Respected financial expert Dave Ramsey offers a comprehensive plan for getting out of debt and achieving financial health. Against a playful backdrop of fitness terminology, Dave gives solid, hard-hitting advice needed to make your goals a reality. Filled with both the "hope" and the "how-to," The Total Money Makeover includes:

• Useful worksheets and forms
• Readable and informative charts and graphs
• The four factors that keep people from getting in shape financially
• Photos and amazing stories from people who have succeeded following The Total Money Makeover plan

The Total Money Makeover is a necessity for everyone in need of a financial makeover. Readers will learn to live by the The Total Money Makeover motto: "If you will live like no one else, later you can live like no one else."

The TOTAL MONEY MAKEOVER

A Proven Plan for Financial FitnessBy Dave Ramsey

Nelson Books

Copyright © 2007 Dave Ramsey
All right reserved.
ISBN: 978-0-7852-6326-5

Contents

Introduction...................................................................................ixWhat This Book Is NOT..........................................................................xiiiMeet The Winners of The Total Money Makeover Challenge.........................................xix1. The Total Money Makeover Challenge..........................................................12. Denial: I'm Not That Out of Shape..........................................................93. Debt Myths: Debt Is (Not) a Tool...........................................................174. Money Myths: The (Non)Secrets of the Rich..................................................525. Two More Hurdles: Ignorance and Keeping Up with the Joneses................................776. Save $1,000 Fast: Walk Before You Run......................................................937. The Debt Snowball: Lose Weight Fast, Really................................................1098. Finish the Emergency Fund: Kick Murphy Out.................................................1339. Maximize Retirement Investing: Be Financially Healthy for Life.............................15110. College Funding: Make Sure the Kids Are Fit Too...........................................16811. Pay Off the Home Mortgage: Be Ultrafit.....................................................18312. Build Wealth Like Crazy: Arnold Schwarzedollar, Mr. Universe of Money.....................20313. Live Like No One Else......................................................................219Budgeting Forms................................................................................225

Chapter One

The Total Money Makeover Challenge

"As lost as a ball in tall weeds!" That is exactly how I felt. Although it was fifteen years ago, I can still taste the emotion as if it were yesterday. Out of control, lost, no sense of power, I felt dread creep across the room like the afternoon shadows on a cold winter's day. Sitting again at the kitchen table with too much month left at the end of the money, I was not having fun. This "adult" stuff where a wife looks to you to provide and kids expect to be fed and kept warm was not exactly working. I didn't feel like some powerful adult; instead, there was a little boy inside me who was very afraid-afraid of this month's bills, afraid of this month's mortgage, and absolutely terrified when I considered the future. How was I to send kids to college, retire, enjoy life, and not live at the edge of money worries?

The "Normal" American Family

It seemed every month I sat at that same table with the same worries, fears, and problems. I had too much debt, too little savings, and no sense of control over my life. No matter how hard I worked, it seemed I couldn't win. I was to forever be slave to some banker, to the government, and to the "needs" of my family. When Sharon and I "talked" about money, we ended up in a fight, leaving her feeling afraid and me feeling inadequate. The next car purchase, the next house, the kids' college-our entire future seemed out of reach.

I didn't need a get-rich-quick guy to pump me up or tell me to be positive. I didn't need a secret formula to riches. I wasn't afraid of hard work or sacrifice. I didn't want to "feel" my way into being "positive." I was positive of only one thing: I was sick and tired of being sick and tired. I was tired of sitting down to "do the bills" and having a heaviness come over me. The hopelessness was overwhelming. I felt like a gerbil in a wheel-run, run, run, no traction, no ground covered; maybe life was just a financial illusion. All the money came in, all the money went out, and only the names were changed to protect the innocent. I owe, I owe, so off to work I go. You know the drill and all the clichs that go with the drill.

Oh, some months everything seemed to work, and I thought maybe we were going to be okay. I could tell myself then, "Oh well, this is how everyone lives." Those times offered enough wiggle room that I could continue to lie to myself that we were making headway, but deep down, I knew we weren't.

I Did It My Way, and My Way Wasn't Working

ENOUGH! THIS STINKS! I finally decided that this nonplan wasn't working. If you have ever had any of those feelings, you are going to love this book, and, more important, you will love your Total Money Makeover.

Fifteen years ago, my wife, Sharon, and I went broke. We lost everything due to my stupidity in handling money, or not handling it, as the case may be. Hitting bottom and hitting it hard was the worst thing that ever happened to me and the best thing that ever happened to me.

We started with nothing, but by the time I was twenty-six years old, we held real estate worth over $4 million. I was good at real estate, but I was better at borrowing money. Even though I had become a millionaire, I had built a house of cards. The short version of the story is that we went through financial hell and lost everything over a three-year period of time. We were sued, foreclosed on, and, finally, with a brand-new baby and a toddler, we were bankrupt. Scared doesn't begin to cover it. Crushed comes close, but we held on to each other and decided we needed a change.

So after losing everything, I went on a quest, a quest to find out how money really works, how I could get control of it, and how I could have confidence in handling it. I read everything I could get my hands on. I interviewed older rich people, people who made money and kept it. That quest led me to a really, really uncomfortable place-my mirror. I came to realize that my money problems, worries, and shortages largely began and ended with the person in my mirror. I realized also that if I could learn to manage the character I shaved with every morning, I could win at money. That quest, the one that ended with me staring at myself in the mirror, led me on a new journey over the last fifteen years: the journey of helping others, literally millions of others, take that same quest to the mirror. Live Events, Financial Peace University, The Dave Ramsey Show (talk radio), and the New York Times best-sellers Financial Peace and More Than Enough have enabled me to tell millions of Americans what I have learned-the hard way-about money.

The Big Challenge: Find a Mirror

I have a challenge for you. Are you ready to take on the guy or gal in your mirror? If you are, you are ready to win. I rediscovered God's and Grandma's simple way of handling money. Wealth building isn't rocket science, which is a good thing for me (and probably you). Winning at money is 80 percent behavior and 20 percent head knowledge. What to do isn't the problem; doing it is. Most of us know what to do, but we just don't do it. If I can control the guy in the mirror, I can be skinny and rich. We will let other books work on the skinny, and I will help you with the rich part. No, there are no secrets, and yes, this will be very hard. Hey, if it were easy, every moron walking would be wealthy.

So my Total Money Makeover begins with a challenge. The challenge is you. You are the problem with your money. The financial channel or some tape sets aren't your answer; you are. You are the king of your future, and I have a plan. The Total Money Makeover plan isn't theory. It works every single time. It works because it is simple. It works because it gets to the heart of your money problems: you. It is based on a series of prices that must be paid to win. All winners pay a price to win. Some losers pay a price and never win, and that is usually because they didn't have the benefit of a proven plan for financial fitness.

Ordinary People

Tens of thousands of ordinary people have used the system in this book to get out of debt, regain control, and build wealth. I've scattered their stories throughout the book. If at any point during your makeover you are tempted to quit or you just need a little encouragement, read one of these stories. These people have sacrificed for a short period of time so they will never have to sacrifice again.

If you are looking for a road map to get you home, you've found it. If you are looking for something easy or fast, you have the wrong book. If you are looking for a book to help you pass your CPA exam in the area of financial knowledge, you have the wrong book. If you are looking for a writer who has intricate academic theories (that don't work in the real world), you've got the wrong guy. I have many of the academic pedigrees, but I ended up broke. I have actually twice become a millionaire from nothing. The first time I was in my twenties, the money was in real estate, and I lost that due to my stupidity; the second time I was not yet forty, but I did the money thing right that time, and I am debt-free.

I often hear about broke finance professors who bemoan that I am way too simple, or as an e-mailer told me on The Dave Ramsey Show one day, "You are a one-trick pony." To those of you who say you have great but unexecuted plans, I say, "Prove it. I have." I like the way I've built wealth better than the way you haven't. You will meet people, educated and uneducated, throughout this book who have won, or begun to win, with money for the first time in their lives. The Total Money Makeover works!

The Total Money Makeover Motto

This plan works, but it will cost you. It will teach you to say new words, like "no." In short, your Total Money Makeover will be a personal money makeover where you learn this motto: IF YOU WILL LIVE LIKE NO ONE ELSE, LATER YOU CAN LIVE LIKE NO ONE ELSE. This is the motto of your Total Money Makeover. It's my way of reminding you that if you will make the sacrifices now that most people aren't willing to make, later on you will be able to live as those folks will never be able to live. You will notice the motto all through the book, even across the bottom of the pages. I'm sorry there isn't an easier path to feature in the motto, but the good thing about this one is that it works. You can repeat the motto to yourself as you pass up a purchase in order to hit your goals. When you work late and are tired, you can say the motto to yourself. Of course, this isn't a magic formula; I'm not into that. But it does remind you that you will win, and the payoff will be worth the cost.

Some of you are so immature that you are unwilling to delay pleasure for a greater result. I will show you exactly how to get the result you want, so the price you pay will not be in vain. I don't want to walk across hot coals because it is fun, but if I can be shown how a short, painful walk will do away with the lifetime of worry, frustration, stress, and fear that being constantly broke brings me, then bring on the hot coals.

Early on in our marriage, we decided that Kari would stay home with our children rather than working outside the home. This decision has perhaps disadvantaged us financially at times, but it has been the best choice for our family in many other regards.

Financially, we have made some mistakes such as keeping our student loans around because of the "low interest" and even leasing a car at one point. To us, credit cards were a status symbol, and we had a few. Our debt peaked at about $375,000 (including the mortgage). That's not the smartest situation to get yourself into when you have four kids and one salary. By the time we got on Dave's plan, we were ready to work with gazelle-intensity to get rid of our debt! During one six-month period we paid off $57,000 and gave $7,000 to our church. That really encouraged us and kept us going! It was also great going to Atlantis with Dave and Sharon as finalists in The Total Money Makeover Challenge!

Now we are debt-free and helping our daughter through her first year of college. We are also saving for retirement at a good rate and building a new house. We enjoy earning interest now, rather than paying it. We couldn't have done it without Dave. We pay cash for everything, and we tell our money where to go. We can't even tell you the peace and freedom this has brought our entire family!

The first months were the most painful as we went from credit to cash. But it's so nice not to be paying for today and yesterday anymore! By following Dave's Total Money Makeover plan, you will gain peace of mind as you get control of your money. Just remember to stay focused.

The key to our success was both of us getting on the same page at the same time. We now work together to plan our spending rather than racing to outspend each other. We are each other's source of strength during weak moments when spending sounds fun again. We have learned to have FUN talking about money and financial goals. It's no longer a contentious subject.

Our advice: Honestly assess your earning capacity and live below your means. Be in control of your own destiny and your own happiness!

Mark and Kari Stolworthy (both age 43) CPA/Systems Consultant; Stay-at-Home Mom

My Promise to You

My promise to you is this: if you will follow the guidelines of this proven system of sacrifice and discipline, you can be debt-free, begin saving, and give as you've never given before. You will build wealth. I will also promise you that it is totally up to you. The Total Money Makeover isn't a magic formula to wealth. This system will not work unless you do, and then only to the degree of your intensity in implementing it. In the following pages, you will meet many individuals and families who have won many money victories, but not one of them won until they won the battle with the guy in the mirror. Your situation isn't your spouse's fault (well, maybe, but we'll talk later), it isn't your parents' fault, it isn't your children's fault, and it isn't your friends' fault. IT IS YOUR FAULT!

My financial life began turning around when I took responsibility for it. People all across America have used these steps to become free, regain a sense of confidence and control, and build a future for their families. Please join me on a journey away from the young man I was, the one I described earlier who was racked with worry, fear, and guilt over money. Take this journey with me to your own Total Money Makeover, but remember, the first part of the quest is confronting the man in the mirror. That man in the mirror is your Total Money Makeover Challenge.

(Continues...)

Excerpted from The TOTAL MONEY MAKEOVERby Dave Ramsey Copyright © 2007 by Dave Ramsey. Excerpted by permission.
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