The Total Money Makeover: An Overview of Financial Wisdom


In his book, The Total Money Makeover, Dave Ramsey shares valuable financial lessons through a charming children’s story about the three little pigs. Just like the pig who built his house with a strong foundation, only those who had solid financial principles in place were able to weather the storm of the 2008 financial crisis. Ramsey himself not only survived but thrived during that time, thanks to the wisdom he had gained from his own past financial mistakes. In this article, we’ll provide a summary of The Total Money Makeover and highlight some of the biggest financial mistakes discussed in the book.

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Biggest Financial Mistakes

Keeping Student Loans Because of Low Interest Rates

One of the common financial mistakes discussed in the book is holding on to student loans simply because they have low interest rates.

Leasing Cars

Ramsey emphasizes the folly of leasing cars, arguing that it is not a wise financial decision.

Using Credit Cards as Status Symbols

Another mistake highlighted in The Total Money Makeover is viewing credit cards as a status symbol. Ramsey advises against this mindset.

Paying Interest Instead of Earning Interest

Ramsey points out the importance of investing and earning interest instead of constantly paying interest on debts.

Using Credit Cards Instead of Cash

One of the major mistakes people make is buying things on credit cards instead of using cash, which can lead to a cycle of debt.

Living Above Your Means

Not accurately assessing your earning capacity and living above your means is another financial mistake discussed in the book.

Lifestyle Inflation

When income increases, Ramsey advises against splurging on a bigger house or new cars. Instead, he suggests saving more.

Denying Financial Addictions

Ignoring the impact of addictions, such as gambling, on one’s budget is a mistake that can have serious consequences.

Proactive Steps to Avoid Debt

To avoid falling into debt, Ramsey offers some proactive steps:

Think Long-Term

Ramsey emphasizes the importance of long-term thinking, cautioning against using debt for short-term investments.

Avoid Lifestyle Creep

He advises against increasing spending as income rises and instead recommends keeping expenses low and saving more.

Myths Debunked

Throughout the book, Ramsey debunks several financial myths:

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Myth 1: Debt is a Tool for Prosperity

Ramsey challenges the notion that debt is a tool for creating prosperity, highlighting the risks and negative impact it can have.

Myth 2: Gambling Will Make You Rich

According to Ramsey, playing the lottery and gambling are not reliable paths to wealth.

Myth 3: Loaning Money Helps Others

Ramsey argues that loaning money to friends or relatives can strain relationships and often leads to negative outcomes.

Myth 4: Cosigning a Loan is Helpful

He advises against cosigning loans, as it can lead to financial complications and strained relationships.

Myth 5: Car Payments are Inevitable

Ramsey emphasizes the importance of avoiding car payments and opting for reliable used vehicles instead.

Myth 6: Leasing Cars is Sophisticated

Contrary to popular belief, Ramsey asserts that leasing cars is not a financially wise decision.

Myth 7: 0% Interest Car Financing is a Good Deal

He challenges the notion that 0% interest car financing is beneficial, highlighting the significant depreciation of new cars.

Myth 8: Debt Consolidation Saves Money

Ramsey cautions against debt consolidation loans, stating that they only treat the symptom rather than addressing the root cause of debt.

Myth 9: Borrowing Against Home Equity is Wise

He advises against leveraging home equity for investment purposes, debunking the notion that it is a profitable strategy.

Myth 10: Home Equity Loans are Emergency Funds

Ramsey argues that home equity loans should not be considered as emergency funds, as emergencies are precisely when debt is not desirable.

The 7 Baby Steps

Ramsey outlines a step-by-step plan for achieving financial freedom, known as the 7 Baby Steps:

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Baby Step 1: Save $1,000 for Emergencies

Building an initial emergency fund of $1,000 is crucial for facing unexpected expenses.

Baby Step 2: Pay Off Debt Using the Debt Snowball Method

Prioritize paying off debts starting from the smallest balance to gain momentum and motivation.

Baby Step 3: Establish a Fully-Funded Emergency Fund

Build an emergency fund equivalent to three to six months of expenses, covering any unexpected financial setbacks.

Baby Step 4: Invest 15% of Income for Retirement

Allocate 15% of before-tax income towards retirement investments, avoiding over-investing at the expense of other financial objectives.

Baby Step 5: Set Up an Educational Savings Account

Consider using an Educational Savings Account (ESA) to save for higher education expenses, ensuring tax-free growth.

Baby Step 6: Pay Off the Mortgage

Accelerate mortgage payments to become debt-free and increase personal wealth.

Baby Step 7: Build Wealth and Give

Focus on accumulating wealth and fulfilling charitable desires, using your financial freedom to make a positive impact.


In The Total Money Makeover, Dave Ramsey provides practical advice and strategies for achieving financial success. By avoiding common financial mistakes, debunking myths, and following the 7 Baby Steps, individuals can take control of their finances and work towards a secure future. Remember to consult a financial advisor before making any investment decisions and refer to The Total Money Makeover for more detailed guidance.

Disclaimer: The information presented in this article is a summary of the book. It is not meant to be financial advice, and readers should consult with a financial professional for personalized guidance.

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