Commit to your plan for ninety days After ninety days, it will be clear which parts work and which ones don’t, so you can use your experience to rework the plan a bit and find that sweet spot in your life.

35. Take time to prioritize your life daily Every day, take a moment or two to figure out what you really need to do and what’s really important.

36. Keep your spiritual life healthy Dave is a devout Christian, but you don’t have to be – just spend some time regularly making sure that your life is in tune.

37. Take baby steps – prioritize your plan and move slowly At the very end of the book, he gives a rough outline of the plan described in The Total Money Makeover, a plan that most of these tips fall right into.

Buy Or Don’t Buy?

As I read Financial Peace Revisited, I couldn’t help but compare it to Dave’s later book, The Total Money Makeover. I kept realizing that specific points in Financial Peace Revisited were exactly the same as points in The Total Money Makeover, and I felt that the later book was more concise and plan-oriented than the earlier book.

By the end, I was able to put in a nutshell my feelings on this book: Financial Peace Revisited is basically a first draft of The Total Money Makeover. The books are very similar, but the thought process in this book is rougher and less cohesive than in the later book.

That’s not to say that Financial Peace Revisited isn’t worth reading; it is a pretty good book, especially for someone who is in dire financial straits and needs a plan to help them start to get their finances in shape. However, The Total Money Makeover is basically the same book, except written much better.

In a nutshell, don’t buy this book unless you’ve already read The Total Money Makeover and you want much of the same material told in a somewhat different fashion. The two books don’t completely overlap, but the meat of both is identical, and The Total Money Makeover is simply a better read with a more complete and concrete plan.

Financial Peace Revisited is the twenty-fifth of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.