"Total Money Makeover" by Dave Ramsey
I first got introduced to Dave Ramsey by a friend who had extra tickets to one of his conferences.
I’ve read a lot of other personal finance books before – “Rich Dad Poor Dad” by Robert Kiyosaki, “The Richest Main in Babylon” by George Clason, “Think and Grow Rich” by Napoleon Hill.
They are great books and in no ways am I recommending you don’t read them, but for me they were just too high level mindset focused and not enough on down to earth mechanics – most often it was hard to connect the concepts from those books to the reality of my personal situation.
I spent my twenties following the traditional path to success – or what I believed was the path to success.
Attend good college, get a good grades. Become a professional – something that makes a good salary and is well respected.
By the age of 30, I felt I had hit all the appropriate targets expected of me by my immigrants parents.
Graduate college in 4 years. Receive a commission to the United States Army and rise to the rank of a Captain. Complete my MBA at a well respected institution. Meet the love of my life and get married.
However, I had a nagging feeling, especially when in came to my personal finance.
I thought I had followed the right pathway and hit all the makers – I wanted to feel like I achieved the American dream. That I had found success. That I had found wealth.
However, when I went to that first Dave Ramsey conference, I got a rude awakening.
I was so focused on “showing” my success that I did not pay enough attention to the nuts and bolts of managing my personal finances.
When I tallied up my “net worth” right after our wedding, I had nothing to show for except a combined student loan of $105,000 – 80% of that being student debt from my MBA program.
What I appreciate about Dave Ramsey’s book is that he gets right to the point – he doesn’t spend time on the mindset of the “rich and wealthy” but for example, he’d go right to – “what car are you driving and why haven’t you sold it yet!”
If you are just starting your personal finance journey, but don’t know where to begin, I highly recommend starting with Dave Ramsey’s book. I first picked it up 10 years ago, but I come back to it often to remind myself of the many timeless principles.
Thanks to this book, my wife and I were able to pay off $105,000 of student loans in 3.5 years and have reached financial security today.
Some quotes and takeaways from the book I want to share:
“When you are physically fat, it is hard to be in denial, because there is the ever-widening belt line. When you are financially fat, however, you can fake it and look good for a while.” – Dave Ramsey
Facing Reality – It’s hard to see if someone is doing financially well or not by just looking at his or her lifestyle. We are conditioned to believe that if someone lives in a big house with a nice car, they must be doing financially well. However, this oftentimes is far from the truth. Until we are willing to face the facts and realize that our financial position is not healthy, we can’t begin to work to make it better.
“Debt is so ingrained into our culture that most Americans cannot even envision a car without a payment, a house without a mortgage, a student without a loan, and credit without a card.” – Dave Ramsey
Be Very Careful with Debt – Dave Ramsey takes a pretty strong stance against debt; no debt. I personally wouldn’t go that far, but I definitely agree with the notion that we must be very very careful when it comes to borrowing money. Debt allows us to buy more than we can afford and we can quickly get into trouble (e.g. foreclosure, bankruptcy, etc.) if not managed well.
“Taking on a car payment is one of the dumbest things people do to destroy their chances of building wealth. The car payment is most folks’ largest payment except for their home mortgage, so it steals more money from their income than virtually anything else.” – Dave Ramsey
Say No to Car Payments – If you ever heard of Dave Ramsey’s radio show, it seems like the answer to most people’s financial problem is ‘sell your car.’ It is funny to listen to, but the reason he recommends this so often, is that it is the truth.
Have a Budget – Until I read Dave Ramsey’s book, I didn’t think I needed a budget. I had a general idea of where my money went and thought that because I had money leftover in the bank at the end of the month, I was managing my money fairly well. Well being buried under $105,000 of student loan quickly snapped me back to reality. Spending money without a budget is like going on a vacation without an itinerary – you can do it, but why allow the stress?
"I Will Teach You To Be Rich" by Ramit Sethi
If Dave Ramsey’s book is great for getting you jump started on the personal finance journey, Ramit Sethi’s book is great for providing a specific step by step road map.
It’s written specifically for young professionals with mid to high income – where to save your money, what to invest in, how to automate your process so you can focus more on your life instead of counting every penny you spend.
Some takeaways from the book:
Automation – His main point is that you should automate your finances so that you can effortlessly save and invest as well as spending the remainder on the things you enjoy.
“Automatically enabling yourself to save, invest, and spend – enjoying it, not feeling guilty.” – Ramit Sethi
Automation helps to remove the “emotional” element of our decision making that often time hinders us from making smart financial decisions – splurge buying because we feel deprived or not buying something we need because we feel guilty.
Long-Term Investing: Along with his emphasis on automation, Sethi’s recommends long-term, passive stock investing instead of speculative guessing. I also liked Sethi’s 85 Percent Solution where it is better to act and get things about 85% right than doing nothing at all.
Be Frugal, Not Cheap – There’s a difference between being cheap and being frugal; being cheap is trying to cut spending on everything, and being frugal is cutting costs on the things you don’t care about so that you can splurge on the things you do.
“Spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t.” – Ramit Sethi
"The Simple Path to Wealth" by JL Collins
After I’ve gotten basics of my finances such as having a budget, saving and managing my expenses, this book quickly became one of my favorite personal finance books because it tackles head on the most talked about personal finance topic – investing.
If you just google “investing” online, you are bombarded with so much information – stocks, bonds, mutual funds, dividends, gold, bit coins, etc. You name it, it’s there.
This books cuts right through the noise and gives you on a platter the only investing advice you will need.
The book grew out of a blog that Jim Collins initially started out as a series of letters to his teenage daughter – after having spent decades studying the market and making his own mistakes investing, he was shocked to find that not everyone shared his passion for understanding money.
In his daughters own word “I know money is important. I just don’t want to spend my life thinking about it.”
By reading this book, we get all benefits from Jim’s realization.
He wrote this book for those of us who necessarily don’t want to spend our life thinking about money, but still want to make smart financial decision.
Some ‘simple’ and powerful lessons:
Spend less than you earn – invest the surplus – avoid debt
Carrying debt is as appealing as being covered with leeches and has much the same effect
Money can buy many things, but nothing more valuable than your freedom
Try saving and investing 50% of your income. With no debt, this is perfectly doable.
When you can live on 4% of your investments per year, you are financially independent.
Three simple tools for your portfolio: Stocks (VTSAX), Bonds (VBTLX), Cash
“You will be the same person in five years as you are today except for the people you meet and the books you read.” – Charlie Tremendous Jones
Books are one of the most powerful vehicles for change.
One of the greatest lessons that my parents taught me, is the value of education.
Having grown up in a post-war Korea, both my parents had limited opportunities for education – neither received more than an elementary schooling.
However, they understood the power of education and drilled that into my sister and I growing up.
I learned early on that books held the secret to so much knowledge and I believe it is one of the most accessible vehicle for life transformation.
For just $9.99 you can access the minds of some of the smartest and wisest people in this world. Free if you have a local library.
Books help you rewire your brain and make you think completely different about the world.
And Financial knowledge gives you power and freedom, as Oprah Winfrey would say “to conquer the world “
So please get your hands on these books. They can transform you and your family’s life.