How the experience of editing the Total Money Makeover changed the way I view my finances
Having written on personal finance for the last nine years and being a financially savvy person, I didn’t think there was much I would learn from working on the Total Money Makeover by Dave Ramsey – I was wrong.
Dave Ramsey is the American money guru on how to beat debt and take control of your money. The US edition of Total Money Makeover has sold millions of copies and his first book, Financial Peace, hit the New York Bestsellers list.
So it was a privilege to be asked to edit the South African version of the book to make it more relevant to the South African audience. There were many topics that really hit home while working on the book.
The first is how much debt Americans have! We worry about our unsecured credit bubble, but when you read stories of people with as much credit card debt as they earn in a year you realize that our banks are pretty conservative in comparison.
One American couple for example earns R760 000 a year, owes R3.2 million on their house, R246 000 on their cars and R426 000 in credit card debt – which just goes to show that wealth has nothing to do with how much you earn but how much you spend. Reading the personal experiences of the people in the book I realised that financial literacy levels do not equate to better financial decisions! As Ramsey says in his book “We go to school to learn to earn; we earn, and then have no idea what to do with the money”.
While they may be major spendthrifts, Americans are not afraid of hard work. The people who were determined to be debt free took on extra jobs – often working three different jobs a week – until they reached their goal. They also stripped their homes down to the bare essentials and sold off unnecessary “stuff” through garage sales. Ramsey says around 70% of people who follow his programme have to make the difficult decision to sell their car so they can be free of the big payment.
The other point that struck me was the amount of complicated financial products and loans America has – there entire sections on ‘rip-off’ products that we removed because they had no relevance to South Africans. My only hope is that none of those products ever find their way to South Africa through “financial innovation”.
On a personal level the book changed me in two profound ways. Firstly I worked really hard to build up my emergency fund. I have emergency money but I was always just short of the three months of expenses that I should have. I cut back, reallocated my budget and within two months I reached my goal. The funds sit there looking at me, tempting me, but reading Ramsey’s book I realise that those funds mean I will never have to take short-term debt because my emergencies are covered. When an uninsured motorist jumped a stop street and ploughed into our car last week, I wasn’t worried about how we were going to cover the insurance excess because that is exactly what my emergency money is for.
I also learnt something about myself which I imagine many people have experienced – a fear of cutting off the credit line. Although I have not used them for years, I have several store cards which I opened before becoming financially savvy. They sit in my purse taking up space. After working on the Total Money Makeover I committed to closing all the accounts and discovered this little bubble of fear rise up asking “what if I need it one day?” I had to remind myself that I would never need that line of credit because I have my emergency funds.
It is this fear of “what if” that credit providers pry on. Recently a friend of mine walked into her bank branch and the consultant offered her a personal loan. My friend declined and the consultant said “it is my duty to let you know that this is a one-off offer and this loan may not be available when you need it most”. How typical of a bank, not to be there when you need them most! The good news is that anyone who takes up Dave Ramsey’s Total Money Makeover Challenge will be able to turn to the consultant and say “I will never need it”.
Dave Ramsey writes in a very accessible, non-financial way. He does not claim to be a financial genius but just someone who lived a very good lifestyle funded by credit until one day he found himself bankrupt and homeless. He used his experience of getting his life and money back on track to educate and inspire other people to so. The book teaches and inspires you to pay off debt, build wealth and live in financial peace.
Ramsey talks of the many people who are too afraid or too used to their lifestyles to make changes until those changes are forced on them. He compares this to a story about how farmers would catch monkey’s eating their crops. “When the monkey puts its hand into the bottle to get the nuts, the neck of the bottle is too small for its fist to come back out. The monkey can’t take his hand out of the bottle without dropping the nuts, which he is unwilling to do. The bottles are too heavy to carry away, so the monkey becomes trapped by nothing more than greed”.
While the book gives you a plan on how to get from where you are now to financial freedom, you have to be motivated and committed. No amount of words replaces your own determination.
Maya Fisher-French was paid a set fee to edit the book and does not earn royalties on copies sold – unfortunately
Dave Ramsey words of wisdom:
“You change the spiritual dynamic of relationships when you loan loved ones money. They are no longer friend, uncle, or child; they are now your servant”
“Don’t even consider keeping up with the Joneses. THEY’RE BROKE!”
“If you worked for a company called YOU, Inc., and your job at YOU, Inc., was to manage money-and you managed money at YOU, Inc., the way you manage your own money now, would YOU, Inc., fire you?”
“I am not against the enjoyment of money. What I am against is spending money when you do not have money to begin with”
“90% of people in our culture buy things they can’t afford”
“A friend of mine works for a debt-consolidation firm whose internal statistics estimate that 78 percent of the time, after someone consolidates his credit-card debt, the debt grows back”
Total Money Makeover by Dave Ramsey is available at leading bookstores including Exclusive books and CNA for R159.99 or you can order online at www.struikchristianmedia.co.za/