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 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.