I've been reviewing Dave Ramsey's book, The Total Money Makeover. It's a fairly popular self-help book, focused on teaching people how to manage money over the course of a lifetime such that even a very average person can retire a millionaire. If you are not already on a path toward becoming very wealthy over the course of your life, I recommend reading it.
The Total Money Makeover is a very simple read. Ramsey opens by explaining that the book is not intended to turn anyone into a financial genius, nor provide any get-rich-quick solutions to money problems. Instead, he spends about a hundred pages explaining why debt is dangerous, that becoming wealthy is difficult but simple enough that almost anyone can do it, and shedding some light on the myths, denial, and other forms of ignorance that pervade our culture and prevent many from retiring comfortably. He follows this with about one hundred more pages laying out seven steps that a person can take over the course of a lifetime to ensure that they are "financially fit" (indeed, very wealthy) by the time they retire.
The steps are summarized here.
1. Build a starter emergency fund
2. Get out of debt (excluding house) as quickly as humanly possible
3. Establish a full emergency fund
4. Start saving for retirement
5. Start saving for Kid's college
6. Pay off the home mortgage as quickly as possible
7. Invest some, give some, and have fun being rich
Though the subject isn't exactly an adventure, Ramsey manages to keep the reading easy and engaging with a straightforward style and interspersed stories from people who have changed their lives according to his efforts. Included among these are details from his own life, explaining that his experience of first making and then losing millions of dollars the wrong way are what allowed him to develop and then teach his strategy to the millions of people now following it.
It has been just under 2 1/2 years since I decided to follow Dave Ramsey's financial advice. At that point I was over $36,000 in debt and was working my first "real" job ever, making $29,000 a year. I owned a bicycle, an old camera, and a computer I'd built in college. I think at that point I also had a mattress and some sheets that I'd acquired via craigslist. I had just spent six months trying to get a decent job, and the six before that I'd been living at my mother's house with mononucleosis, mostly sleeping. I'd have described myself as essentially a complete and total human failure.
I make a little more money today, and still don't own much, but am certainly comfortable. Within the next few months I will be paying off the last of my student loans. I'll be surprised if I manage to ever do or say anything of lasting significance. I will also be surprised if I don't retire a multimillionaire, even assuming I never manage an income above $40,000 per year.
If nothing else, I can say that the first two steps of the Ramsey plan worked for me. They are also very challenging. Ramsey claims that it take an average of 1 1/2 to 3 years to get out of debt, after which life becomes so much easier that one simply wishes to have taken his advice sooner. That has been consistant with my experience.
Ramsey's work strikes me as simple but not simplistic: it could be boiled down to an even shorter "live on less than you make," if not for the fact that most of us get the idea rather than understand the principle. What one learns from following the steps as he outlines them runs a bit deeper than just how to create a budget.
Ramsey cites ignorance and denial rather than stupidity as being the root cause of the average person's financial woes. I'm half African-American. I spent about a year during this process living in a house with six other activists of color. An experience we had in common was that we were all broke, and that in none of our families was there any tradition of educating the youth about money. If this is culturally common among African-Americans, it is something we will need to address from within. This is not to dismiss the historical factors, but to recognize one area in which we might improve in the process of counteracting them.
I have come to realize that "live on less than you make" and "sustainable living" are essentially the same principle stated different ways. One might use this understanding to draw new lines around politics. One might consider that consumer culture is actually more interested in spending, rather than making, a million-dollars, and that the former desire is unhealthy at almost every level. I will simply end here by noting that I expect to develop a deeper understanding of the principle behind wealth, and in so doing I anticipate becoming both more financially successful and more environmentally beneficial.