THE TOTAL MONEY MAKEOVER — DAVE RAMSEY | KEY TAKEAWAYS
If you’ll live like no one else, later you can live like no one else.
Personal finance is 80% behavior & 20% head knowledge.
Here are the key learnings from this classic personal finance book.
1) Budgeting:
A budget is people telling their money where to go instead of wondering where it went. The quality of your life at retirement depends on your becoming an expert in money management today and the starting point for developing this skill is to keep monthly budget. It’s easy to overspend when you don’t have clear boundary line. The budget tells you what the line is for each category.
A written budget for month is your money goal. People who win at anything have written goal. Setup a new budget every month. Spend every dollar on paper before the month begins.
2) Mindset:
As personal finance is 80% behavior and 20% head knowledge, our mindset about money determines our financial future. We should always strive for better change and break through the temptation to remain in the same situation. We can be broke as still we can’t be poor because poor is a state of mind. Wandering through life aimlessly will bring you much frustrations. No one is born financially smart, we should work smart and reach to the point where the magic of compounding works for us.
3) Invest for long term:
If you want to reach a point where your money works harder than you, you MUST start investing TODAY. Invest certain percent of your income (Let’s say 15%) for retirement fund. For the long term, use mutual fund and turn on dividend reinvestment plan and let the magic of compounding works for you. And in the long term, your money makes more than you do and that point is where you are officially wealthy. This requires lot of discipline. Keep investing and be DISCIPLINED!
4) Other Learnings:
- Debt is not tool. Debt adds considerable risk, most often doesn’t bring prosperity & isn’t used by rich wealthy people nearly as much as we led to believe.
- A hard truth — Giving Debt to friends & relative can hamper relationships: If you loan money to a friend a relative, the relationship will be strained or destroyed. The only relationship that would be enhanced is the kind resulting from one party being the master & other party a servant. If you loan your relative or friend Rs.20000 & he never speaks to you again, was it worth the Investment? A hard truth is we don’t control how debt affects relationships, debt does that independently of what we want.
- Always stay away from Quick, Easy money Schemes. It sounds too good to be true and yes, It is the oldest lies and biggest myth about money ever existed. Nothing comes that easy.
- Debit card is always better that Credit card. Broke people use credit card to spend money in some stupid stuff before they actually have money. It is a symptoms of poor money management.
- Always keep some emergency fund in liquid form. Don’t keep that money in FD or in some form of investment because we never know when emergency come. But be sure to define the real cases of emergency.
Also If you’re an on-paper, on-purpose type of person when it comes to handling your personal finances, download one of his budget forms or other useful spreadsheets.
Thank you for your time & consideration.
Keep learning, Keep Shining !