Updated on 07.13.09

The Total Money Makeover: Build Wealth Like Crazy

Trent Hamm

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.

ttmmA 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.

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.

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.

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  1. Baker @ ManVsDebt says:

    “The princess is no longer in another castle.”

    Haha, nice one.

    Honestly this concept is the thing that keeps me going. Dave likes to say that your “largest wealth building tool is your income.” I really like envisioning what it would look like to have our income completely freed up.

    What we’d be able to accomplish in both wealth building and giving is fun to dream about. In addition, the freedom that comes with being able to really pursue your passions even if it means a 80% pay cut (especially if those passions help others).

    Dave does a great job of keeping the focus on the possibilities that exist here, which I think is a reason he’s been so successful in motivating so many. Give them baby steps to get going and then keep the “eye on the prize”.

    Loved it!

  2. Thomas says:

    I haven’t bought this book because I’ve worked hard for 2 years (as of this month) to rid myself of all but mortgage debt and build some wealth. Now I’m clear of debt (I sold my house), I watch savings grow and I’m not sure how much more I can get out of finance books that preach Dave’s principals.

    Still, I cling to your reviews as a motivator. I also have net worth goals on my wall, listed by quarter, and I use that to keep motivated. My ultimate goal is $1,000,000 by 50. $900,000 to go in 14 years so it’s ambitious, but doable, DOW willing.

    My point is that no matter where we are in a financial journey, your blog, this book, financial web sites, all help us to stay on track with a simple approach.

  3. Dan says:

    A lot of great stuff here. Dave Ramsey is great. I appreciate you expanding on what he writes. One thing I must disagree with though.

    You write “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.”

    However, your opinion is in direct opposition with Dave’s attitude. On his website he writes:

    “Pay a pro. I still choose to use a pro and suggest you do to. Statistics show that “do it yourselfers” are quick to jump out of funds when they begin to under perform. A good professional advisor will remind you why you chose the fund and prevent you from buying high and selling low.”

    Personally, I can see the merit in both points. My issue is that you should make sure to clearly point out that Dave believes in keeping it simple, but he is not an advocate of DIY.

  4. Kevin M says:

    Why not consider your car an asset (instead of an expense in your example)? You could easily value it using kbb dot com. After all, it does have value should you go to sell it. Sorry to nitpick, it’s the accountant inside of me.

  5. I wouldn’t consider a car or anything else that looses value over time an asset financially speaking. This is especially true if you have a loan on said depreciating asset.

    This was one of my favorite chapters in the total money makeover b/c it represents the point at which you reach financial freedom and can call your own shots. Can’t wait until I get there… I’ve got a ways to go.

    -Gen Y Investor

  6. Anna says:

    Trent, The book club thing is a great idea, but I’d vote for something a little more controversial (to you) next time. Don’t get me wrong, I’m not looking for a “this guy is an idiot” nonsense that would be completely out of place at the Dollar, more along the lines of “This is a viable strategy, but I prefer…because…”.

    This threads just been a pretty dry read for me, like discussions about the weather: essentially, it’s me agreeing with you agreeing with Dave.

  7. Dangerman says:

    “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.”

    Dave Ramsey is NOT particularly good on investing, and I believe this statement to be completely inaccurate.

    A good fee-only financial planner charges ~1% of total assets under management, but can easily add far more than 1%/year through proper diversification and tax planning. Personally, I’d say the cutoff is $1 million in investable assets.

  8. Jackie says:

    @#3, by that logic, lately houses aren’t assets either. Mine has lost $20,000 in value since I bought it, and I now owe more than it’s worth, but it’s vital to my net worth calculation.

  9. Kat says:


    That’s why Trent uses his TAX ASSESSED value of the home, not current market value. Tax assessed value will rarely go down by $20g, but is also likely a much lower amount than what you think your home is worth.

  10. Amy says:

    Reader mailbag question:

    I have a 2000 Ford Escort that has a couple more years in it (I hope). My husband and I share the car, and we are planning on purchasing a used car sometime next year. That’s how long it will take to save the money to pay in cash so we don’t have to go into debt. But with the market the way it is, should we consider getting one sooner to take advantage of lower prices and better offers? We are currently $5,000 to $10,000 short. As far as our current debt, I have student loans and we are renting out a house that we own, which covers all the bills. Neither of us has ever owed on a car.


  11. @#5 You have my logic confused. Over time real estate values have roughly kept up with inflation… thus over time houses appreciate in value. Just b/c they’ve lost value over the last few years doesn’t mean they’re going to keep going down in value.

    A car on the other hand will eventually depreciate until it’s amost worthless.

    -Gen Y Investor

  12. KC says:

    Actually cars don’t appreciate until they are actually worthless…that is if they are running. It’ll drop to about $1200 (give or take a few hundred) and stay there unless something significant happens – like rust, accident, etc. I had an 89 Nissan Stanza that was worth about $1600 from 2000 til the time I sold it in 2005 (for $1600).

    My sister is notorious for buying a well-used import for around $1300-$1800 and driving it for 3-5 years and reselling it for about what she paid for it. She had a Mercury Tracer (ok, not an import, but a little cheap car) back in the 90s that she actually sold for $200 more than she paid for it 4 years earlier. She painted the bumper (herself) and made a few more cosmetic repairs. But the car still ran and it stayed at its intrinsic value over those 4 years.

  13. J says:

    @Gen Y Investor — I think Kevin M was using how an accountant would value your asset. A car is indeed an asset because it has some value — in the same way the rest of your “stuff” has a value. Even a non-running car has value as scrap metal, although the value would be lost in the noise when you include things like houses and retirement investments.

    A loan against the car would show up as a liability, though.

  14. lurker carl says:

    Trent’s million dollar friend living in poverty likely is suffering from a mental illness, this person sounds like a “Cat Lady” sans cats. It is a poor example, hoarding money is a symptom rather than the true cause of that misery.

    @Amy – Wait until you have the money. This automobile buyer’s market will still be here when you’re ready to purchase. There are still way more vehicles than owners, the glut of new and used cars will not evaporate any time soon.

  15. J says:

    I will say that this was indeed the most hopeful and exciting chapter of the book. I will agree that Ramsey’s investment advise is notoriously weak, but by this point in the game, anyone following the plan would be in a position where experience would have taught them a lot. So at this point, they may realize that it may indeed be time to call in a pro (and, of course, there is the Ramsey ELP program to help you there :) ).

    At this point you have built an emergency fund, eliminated all debt (including the mortgage), funded retirement, funded the kid’s college (and you may be done paying for it) and been living the lifestyle for years, you might be ready to admit that you need to enlist the help of a professional — or you have become so well educated that you can indeed make some good calls.

    I do agree with the basic tenet that things should be simple, though. The recent worldwide economic adventure should be evidence enough that you need to understand what you are buying into — and to beware things that seem too good to be true (or use too many big words :) )

  16. Patty says:

    Ahh the one point I pick up is the charity part. I hope that you would reconsider not waiting to help out. I’ve been a volunteer most of my life, with my time, especially when I was young, and now with some financial support and with my expertise and time. I have been so rewarded and so blessed by being part of organizations that make my backyard a better place for my neighbors. I encourage you and all your readers – help out, even just a little – you too can make a profound difference. Thanks

  17. spaces says:

    Beyond the looking glass, indeed.

    It’s not a realistic goal for me, but if it is for you, more power to you.

  18. Rosa says:

    Because our house is so much of our total assets, and our retirement accounts were stock heavy, our net worth has been going down probably for a while – the recent appraisal put it well below our tax appraisal value (which was close to the sale appraisal value, since they pegged it to sale price when we bought).

    So I’m glad I don’t play the net worth scorekeeping game.

    The other quibble I have is – why wait to give? I can see it if you’re in bad debt, but if we all put off our charitable giving until we’re out of mortgage and student loan debt and have our retirement savings fully stuffed, the world is going to be a poorer place in general. Charitable giving is a part of our monthly budget, just like entertainment and groceries – all things we could cut a lot if we had to, but don’t because we can afford them. Aside from the pleasure it gives me I want our son to see giving as a natural part of life, not something you put off til later.

  19. Mighty says:

    Tracking our networth has been very helpful for Fierce and me. Now we can say, “If we take this windfall and put it against a student loan or into our Down Payment Fund, then we will have improved our networth by 1%.” This motivates us as we make decisions throughout the month. Each time we err on the side of frugality, we put the money saved in our Snowball Account. At the end of the month, we split the account between debt repayment and the Down Payment.

    I also think Dave’s right about keeping a good perspective on money. If you end up living in a dilapidated trailer with a million in the bank, you’ve missed the point.

    I look forward to being able to give generously to causes I love and people who have been so supportive. Besides that, some traveling and all organic food.

  20. Dan says:

    on giving,

    it’s strange how/why this works, but if i were to pray for money, it doesn’t seem to come to me. but when i give it away deliberately asking nothing in return…it seems to come back to me.

    i’ve heard others’ have experienced this as well. it’s quite amazing.

  21. erzebet says:

    actually i do not consider a car an asset at all and neither a house unless you rent it.

  22. KC says:

    @Dan – I totally agree. But when I give I usually do have an ulterior motive. I like to give locally. I do get something in return – a better community that I live in. But you are right – sometimes you have to dig deep to give, but you will find you get a lot in return and its not always money.

  23. Scott says:

    My position is a little different.

    I say money has 3 basic purposes (or uses) in this order: 1. To provide for the food, shelter and clothing needs of yourself and your family. 2. To protect your future. The day will come when you will no longer work either through illness or retirement and you need to prepare for that. 3. To enjoy. Giving is a part of being able to enjoy money. Investing could come under #1 or #2.

  24. Strick says:

    Rosa – I think Ramsey advocates giving 10% even when your are still poor and in debt. The “giving” in this stage would be over and above this 10%.

  25. Kevin says:

    @Dan (#15):

    “if i were to pray for money, it doesn’t seem to come to me. but when i give it away deliberately asking nothing in return…it seems to come back to me.”

    Dan, even if that were true (and we both know that it’s not really), that’s a pretty poor reason for giving. Giving is supposed to come from the heart, with no expectation of anything in return. Dan, if your intention is to spread the message that people should give more, I think suggesting that they’ll profit from it is the wrong way to go about it.

    Regarding this chapter, I kind of disagree with Dave’s conclusion that there are only 3 meaningful things to do with money (invest it, have fun with it, or give it away). I think it’s really just the one thing: have fun with it. The only reason to invest it is to get more of it. If you just take that new, extra money and invest it again, there’s really no point. At some point, you have to spend it.

    As for giving it away, well to me, that falls under the “have fun with it” category. For some people, giving away money is fun, so it’s really the same thing, in my opinion.

    At the end of the day, the only meaningful thing we can do with our money is have fun with it. We invest to get more so we can have more fun. We give it away because some of us think that’s fun (others might have a different idea of “fun”). But it’s really just the one thing: fun.

  26. steve weaver says:

    @Kevin (#20)
    Actually, you and Dan both have a point. While the money doesn’t literally come back to you when you give, you do become more aware of the windfalls in your own life. I’ve given away money just because I knew I could spare it and the receivers would get much more benefit from it than I would.
    I’m technically poor (Living just above the poverty line), but helping others gives me: A)Hope, that I’ve made a difference and have set an example. B)The satisfaction of knowing I’ve brightened someones day & C)Confidence that my life is improving simply because I’ve “Paid it forward” in my personal Karma account.
    So you’re right too Kevin, sometimes doing the right thing is just plain fun!

  27. AC says:

    I agree with @Rosa that giving needs to be something that is done all along rather than something that waits until I’m at the “pinnacle point.” Since the pinnacle point is somewhat of a moving target, “waiting for the pinnacle point” could turn into procrastination and a million excuses as to why I’m not quite there yet. If it means that it takes me a little longer to reach that point, that’s fine because I know that it’s for good reason. Better to give all along rather that always tell myself that “I’ll give next year.”

  28. Rosa says:

    @Strick – thanks for the clarification! You can tell I haven’t read the book.

  29. Erin says:

    Generation Y investor and erzebet – net worth is a snapshot at this moment in time of your assets and liabilities. Add up in a column what you could sell all of your assets for today (car, house, etc.) and in another column add up all of your debts. So a car and a house will always go in the asset column at their current value, although it’s entirely possible that they could get cancelled out by your debt and then you would have a negative net worth. $100000 in assets and $50000 in debt would mean a $50000 net worth, regardless of whether those assets will be worth less next year or next month.

    Dangerman, I’m curious why you say Dave Ramsey is not good on investing. I’m not disagreeing with you, just curious on your reasons for that statement.

    I don’t think I agree with “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”. A financial planner is not the same thing as an investment broker, although many (most?) of them do that as part of their jobs. We outsource a lot of research to our financial planner. Most of it is stuff we could do ourselves but just don’t have the time for. We make sure we understand the reasons for her recommnendations and make the final decisions ourselves, but she does a lot of the legwork. It’s sort of like hiring a cleaning person. Yeah, sure, I could clean my house myself but I don’t have time and don’t like it and would rather budget to pay someone for it.

    Getting back to the book, I think my husband and I are both really looking forward to being able to give significantly once we get out of debt and get into the wealth-building step. It was really enlightening to read in the book what kinds of things normal, middle-income people were able to accomplish once they got rid of debt and were able to invest over the long-term.

  30. Bill in Houston says:

    I really do need to buy this book.

    I’ve taken Ramsey’s advice in the past and it has worked. He introduced me to the snowball concept and I paid off over 15k in credit card debt that way. My wife and I have both said that we’d like to donate more to our church and the charities it supports. We’ve donated time and money, but want to give more. I’ve done pretty well in the past few years and we’d really like to give more back.

    We also like our fun (luxo vacation in Mexico at the end of June, for example) and while my investments are conservative, I’m up 5% for the year. I’d like to see what else I can do.

  31. I can vouch for the Simple Investing idea. Some years ago I knew a man who had amassed a considerable fortune and he did it all old school.

    He invested in stocks, bonds and real estate, never anything fancier. He selected his own investments, always purchased real estate for cash and only bought high dividend paying stocks. All buy and hold for decades.

    No speculative plays, no micro management, no financial planners, no investment advisors, no leveraged plays, and not even any tax sheltered plans. Like I said, old school.

    This guy was a simple man from humble beginnings, and had no college education. But he had a nose for value, and no tolerance for b.s. By the time he reached old age, he had investments worth millions, all accumulated through patience and simplicity.

    He was living Rich Dad, Poor Dad decades before the book was written.

  32. Dan says:

    follow up on giving…

    i have a belief of the “circles” of importance around me. this is my priority list of what order to “take care of things” (right or wrong, don’t care to be judged on this, it’s just the way i think)

    1-myself (if i’m not healthy,wealthy,wise, i can’d do anything for anyone)

    2-spouse,kids (they are my major motivator)

    3-immediate family/real close friends (mom,dad,siblings,best friend)

    4-non-close family/friends (blood still thicker than water, friends were there for you at some point, point of helping this group is that these people shape you and were probably there for you too in some way)

    5-neighborhood (protect your home/apt/belongings thru networking with neighbors)

    6-community (want to have a good town, school system)

    7-county/state (part of your identity)

    8-country (yeah, USA finally matters at this point)

    9-foreign countries of ethnic origin (your heritage)

    10-third world countries-children (poor children in africa or wherever)

    11-at this point, it’s everyone else pretty much

    – so if i ever have a massive windfall, it trickles down according to this priorty list

  33. Tony says:

    I think you missed the concept of the “Pinnacle Point”. Ramsey says “This Baby Step takes us to the point at which your money works harder than you do, the “Pinnacle Point.”

    He is referring to the point when the income generated by your investments (stocks, bonds, rental property, etc) is equal or greater than the income generated by your regular job.

    That’s the point at which theoretically at least you could quit your job and keep the same lifestyle. To me that’s Financial Freedom.

    Being debt free is good, but is nowhere near close to the “Pinnacle Point”.

  34. Johanna says:

    Dan, your hierarchy there just goes to show why “give so that it comes back to you someday” is such a poor attitude. You’ve ranked people in pretty close to the order in which they’re likely to give anything back to you – “poor children in Africa or wherever” are extremely unlikely to ever be in a position to do anything for you, so in your world, they don’t count for squat.

    A donation of $50 to the Fred Hollows Foundation can pay for an operation to restore a blind person’s sight. A gift of $50 to your best friend will get him what? A handful of CDs, or books, or maybe last year’s iPod.

    Of course, your best friend is likely to remember your gift and thank you, and maybe give you a gift in return, whereas the formerly blind person lives in “Africa or wherever” and probably won’t ever even find out who you are. If you want to take that distinction into account in choosing what to do with your money, that is your right, of course. But call it what it is: You’re not being unselfish with all that giving to the people closest to you – you’re being selfish.

  35. Debbie M says:

    I guess by “three good uses for money,” he means after you’ve covered the basics. Because my favorite use of money is covering NEEDS. I enjoy eating. Every day! And living indoors. Even in good weather! And being able to clothe myself and get myself to work.


    I also like keeping score. My net worth sometimes takes a hit even when I don’t make a major purchase (hello, plummeting stock market). Actually, the way I calculate my net worth, I don’t even include the money I’m using to save up for things like cars and vacations, so it doesn’t plummet when I finally spend that money I’ve saved. It was already pre-spent in my head, though of course since it’s not actually spent yet, I could still change my mind.

    Oddly, I do include my car. It’s good to remember that the value is going down, but it’s also good to remember that the current value can be added to my next-car savings for a more realistic view of what I can actually afford.


    I also agree with simple investing. Frankly, I wouldn’t trust a financial advisor farther than I could throw him. I admit I’m biased because I disagree so utterly with what one recommended for a friend of mine. I’ve enjoyed learning more, making my own mistakes on my pathetically small amounts of money and now feeling more confident about controlling my medium amounts of money. I don’t want to learn all about how to judge a company but I am a big, big fan of diversification. It’s so exciting that mutual funds and REITs are available to the general public these days. And online savings accounts!


    I wouldn’t say there’s just one “pinnacle point.” I think there are many, many victories that feel good on the personal finance road. So far I’ve been thrilled when:
    * I got my first car
    * I lived on my own without any parental handouts (living at home) or governmental handouts (financial aid)
    * I paid off my student loan
    * I increased my donations to my full goal of 10%
    * I bought my second car with cash
    * I bought a real house that I could imagine living in forever if necessary
    * My car broke down on a road trip and I just put it in the shop, rented another car, and continued my trip as planned (boy, did I feel rich!)
    * My salary surpassed that of a first-year teacher (for a couple of years, anyway)
    * My IRA savings exceeded my pension (for a couple of years, anyway)

    In the future I look forward to more
    * Paying off my house
    * Retiring early (the crossover point)
    * Having enough investments to be as well diversified as I would like.

    On the other hand, I haven’t had any debts other than my mortgage for decades now and I don’t have any dependents, and it really doesn’t feel I’m building wealth like crazy (except the past couple of months with the stock market recovering). That’s probably because I read too many financial blogs of people with twice my income and because my current goal is retirement (an extremely expensive goal). I think I will feel like my money is quickly piling up once my mortgage is paid off (in 3.5 years), but meanwhile, my money is only accumulating slowly. Of course, I am also accomplishing a lot more pricy goals than I was in my student days.


    I don’t actually think giving away money is fun. I think of it more as a duty. I am so much better off and luckier than most people in the world that it just seems wrong to hog all my money to myself. Sometimes I think I should donate all but the amount I really need (probably at least 50%, maybe 80%). Sometimes I want to give away as little as possible so I can have more fun myself. I have compromised on 10%, which is pretty far above average but still leaves me most of my money.

    It’s true that I don’t actually see the results of most of my giving. I give to far away organizations that help preserve the environment, empower poor people, help abused people, subsidize pain research. Then I read a few stories from these organizations but it’s not the same as when I subsidize my siblings when they are poor so they can join us on family trips. It doesn’t really affect me personally like that.

    As far as donating my time, I don’t actually want to physically help with what I consider to be the worst problems. I am afraid to fight persecution and abuse and don’t want to look. It’s depressing to see starving and abused people. I don’t want to learn biochemistry. What I’m better at is tutoring math and being a scout leader and teaching first aid classes—helpful, perhaps even somewhat life changing, but not really all that huge in the grand scheme of things.


    I do like the idea of doing something, of course, even while you’re pulling yourself out of debt. At first you can have fun mostly only in cheap and free ways, but you can still have fun. There are so many fabulous opportunities. We have easy access to great books, movies, and music (in libraries). Access to great art as well as scientific and historical findings (in museums and libraries). So many games and sports have been invented that there’s bound to be one you like. We have access to an amazing number of foods, even out of season. It would be a sad, sad thing to have only one priority (even if it’s personal finance).

  36. Pizpo says:

    #5 and #6: House you live in should not be counted as an asset. House you rent to another, should be counted.

    Trent: You state “I wouldn’t really become a different person even if I had limitless money.” I hope you are right, but based on my knowledge of human nature, I suspect you are wrong. Let me ask you a question: If someone offered you “limitless money” would you take it? If you would, then you would change. If you would not, then you would not have changed. Think about it.

  37. Kelly says:

    Regarding 28, @Pizpo, you are right that technically anyone who would accept the limitless money changes, but the question is whether someone’s core values change. My wife and I have had this conversation multiple times about if we won the lottery what would we do (we actually don’t play so this is purely hypothetical). In our case, we wouldn’t move houses, just remodel a few rooms we are already saving for. We might change jobs to free up more time or quit altogether to volunteer somewhere. In essence though, our values, character and beliefs are not changing. I think this is what Trent is referring to and from reading many of his posts, I tend to believe him…anyways, just my two cents.

  38. Damester says:

    Kevin writes:
    “Giving is supposed to come from the heart, with no expectation of anything in return. Dan, if your intention is to spread the message that people should give more, I think suggesting that they’ll profit from it is the wrong way to go about it.”

    Exactly. That’s often the problem with “giving” in this country. People aren’t really giving, they are just doing something with the expectation of quid pro quo.

    Then they are frustrated when they don’t get something back.

    When you give, you give…freely with no expectation. Otherwise, it’s not giving, it’s some form of “investing” in which you hope to harvest a return of some sort.

    So many people give in so many ways each day and we all benefit. People often forget that.

    Doing something, no matter how small, for another is what it’s all about. Yea, it’s hard at times because so much of the world seems ungrateful (you hold the door for people and not only do they not say “thank you,” bu they knock you over going thru)and there is so much lack of grace and expectation that one wonders if it’s true that no good deed goes unpunished.(People are even penalized for their good gestures in this chaotic world we live in. Think about all the people who no longer help others who are sick because they could get sued.)

    But giving is about our intention. Not an outcome or result or response.

    I’ve read far too many articles, books, etc. that keep touting how giving results in you getting. We know that isn’t the case, especially if we’re talking literal profit. If it were, there wouldn’t be non-profit organizations!

    Money is energy. Like everything else, you have to think about how you use it to create a better world. Beyond the circle of immediate gain.

    If you look carefully in life you’ll see that giving (money or otherwise) is never tied to how much money people really have (Hey, Bill Gates gave little money to charities until he got married and had kids.) We all know people with billions who only donate because it’s a tax deduction and people who cannot deduct what they give, but do it anyway.

    If you want help, your modest income friends will be the first to offer. Your rich friends? Rarely are they the ones who open their wallets unless it’s a direct benefit to them. Not all, but most.

    If you give without expectation, you never lose anything.

  39. kitty says:

    “#24 Erin @ 8:16 am August 6th, 2009
    Dangerman, I’m curious why you say Dave Ramsey is not good on investing. I’m not disagreeing with you, just curious on your reasons for that statement. ”
    Erin – I am not Dangerman, but I happen to agree with him. Here is why:
    1. Dave tells people to find some value mutual fund (not index) that historically provided good returns. He also claims that most mutual funds beat S&P index. This is not true. Statistically, most funds under perform the index.

    2. Dave’s estimation of market returns is way too high: he promises people almost guaranteed 12% return. He also uses this number as if it were compound annual return rather than average i.e. if you get this return every year. This is very different. If the market gains 100% one year and loses 50% the next, you compound annual return is 0%, not 50%.

    3. Dave never talks about the risks associated with stocks nor does he ever mentions that past performance is no guarantee of future results. He suggests to people to put most of their money outside of emergency fund into stocks. A more reasonable approach is NOT to keep any money you may need within next 5 years in stocks. It’s also reasonable to reduce your exposure to stocks as you get older. You probably heard about all these retired people who lost much of their 401K value in this crisis. They may as well have listened to Dave.

    4. Dave has NOT predicted this crisis nor does he have any history of good investment decisions. Now, many experts missed it too, but there were a few who saw it. I know a number of non-experts who foreseen it and got out. But generally when people say that someone is good in investing, they mean someone with a track record of good investment decisions. I don’t remember anybody mentioning any good investment decisions Dave made, did you?

    5. In one of his “ask Dave” answers he suggested to a 65-year retired old guy to put most of his money into stock mutual funds. This was before the crash. This is wrong. A retired guy shouldn’t be that exposed.

    6. Dave made his money in his business of giving advice on how to get out of debt. Before that he was in real estate. He hasn’t made money in stocks like, for example, Buffett. Nor does he have any kind of financial education. Why would you consider his investment advice any better than that of any guy on the street?

  40. Dan says:

    you’ve all missed my point. i never said i intend to give because i think i’ll get it back. i said that when i’ve given deliberately (meaning without wanting something in return) it always seems to come back to me in some way, shape, or form.

    as for my hierarchy…it’s the way i GIVE, not LEND. so if i GIVE, it means i expect nothing in return. i help all on the list. it’s just that i’m going to help in that order.

    for crying out loud, how can i do any good for anyone if i neglect my own personal needs first? i won’t do anyone any good, dead! (and when i say needs, i’m referring to something more like the 7 basic human needs)

    like i stated earlier, i wasn’t going for judgement from those of you who wish to read more into words than what is actually written. in future posts, i’ll try to be more specific and formal as opposed to the informal style i like…

    (like lower case i’s for example)


  41. David says:

    I absolutely loved all three of the ideas, I would just change the order.

    First thing I did after becoming debt-free was to invest some. Without the financial planner, though. Unless you can find a free one, I find the process of learning about investing as enjoyable as investing itself.

    Then, I would “do something” next. Personally, I treated myself to a trip to Mosocw, Russia!!

    And finally, give. Keep track of it all so you can get the tax benefit, but absolutely, give.

    Thanks for the info

  42. Moom says:

    I’d assume that “your money works harder than you do” means that your investments/business is producing more income than your labor time is.

  43. Pizpo says:

    #29 Kelly:

    If you do not play, I believe you that your core values would not change (although I am still a skeptic, the fact that you do not play allows me to give you the benefit of the doubt). I understand what you are saying and agree that Trent seems like the type that is well grounded enough not to change. But my mere point is that it would be really hard for anyone not to change with “limitless money.” For the record, lottery does not equal “limitless money.” Obviously, this is all hypothetical since “limitless money” does not and cannot exist. I am humble enough to admit that I would change with “limitless money” or at least my true “core values” would become more pronounced and exposed by such “limitless money.” To the extent that those core values are different from what I believe them to be, I would have “changed.”

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