Quick Summary: Dave Ramsey’s Complete Guide to Money (2011) is the companion book to Financial Peace University, his nine-lesson personal finance course. It answers money-related questions and shows you how to figure out your finances in small steps.
Ramsey teaches about money management, debt relief, and investing. He covers everything from child support to retirement planning. You will learn how to negotiate a deal, choose the best insurance plan, and buy or sell a house. After you have amassed sufficient wealth, you will be able to begin giving, which is the ultimate and most important goal of your financial journey.
You do not have to read the entire book if you don’t have time. This book summary provides an overview of everything you can learn from it.
Let’s get started without further ado.
Complete Guide to Money Book Summary
Sometimes hitting rock bottom is all that is required to get your finances in order. However, you do not have to go bankrupt to do so. Your first priority should be to save money. Seven out of ten Americans could not handle a $5,000 emergency, and this needs to change. Begin by putting $1,000 into a starter emergency fund, and do it quickly, even if it means surviving on rice and beans for a while. Although $1,000 isn’t much, it has a significant impact on your finances; it represents change. It indicates that you have made a conscious decision to address your financial situation.
An emergency fund exists to ensure that you can get out of debt. After you have paid off your debts, you can begin adding to the initial $1,000. It is critical to keep your emergency fund readily available. However, you should not keep it in the same account as your grocery account. A dedicated money market account is the best option. You can use it to write checks and access ATMs.
When you’re ready to start saving for purchases, you should know when to pay cash. You don’t have to worry about getting ripped off with interest charges if you pay in cash.
Discipline is essential for wealth creation. Putting $100 aside each month may appear simple, but doing so every month for several decades is difficult. Additionally, you should begin saving as soon as possible. At a 12% interest rate, someone who begins investing $2,000 per year at the age of 19 for the first eight years ends up with more than $2 million at the age of 65, with only a $16,000 investment. Someone who starts at 27 and invests the same amount at the same interest rate every year until the age of 65 will not catch up. This is why getting started early is critical.
Relationships and Money
Money wreaks havoc on every aspect of your life, including relationships, marriage, children, friends, and family. Money problems have the power to devastate your entire life, and they are the leading cause of divorce in the United States. Men see money as a scorecard, whereas women see it as security. Almost every marriage contains a Nerd who saves and a Free Spirit who spends.
This is natural, and even with all of these differences, it is possible to reach an agreement on finances. You and your partner must hold a Budget Committee Meeting once a month to accomplish this. The Nerd is usually the one who devises the budget, but the Free Spirit must be involved.
Single adults face unique challenges. Loneliness may cause them to overspend, and single parents have the most difficulty keeping their children happy and healthy. Find an experienced person you can trust to be your financial mentor.
Children learn by observation. Early on, introduce them to the concept of money and savings, and serve as a financial role model for them. Teach them the value of hard work, saving, spending, and giving. From the age of three to five, give children spontaneous rewards for any small task they complete.
When they are six, you can introduce the concept of earning money for chores you assign to them. Give them one dollar per chore, for example. Debit cards can be introduced after the age of 13. Children can be in charge of their own savings. You can assist them by dollar for dollar matching their savings and depositing the funds into their accounts. After the age of 18, children can manage their own finances. You can assist them during a difficult time, but you should not allow them to become financially dependent on you.
Some family members or friends may approach you for financial assistance. You can either give them money or teach them how to manage their own finances. Don’t get a drink for a drunk.
Tom, a successful business owner, couldn’t understand why his company was thriving while he was drowning in debt. While he had a budget for his company, he didn’t have one for his family. A plan is essential in any endeavor. You will never get anywhere if you do not have a plan or a goal.
A budget is the foundation of your financial plan. Your first monthly budget will most likely be a disaster, but you will gradually get the hang of it. In addition to your budget, you must learn how to balance your checkbook. It is critical in order to avoid overdrafts on your account, which can quickly accumulate.
People avoid budgeting because they believe it is restrictive; however, this is not the case. Simply because something is outside of your budget does not mean you cannot spend money on it. Some budgets fail, and it is not the budget’s fault. Budgets should be adaptable. Your budget must be adjusted on a regular basis; it is not set in stone.
Every month’s budget is unique. Begin by considering the Four Walls: food, shelter, clothing, and transportation. They keep your life together and are important. Being able to provide these for your family will relieve you of any feelings of shame or fear. The envelope system is a good way to budget. It’s been around for a long time, but it still works. For example, suppose you put money in an envelope for food and only spend it on groceries and restaurants. You don’t spend another dollar on food until it’s empty.
Getting Rid of Debt
Our perception of debt is based on misinformation that has been successfully marketed to us. When it comes to debt, we must completely change our mindset.
Contrary to popular belief, winning the lottery is not a quick way to become wealthy. It is simply a tax on the poor, who are twice as likely as those with higher incomes to participate. The real way to win is to put the money you would have spent on lottery tickets into something else. Another way you’re being taken advantage of is by believing that car payments are a necessary evil. Millionaires avoid overpaying for cars by settling for dependable used vehicles and paying cash.
Credit cards aren’t required and can be easily replaced with debit cards. You can get by with only two plastic cards in your wallet: one for business and one for personal use. Be aware that when you use a credit card instead of cash, you tend to spend more.
If you believe that debt consolidation can help you get out of a bind, you are mistaken; you cannot borrow your way out of debt. Debt is never a way out, and as Proverbs 22:7 states, “the borrower is the slave of the lender.” Stop borrowing money if you want to get out of debt. You must begin saving, sell items you can live without, and accept that you must work hard to achieve financial stability.
Credit Sharks in Suits
Many people regard a credit score, or FICO, as a measure of financial success. In reality, your FICO score only reflects your proclivity to incur debt. It includes the history, levels, duration, type, and new debt of your debt. It does not consider your savings or even your income.
Credit report errors are extremely common. At least once a year, review your credit report and correct any errors. Always notify an agency of inaccuracies in writing. Identity theft may also result in the destruction of your credit report. You should place a fraud victim alert on your credit bureau report right away, and then file a police report. You will not be required to pay anything because this is theft. Keep meticulous records and be persistent; you are not at fault.
You will almost certainly come across illegitimate collectors who will try to dupe you out of your money. The worst are credit card collectors. To free yourself from their grasp, you must first understand your legal rights. Collectors, for example, can only call you between 8 a.m. and 9 p.m. your time. If they call you at another time, simply inform them that their call is being recorded and that you are aware that they are breaking the law.
If you must pay legitimate collectors, pay them as much as you can. Pay your priorities first, then set aside a portion of your earnings to pay off your debts. It may not be enough to cover your debt, but you will be sending something. Never give any collector access to your bank account, and always ask for a physical copy of any deals or settlements.
The Power of Marketing
Businesses are constantly competing for your money. They create detailed plans and spend ridiculous amounts of money on marketing strategies to entice you. Personal selling is a marketing technique to watch out for. When it results in a win for both parties, it can be enjoyable and simple. However, many salespeople misapply it. Instead of responding to questions with yes or no, they cleverly turn them into more questions in order to keep customers engaged and generate a sale.
Financing is another risky marketing technique. You are presented with a deal that forces you to consider how much money you would save rather than how much you would spend. A common deal is 90-days-same-as-cash, usually with a hefty 24 percent interest rate.
Media advertising is also very effective. It relies on repetition. If the same product is thrown in your face multiple times a day in an enticing manner, you may eventually succumb and buy it. The final marketing strategy to avoid is product positioning. It is a complex science that uses specific colors, brand recognition, and shelf placement to entice you to buy.
When making large purchases, always consult with your partner first and wait overnight. Impulse purchases can cause you to spend far more money than necessary on items you do not require.
Steve and Sandy paid off their debts in a year, established a large emergency fund, and purchased a $400,000 term life insurance policy. Steve was dying of brain cancer and wanted to make sure his wife was okay without him. One of the most important things to consider is insurance. Increase your deductible and carry adequate liability for homeowner, renter, and auto insurance, and drop collision coverage if you drive an older car. Increase your deductible and out-of-pocket maximum for health insurance, and always opt out of the maximum payout limit.
If you are unable to work, disability insurance replaces your income, and occupational disability coverage can provide you with enough income to get you by until you learn a trade that you can practice. Avoid policies that are only valid for 5 years or less. Long-term care insurance is for when you reach the age of 60. This pays for all or part of the costs of nursing homes, assisted living facilities, and in-home care, and you don’t need it before then.
You should already know how to monitor your credit reports on your own, so you don’t need an identity theft policy. Choose one who can clean up after themselves.
Life insurance should never be used as a long-term strategy; rather, it should be used to tide you over until you have enough money to become self-insured. Purchase term life insurance, which is less expensive because it includes no savings component. You want a policy that will pay out roughly ten times your annual income. Never think of insurance as an investment.
Bargains and Negotiation
Price negotiation is the norm in most cultures. Your goal is not to harm the business owner; in any deal you make, you can both get what you want. Don’t be afraid to negotiate. You can use a variety of negotiating strategies to ensure that you always get a good deal. If you tell the seller you’re willing to pay full cash, they’ll be more willing to lower the price.
Cash guarantees that they will receive their funds immediately. When it comes to communication, sometimes less is more. If you hear a price that isn’t acceptable to you, simply say so, or don’t say anything at all. Sellers despise silence and will offer a lower price to fill the void.
You can also simply begin walking away. Sellers will almost always respond with a better offer. You may need to be inventive at times. If the seller has a set price, use the “If I” technique. That’s when you say, “If I accept that price, you must include…” If it works, you will receive an additional, technically free product.
Garage sales, flea markets, pawn shops, and conventions are excellent places to haggle for a good deal. You are usually dealing with a single person rather than a large corporation.
The Pinnacle of Investing The point in your financial life when you make more money from your investments than you do from your job. Investing does not have to be difficult; it can be simple and stupid. If you need to hire a financial adviser, look for someone who can make the investing process seem simple to you.
One of the most important investing strategies is to not put all of your eggs in one basket. This is known as diversification. If something goes wrong, you will not lose your entire investment. It simply reduces any risk. Investment is risky, but mutual funds provide excellent long-term diversification. Instead of putting $20,000 into a company that could fail the next day, you’d put that money into a mutual fund that would invest it in a hundred different companies. If one company fails, the others will support you.
Retirement and College
The next thing you should think about is a retirement wealth-building strategy. You can’t wing it with a retirement plan; you have to know what you’re doing. For example, many people consider their 401(k) to be their emergency fund, which should never be the case. The most effective way to build wealth is to put 15% of your household income into Roth IRAs and pre-tax retirement plans. Because our government is unconcerned about our ability to save, we must be proactive.
For example, if your 401(k) is invested in a mutual fund, you are saving with a tax-favored plan. Your 401(k) is the coat that protects your money from the cold of taxes, not the thing that makes you money. You have several options, including an IRA, a Roth IRA, which provides tax-free growth, a Simplified Employee Pension Plan, and the 401(k), 403(b), and 457 Plans. 401(k)s are the most common in businesses, and when you leave, you should always request that your company-sponsored retirement plan be rolled into an IRA.
When planning for retirement, don’t forget about college funding. Remember that you do not owe a college education to your children. It’s necessary, but it’s also a privilege. You should never put your children’s college savings ahead of putting food on the table.
Because your money grows tax-free, an Education Savings Account is definitely worth considering. If you don’t meet the income requirements, consider a 529 plan, but do your homework because some of them don’t give you complete control over your mutual fund investments. Savings bonds and pre-paid tuition plans are less cost-effective than mutual funds. Never use student loans because they are debt, and debt is the first thing you should eliminate from your life.
The only constant in life is change. We change jobs frequently, with many people having 10 different jobs over a 20-year period. It is a myth that you will grow accustomed to a job you dislike. If you’ve always been driven by precision, you’ll never change, and if you hate your job, you’ll never excel at it.
When job hunting, you must have a plan and a strategy. You can’t just send out a bunch of resumes and hope for the best. Conduct thorough research on each company you’re considering and determine exactly what they require. Prepare an introduction letter, cover letter, and resume. Tailor them to the recipient, include only what you believe they require, and get right to the point. Mention the date and time you will call them, and stick to it.
Part-time jobs are sometimes necessary to get you out of a rut, and you should not be ashamed of having one. Just keep in mind that they are only temporary.
Mortgages and Real Estate
Your home is most likely the most significant investment you will ever make. You should pay it off as soon as possible. You will either sell or buy a house in your lifetime, so you must think like a retailer or an investor when doing so.
When selling your home, you must ensure that it is in perfect condition. You must make potential buyers feel as if they are in their own home, not yours. If you’re not sure about all the details, hire a good agent. They will walk you through the entire paperwork process.
Always obtain title insurance and land surveys when purchasing a home. If you want to purchase through an agent, look for one who does not think like a retailer. Agents have access to the Multiple Listing Service, which contains a wealth of additional information about homes. Some things to look for in a house are its location, price in relation to the neighborhood, view, and outdated elements that can be easily replaced. A certified inspector should always inspect a home. Avoid mobile homes and timeshares because their value is only going down.
Mortgages are not recommended, but if you must, get a 15-year fixed-rate conventional mortgage, put at least 10% down, and make sure that your house payment does not exceed one-fourth of your take-home pay. The 100-Percent-Down Plan, which is paying cash, is by far the best way to buy a house. Go for it if you have that much money in the bank. It will provide you with unfathomable freedom.
God is a giver; he gave his only son to the world he adored. Giving is the only way to reach your full potential. The common misconception is that wealth is created by hoarding it rather than giving it away. It is simple to give someone else’s money, and you should understand that God, not you, is the true owner of your money.
He would want you to give him that money, and He would put his trust in you. God does not require your money; He created you in His image and is a giver. As a result, when you help others, you will feel most fulfilled and true to yourself.
Consider donating 10% of your income to your local church or a favorite charity. Pastors are taken for granted, and they deserve far more than we currently provide. You don’t have to give everything; keep the goose and distribute the eggs generously but wisely.