Over the last few days, I decided to re-read Dave Ramsey’s The Total Money Makeover just to skim it and go through anything I might have missed. I read this book about 8 years ago when finances were more tight, and a lot of the information is pretty helpful.
The takeaway I got after reading a second time was that this book works well for someone that doesn’t have much of an idea on how to handle finances. For someone without any opinion on how to manage their money, this provides a pretty simple workflow to get yourself on the right track.
However, if you’re someone who has more experience, you’ll probably find this book doesn’t teach anything new. Re-reading it the second time, nothing notable came out to me as something I was missing in my financial management. Another issue is that there are a few somewhat controversial ideas that don’t apply if you have decent discipline (avoiding credit use, paying down a house 100%, or only using 15 year mortgages come to mind) that can end up hurting you in the long run.
A couple major points:
- The snowball method of paying down debt (paying down lowest balance first) I do think has some merit – although you lose out on some interest paid, I think in the long run you end up more motivated to keep on track.
- Staying debt-free is promoted as the best way to build wealth, which I think makes sense – avoiding regular payments and using the income provided to build wealth.
- Valuable to think long term as possible, especially with overall cost of items (think “how much”, not “how much a month?”)
- Important types of insurance to have:
- Auto & Home – high deductibles for lower premiums
- Life – 20 year term equal to about 10x income, don’t place savings in life insurance here
- Disability – purchase through work if possible
- Health – high deductibles for lower premiums, alongside use of HSA
- Long-Term Care Insurance – if >60 years old
- Large tax return? You need to adjust your withholding to allow use of that money throughout the year.