The younger we are when we learn how to handle money, the better it is for us! Though a three-year-old won’t be able to explain terms like ‘diversification,’ they can learn that cleaning their room results in a great big one dollar bill. ~smile~ Teenagers can appreciate the beauty of depositing a paycheck into their savings and checking accounts (and learning to balance a checkbook). Young adults preparing for marriage, and young adults with no intentions of getting married any time soon, can learn how to get on the right financial foot by reading and implementing the information found in a book called The Total Money Makeover by Dave Ramsey. No one over the age of eight can read this book and say, “None of this applies to me.” This book is filled with easy-to-understand and user-friendly tips on how to start (or continue!) taking control of your finances.
Reading The Total Money Makeover was so humorous and enjoyable that I didn’t feel like I was learning – at least not in the dry, drudgery kind of way. {Eric’s note: This is where Heather and I are different – I love reading and learning new concepts! ~smile~} Reading books are not typically how I prefer to learn new concepts (I’d rather be shown how to do something and replicate it instead of reading about it). Ramsey’s writing style and down-to-earth, layman approach to finances made this an incredible read, even for me! Once you finish this book you won’t find yourself sitting around thinking, “So now what?” You know what steps to take because Dave has laid the path for you.
Dave Ramsey does know a lot about money from the basics of saving and budgeting to the nitty gritty of investments and insurance; however, he doesn’t take credit for coming up with the concepts he teaches on his own. He says that the principles are all right there in the Bible – it is just that he has packaged them well. Ramsey takes Biblically-sound principles, presents them in an easily digestible way, and gives us solid, concrete tips as to how to set our financial plans in motion.
This book is filled with incredible information so I’ll discuss just a few of his points (a mere drop in the bucket – seriously, this book is awesome) in this book review series.
Baby Steps
For those who are familiar with him, Ramsey is famous for his seven baby step model. For those of you who aren’t as familiar, here they are below:
- Baby Step One – Save and put $1,000 dollars in the bank (or in an incredibly safe place you can get to in case of emergency).
- Baby Step Two – Pay off all debts starting with the smallest balance regardless of interest rate (all debts excluding a first mortgage).
- Baby Step Three – Save three to six months of expenses (not income, expenses) into a fully funded emergency fund.
- Baby Step Four – Invest 15% of your income for retirement.
- Baby Step Five – Begin saving for your children’s college expenses (not to be started until you have children).
- Baby Step Six – Pay off your house early!
- Baby Step Seven – Build wealth in order to invest, spend, and give (a lot of it!).
As you might have guessed, I strongly recommend (and Ramsey recommends) that you begin your financial journey with Baby Step #1.
Heading Toward Marriage with Debt?
Some people even believe that a couple should not get married until they pay off all of their consumer debts (i.e., Baby Step #2). If a couple decides not to get married until their debts are paid in full, that’s okay if that’s what they want; however, Ramsey does not believe couples with consumer debt should automatically put off getting married. Yet, he does say that your fiancé’s or fiancée’s attitude towards debt and lifestyle spending does matter.
So, if you are both working to get out of debt and stay out of debt, then you have similar attitudes; but, if one of you is gung ho about getting out of debt and the other does not see a problem with accumulating more debt, your future marriage will be affected.
With that being said, I strongly recommend not getting married until you at least have your baby emergency fund completed ($1,000 in the bank). Since you won’t know what to expect during those first few months of marriage, it’s good to have the added peace of mind that you have a little bit in savings in case there is an emergency. This also keeps you and your future spouse from having to rely on credit cards for emergencies. If you start using credit early in your marriage (or early in your life for that matter), it’s not an easy habit to break later. Oh, I’ll just put this burger on my credit card. You’ll say that to yourself hundreds of times and before you know it, you will be paying 18-36% interest on burgers which are long since gone.
Check Out Dave Ramsey
If you are not familiar with Dave Ramsey, feel free to check him out at daveramsey.com! The Total Money Makeover was a great read and following Ramsey’s baby steps has been (and continues to be) a huge blessing to our marriage!
Wherever you are in your financial plan (from “I don’t have a dime” to “I am completely comfortable with my financial state”), start aggressively saving for your baby emergency fund. There is peace that comes with knowing you have a little money earmarked for emergencies in case an unexpected expense comes up and it frees you from having to rely on credit cards!
If you’d like a copy, please comment below on your thoughts on building an emergency fund and the importance of that to a beginning marriage! If we get five or more relevant comments (by 8-Apr-2013), we will choose a winner at random and send him or her the book! Happy commenting!
Do you have your baby emergency fund? How do you think you’ll feel once you do?