The book review

Recently a Facebook friend of my husband's sent him a copy of Dave Ramsey's The Total Money Makeover. I had heard of the book before, but I was resistant to the idea of reading it, probably because I had heard that it's heavy on the Bible quotes. But Edson read it, assured me that it wasn't overpoweringly Biblical, and was excited about the possibilities. So I read it, too.

So, this is not great literature. It's a bit corny, still has more of a religious tone to it than I would like (meaning, greater than zero), and can be redundant. Arguably, the repetitiveness is at least partly intentional, considering that a large portion of the book is motivational.

The central thread of the book is a simple - NOT easy, but simple - plan for financial freedom. Ramsey sets out seven "Baby Steps":

Step 1: Set aside a small emergency fund of about $1,000. You don't want to incur more debt if an emergency comes up.

Step 2: Pay off all debt except mortgage, using a "debt snowball" payment plan. This involves budgeting each and every dollar that comes into the family and 'telling it where to go.' Any money that isn't allocated elsewhere in the budget goes to paying the debt with the smallest payoff amount; other debts get minimum payments. When the smallest debt is paid off, that money goes to the next larger debt, and so on, until all are paid off.

Step 3: Save a full emergency fund of three to six months' worth of expenses. This needs to be kept liquid. Ramsey suggests a Money Market account with no penalties and full checkwriting privileges. He also says that if circumsances dictate (layoffs looming? twins on the way?), this can be done before starting Step 2.

Step 4: Invest 15% of gross household income in retirement. Ramsey suggests choosing mutual funds with a good track record over the past 10 years, and spreading investments across four types (large cap, mid cap, international, and small cap). He also stresses taking advantage of all company matching and tax advantages available - 401k and Roth IRAs, specifically.

Step 5: Save for college. This is preferably done using an ESA in a growth-stock mutual fund, plus a flexible 529 plan if more investment is needed than is allowed in ESAs.

Step 6: Pay off your home mortgage. Anything left in your budget after living, retirement, and college investment goes to the home mortgage.

Step 7: Have fun, invest, and give.

Ramsey makes it very clear in the book that he is not saying this is an easy plan. It's extremely simple, but also extremely difficult. One of his favorite catch-phrases is "gazelle intensity" - recalling nature shows we may have seen where the gazelles catch wind of a cheetah lurking in the bushes nearby. Their intense focus and energetic actions are what result in their survival, almost every time. (What the nature shows usually don't emphasize is that the cheetah only succeeds about once in every 19 attempts.) So Ramsey stresses that intense focus and energy are needed to follow the steps of this plan and make it work. But, he says, in most cases the first six steps of the plan should take only about two years if you have this "gazelle intensity."

This might mean selling things that you love (but not heirlooms, which are irreplaceable), taking a second job, cutting costs to a point you wouldn't have imagined possible. But the payoff is complete financial freedom. The motto that shows up at the bottom of every page of the book is, "Live like no one else so that someday you can live like no one else."

Well, not to put too fine a point on it, Edson and I are buying in. And I've decided to journal our efforts here.