Book Review: Dave Ramsey's Total Money Makeover

I found his book incredibly inspirational. My parents' didn't teach me much about managing my money other than telling me to donate 10% of my income and talking about how they financed cars as opposed to paying cash for them even when they could because they wanted to maintain liquidity. So, I needed help and I found it in this book. I had been reading The Simple Dollar, which I've read almost since it began and this book along with Your Money or Your Life are two books the author often recommended. I could not get into Your Money or Your Life by Vicki Robin and Joe Dominguez since it came off as incredibly preachy and it felt like it was written by two hippies.

via Walmart

So I read the Total Money Makeover and took notes after I started my first real job post law school. My two big take aways from Dave Ramsey's Total Money Makeover were that if you make sacrifices today you can be safe and secure tomorrow and debt payments are bad because you could be using those payments on things you wanted in the past for things you need or want now.

He recommends a seven step total money make over: (1) You start by putting aside a small emergency fund, (2) then you focus intently on paying off your debts, (3) once your debts are paid off build up a bigger emergency fund, (4) start investing 15% of your before tax income for retirement, (5) save for your children's college, (6) pay off your mortgage, and (7) then have fun and be charitable. I haven't followed his 7 steps perfectly.

via 401kcalculator.org and flickr

We do not have a dedicated emergency fund but we maintain a large cushion in our accounts which serves the same purpose as an emergency fund--we have cash money that we can use if anything goes wrong. I'd recommend having two emergency funds--one for real emergencies like loosing your job or a bad injury and a replacement fund for things that you know will happen but are unpredictable like car maintenance or replacing your computer.

I also disagree with Ramsey about his absolutely no debt philosophy. He says you should rip up your credit card and only use cash. I think if you can you can you should have a little debt to build up credit and I think there are times it makes sense to have debt. If you're going to need a loan to buy a home or anything else you'll want to have a good credit score. Some employees and landlords will check your credit score and in order to have a good credit score you need to borrow money.

I also think that it makes sense to go into debt now so you can make more money later. Student loans are a great example. Hypothetically my BA and JD enable me to make way more money than I could if I only had a high school diploma. Car loans also make sense if you live in a rural area, like we do, and you need reliable transportation to get to work to make money. A mortgage makes sense if buying a home is over all less expensive than renting.

This was a very expensive purple hood and
velvet hat. Hopefully, I will have a good return
on my investment in this academic regalia.

I do think he is wise to encourage caution about loans. You have to be smart about taking out loans. My law school loans have higher interests rates between 8.5% and 6.5% and I borrowed more money than I needed since I rejected my parents' help to pay for living expenses. Student loans for undergrad seems to have far lower interest rates. But you shouldn't borrow any more than you need to get through school and I wish I would have paid interest on my law school loans while in school so the interest wasn't capitalized. You should look at your student loans as an investment so try to pick a field of study that has a high rate of return (computer science, not law school for example).


My husband has good credit so the interest rate on his car loan was low. He bought a used Prius with low milage so we save money on gas. We're paying extra on the car loan so we can pay it off faster. But we didn't do that with his student loans because he knew they'd be forgiven after he taught math in an underserved area for five years.

Filling up the Prius, a Rare Event

Some people say that if you have a low interest rate on a loan, less than the rate the market would return if you invested it, then it makes sense to invest that money instead of pay off the loan faster. I think it depends on what kind of a person you are. I am incredibly risk adverse so I would rather pay of debts that I have to pay off before investing money.

Ramsey's advice to go cash only is great, however, if you've had trouble with credit cards in the past. If you know you'll buy things you don't need and can't afford if you have a credit card then not having a credit card is probably the best thing for you.

This hasn't been a problem for Hubs or me. I forgot to pay my bill once then set it up for autopay and once I charged more than I could pay off at the end of the month (this happened during the most stressful time of my life a few months before the bar exam and I was engaging in so much needed retail therapy but I have better coping strategies now). Hubs and I both like using our credit cards because we don't charge more than we can afford and we get rewards (cash back, we were looking at a getting a card with airlines rewards) so it we get some of the money we spend back.

Have you read the Total Money Makeover? If so what did you think? What's some good finical advice that's been given to you?

Panic at the Bank

I use Mint to track our spending and I am trying to use it to budget better. Tuesday morning I logged on to Mint and Hubs' checking account was overdrawn by over $1,000 because of a transfer to me?! I panicked and felt so sick because I had no idea what happened but I assume it was my fault. Eventually I figured it out.

I had gotten a $4,500 check from my dad while I was home to put towards paying off my student loans.^* I have savings accounts at CapitalOne360 (formerly ING Bank) which earns a high interest rate and one of those accounts is dedicated to paying my student loans via automatic withdraw. I couldn't put the money from my dad right into that account because they do not allow mobile deposit for checks over $3,000.

When I got home from my trip home, I deposited the large check in my checking account at my local bank. Then I transferred the money from what I thought was my checking account to my student loan savings account. I was wrong about which account I set up the transfer from though.

Somehow Hubs' checking account ended up as the only account linked to my online savings accounts. (He later told me his account got linked so he could add money to our house savings account. But I still can't remember why I unlinked my account.) I thought my checking account was the only linked account. I didn't notice that it was his because the website only displays the last four digits of the account numbers and Hubs and my checking accounts have the same four numbers in almost the same order, just the placement of the last two digits are different. For example: the numbers might be 4567 and 4576.

So I had my online bank transfer $4,5000 from his checking, which didn't have that much money in it, to my savings account. Keep in mind, I thought this money was going to come out of my account, which did have enough money to fund the transfer. Tuesday morning when I logged into Mint to categorize transactions for our budget I was greeted by these alerts:

MAR 18 The balance in Hub's Checking is at –$1,630.09.
MAR 17 Your $4,500.00 purchase from eHa has cleared Hub's Checking account.

As soon as I saw this I just felt so horrible! I know Hubs thinks I'm an irresponsible spendthrift sometimes since I love spending money on clothes and I was so afraid this would cement his opinion regarding my irresponsibility.

I thought I knew the login information for his online banking account. So I tried to log in as him so that I could transfer money from my checking to our joint checking and from the joint checking to him. It turns out that I didn't know his login info. So, I grabbed all three of our checkbooks and headed to the bank.

I was able to transfer money from my account to his. At least I hope I transferred it to his account since they couldn't tell me anything about his account since I'm not on it. (I totally understand why they'd do this but I was so stressed out from having realized that I messed up his account that I was still frustrated with the system.) They weren't even able to tell me what kind of fee he'd be charged for my mistake though they could tell me that usually they charge $35 for each transaction that overdraws the account.

Our closet bank branch is at the grocery store we go to so I got him some treats at the store. And, as soon as I got home I sent him an email at work so he'd know what had happened. I also wanted him to know so that he'd only use his credit card or cash to make purchases until I confirmed that the money ended up in his account.

I overdraw my account kind of often since I forget when I've schedule transactions and I keep my checking account pretty empty so that I am not tempted to spend. I've also confused my checking account with our joint account before (they don't have nearly identical account numbers though) so I've overdrawn an account because I confused the two. It's just so hard to look at the numbers and know what they mean and I'm in too much of a rush/too lazy to double check. I've also over drawn our joint account because my credit card is set to auto pay from it but I manually paid my credit card bill one month and it still withdrew my total balance for the month. Oops! Hubs, however, is so good and perfect with his money that he's never overdrawn his account and he never forgets bills. And I feel so bad that I've done this too him.

Plus, my inability to notice the difference between the two account numbers made me really question my ability to do well as an attorney. Being a lawyer is all about paying close attention to detail. How can I be a good lawyer when I can't tell the difference between those two account numbers or remember that we unlinked my account from my online savings and added his account instead? (I honestly don't remember unlinking my account.)

I was so shook up about after I got home that instead of making myself chicken curry for lunch (a greenish colored dish) I accidentally put leftover split pea soup on rice. I didn't notice it wasn't chicken curry until I started eating it.

Hubs came home and checked his checking account and his balance was much higher than he remembered it. My online bank "returned" the funds and I had transferred money into it too! I called my online bank and they said they wouldn't try to take money out his account again and I removed it as a linked account. He told me he was worried for a bit it wasn't a big deal. Today everything is almost back to normal except for the fact that Hubs got charged a $35 fee.  I plan on paying him back since I have some money from cleaning out my closet on eBay even though Hubs was all "don't worry."

Anyway. I clearly have trouble managing my finances. Hubs suggested that we just link our joint account to the online bank and have that be the only one linked. I think this is likely the best way to keep something like this from happening in the future. But I am still a little worried. Probably for no reason.

Any ideas for me? Has this ever happened to you? Please tell me I'm not alone in making stupid mistakes that end up costing $35+.



^*Like I said earlier this week, I'm spoiled. My parents wanted to pay for my graduate school and they paid for my undergrad. They both went to med school and they wanted well educated children but they didn't want their children to have tons of student loans. But I have two little sisters who would both be in college while I was in law school. My parents didn't fancy paying $150,000 to various educational institutions. I don't know if they even could have done so. So I took out loans to pay for law school with the understanding that they would help me if I had trouble paying them back which I have because I haven't been able to find a permanent job requiring a J.D.