"The Total Money Makeover" by Dave Ramsey

• I am positive that personal finance is 80 percent behavior and only 20 percent head knowledge.
• The math of wealth building is not rocket science; it is simple--but you have to DO IT!
• What I have discovered is that some of the most profound and life-changing truths you will ever discover are very simple.
• Ignorance is not lack of intelligence; it is simply “not knowing.”
• The S&P 500 is the 500 largest companies traded on the New York Stock Exchange, sometimes called “The Big Board.”
• The S&P 500 has averaged 11.3 percent per year for the last seventy-plus years, as of this writing.
• Behavior intelligently viewed takes into account the emotional, the relational, the family history, the socioeconomic impacts, and the spiritual. To ignore any of these while discussing behavior change about money is incomplete and very naive.
• Don’t confuse extreme confidence with arrogance.
• The principles stand, and they work every time.
• If you live like no one else, later you can live like no one else.
• You don’t have time not to work on a budget, retirement plan, or estate plan.
• What to do isn’t the problem; doing it is. Most of us know what to do, but we just don’t do it.
• Winning at money is 80 percent behavior and 20 percent head knowledge.
• All winners pay a price to win.
• 90% of people in our culture buy things they can’t afford.
• If you will make sacrifices now that most people aren’t willing to make, later on you will be able to live as those folks will never be able to live.
• You will win, and the payoff will be worth the cost.
• This system will not work unless you do, and then only to the degree of your intensity in implementing it.
• Your situation isn’t your spouse’s fault, it isn’t your parent’s fault, it isn’t your children’s fault, and it isn’t your friend’s fault. IT IS YOUR FAULT!
• My financial life began turning around when I took responsibility for it.
• The first part of the quest is confronting the man in the mirror.
• Savings without a mission is garbage. Your money needs to work for you, not lie around.
• Debt consolidation is dangerous because you treat only the symptom.
• Focused intensity, life-or-death intensity, is required for you to reset your money-spending patterns, and one of your biggest obstacles is DENIAL.
• Ninety percent of solving a problem is realizing there is one.
• Grow a backbone. When something is wrong, stand up and say it is wrong, and don’t back down.
• You have to see the need to make dramatic changes.
• We can lose our health, our fitness, and our wealth gradually, one day at a time.
• The enemy of “the best” is not “the worst.” The enemy of “the best” is “just fine.”
• Change is painful. Few people have the courage to seek out change. Most people won’t change until the pain of where they are exceeds the pain of change.
• If you keep doing the same things, you will keep getting the same results.
• It is human nature to want it and want it now; it is also a sign of immaturity.
• Debt has been sold to us so aggressively, so loudly, and so often that to imagine living without debt requires myth-busting.
• A major barrier to winning is our view of debt.
• Debt adds considerable risk, most often doesn’t bring prosperity, and isn’t used by wealthy people nearly as much as we are led to believe.
• Debt brings on enough risk to offset any advantage that could be gained through leverage of debt.
• Lotto and Powerball are a tax on the poor and people who can’t do math.
• If you want to be skinny, study skinny people, and if you want to be rich, do what lots of rich people do, not what some myth-sayer says to do.
• The borrower is servant to the lender.
• We continue to believe the myth that a loan to a loved one is a blessing.
• The lender requires a cosigner because there is a very high statistical chance that the applicant won’t pay.
• If you cosign for a car, the lender will not contact you when the loan is paid late every month, but your credit is damaged every month.
• If you truly want to help someone, give money.
• The Payday loan is one of the fastest-growing trash lenders out there.
• We buy things we don’t need with money we don’t have in order to impress people we don’t like.
• When you think short-term, you always set yourself up for being ripped off by a predatory lender.
• Ninety days is not the same as cash.
• Whole life insurance is a horrible product. Why would you pay someone interest on your own savings? That’s backward, and it does not make you smart.
• Staying away from car payments by driving reliable used cars is what the average millionaire does; that is how he or she became a millionaire.
• Taking on a car payment is one of the dumbest things people do to destroy their chances of building wealth.
• You have to reach the point that what people think is not your primary motivator. Reaching the goal is the motivator.
• If you insist on driving new cars with payments your whole life, you will literally blow a life’s fortune on them.
• Consumer advocates, noted experts, and a good calculator will confirm that the car lease is the most expensive way to operate a vehicle.
• If you look at only the monthly outlay, then you will always lease, because it almost always costs less down and less a month, but in the long run, it is much more expensive.
• Creating an unneeded business expense for the sake of a tax write-off is bad math.
• A new car loses 60 percent of its value in the first four years.
• A good used car that is less than three years old is as reliable or more reliable than a new car.
• The average millionaire drives a two-year-old car with no payments.
• The truth is that most slightly used cars have gotten all the kinks worked out of them and were not traded because they were bad cars.
• The best myth is the “build your credit” myth. This myth means we have to get debt so we can get more debt because debt is how we get stuff.
• Don’t let anyone tell you to go into debt to make way for a mortgage; that is a lie.
• The Visa debit card or other check cards that are connected to your checking account give you the ability to do virtually anything a credit card will do.
• Remember, there is one thing the debit card won’t do: get you into debt.
• 60 percent of people don’t pay off their credit cards every month.
• It hurts when you spend cash, and, therefore, you spend less.
• When you play with snakes, you get bitten.
• Getting a credit card for your teenager is an excellent way to teach him or her to be financially irresponsible. That’s why teens are now the number-one target of credit-card companies.
• You are not teaching your sixteen-year-old child to spend responsibly when you give him a credit card.
• The reason why lenders market so aggressively to teens is brand loyalty.
• You have to start teaching kids early because “kid-branding” is now commonplace. Lenders are teaching kids earlier and earlier their message of reliance on plastic.
• We teach our kids to work--not like being at some boot camp, but that doing chores equals money Our kids are on commission, not allowance. Work and get paid; don’t work and don’t get paid.
• Debt consolidation is dangerous because you treat only the symptom.
• You can’t borrow your way out of debt.
• If you stay in debt longer, you get a lower payment. If you stay in debt longer, you pay the lender more, which is why they are in the business of debt consolidation.
• Debt is not a tool; it is a method to make banks wealthy, not you.
• Always keep in mind the idea that if you tell a lie often enough, loud enough, and long enough,the myth becomes accepted as a fact.
• Your largest wealth building asset is your income. When you tie up your income, you lose. When you invest your income, you become wealthy and can do anything you want.
• Quick easy money is one of the oldest lies, or myths, in the book of the human race.
• The secrets of the rich don’t exists, because the principles aren’t a secret.
• Things won’t be okay unless you make them that way. Your destiny and your dignity are up to you. You are in charge of your retirement.
• Gold has a poor track record and isn’t used when an economy collapses.
• The truth is that gold is a lousy investment with a long track record of mediocrity.
• It is important to remember that gold is not used when economies fail.
• History shows that when an economy completely collapses, the first thing that appears is a black-market barter system in which people trade items for other items or services.
• No one develops and makes a six-figure income on three hours a week.
• A new $28K car will lose about $17K of value in the first four years you own it. To get the same result, you could toss a $100 bill out the window once a week during your commute.
• It is really hard to sell books and tapes that teach the necessity of lots of hard work, living on less than you make, getting out of debt, and living on a plan, but I’m trying--because it’s the only way that will work.
• Cash Value life insurance is one of the worst financial products available.
• No one gets rich quick by using secret information.
• A Cash Value policy is an insurance product that packages insurance and savings together.
• Do not invest money in life insurance; the returns are horrible.
• Poor is a state of mind.
• Trailers go down in value rapidly, making your chances for wealth building less than if you had rented.
• Plans for prepaid funerals and college expenses give low rates of return and put money in the other guy’s pocket.
• When you prepay something, your return on investment (interest) is the amount the item will go up in value before you use it.
• Prepaying items is like investing at the item’s inflation rate.
• Pre-planning the details of your funeral is wise, but prepaying is unwise.
• Most people concentrate on the urgent in our culture.
• Wandering through life aimlessly will bring you much frustration.
• We worry about our health and focus on our money only after they’re gone.
• A budget is people telling their money where to go instead of wondering where it went.
• You have to make your money behave, and a written plan is the whip and chair for the money tamer.
• The quality of your life at retirement depends on your becoming an expert in money management today.
• Estate planning is never urgent until someone dies.
• You must think long-term to win with money, and that includes thinking all the way through death.
• Another problem with debt management by someone else is that your habits don’t change.
• Turning all your problems over to someone else treats the symptom, not the problem.
• Don’t take bankruptcy advice from debt-management companies; you likely aren’t bankrupt.
• Only inaccuracies can be cleaned from credit reports.
• Bad credit drops off your credit report after seven years unless you have a Chapter 7 Bankruptcy, which stays on for ten years.
• Your credit report is your financial reputation, and you can’t have anything taken off your report unless the item is inaccurate.
• Divorce decrees do not have the power to take your name off credit cards and mortgages, so if your spouse doesn’t pay, be ready to. You still owe the debt.
• If your name is on a debt, you are liable to pay it, and your credit is affected if you don’t.
• If you are going to leave a marriage, make sure that all debts are refinanced out of your name or force the sale of the item.
• Collectors are not your friends.
• Any deal, special plan, or settlement you make with collectors must be in writing BEFORE you sent them money.
• Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage.
• Bankruptcy is life-altering and leaves deep wounds both to the psyche and the credit report.
• Chapter 13 Bankruptcy, more like a payment plan, stays on your credit report for seven years.
• You are being robbed every day by not using the power of cash.
• If you carry cash, you spend less, and you can get bargains by flashing cash.
• Cash enables you to say no to yourself.
• Some insurance you can’t afford to be without.
• We all hate insurance, until we need it.
• Auto and Homeowner Insurance--Choose higher deductibles in order to save on premiums.
• Life Insurance--Purchase twenty-year level term insurance equal to about ten times your income. Term insurance is cheap and the only way to go; never use life insurance as a place to save money.
• Long-Term Disability--If you are thirty-two years old, you are twelve times more likely to become disabled than to die by age sixty-five. The best place to buy disability insurance is through work at a fraction of the cost.
• Health Insurance--The number-one cause of bankruptcy today is medical bills; number two is credit cards. One way to control costs is to look for large deductibles to lower your premium. The HSA (Health Savings Account) is a great way to save on premiums. The high deductible creates a much lower premium, and this plan allows you to save for medical expenses in a tax-free savings account.
• Long-Term Care Insurance--If you are over sixty, buy Long-Term Care insurance to cover in-home care or nursing home care. Make your parents get it.
• You are going to die--so do it with a will.
• 70% of Americans die without a will.
• A will is a gift you leave your family or loved ones. It is a gift because it makes the management of your estate very clear and lift-years easier.
• The goal is not to be normal because normal is broke.
• Denial, Debt Myths, and Money Myths are three major obstacles that keep you from becoming a fiscally fit body of money management staying power.
• “We have met the enemy and he is us.”
• To set out a game plan and not acknowledge the obstacles to that plan would be immature and unrealistic.
• No one is born financially smart.
• Ignorance is not a lack of intelligence; it is lack of know-how.
• Stupid things are always going to be done in families unless the wiser member learns to stand up to the forceful one.
• Great marriages don’t just happen. Wealth doesn’t just happen.
• Ignorance is not okay.
• What you don’t know will kill you. What you don’t know about money will make you broke and keep you broke.
• The Joneses can’t do math.
• This need for approval and respect drives us to do some really insane things.
• One of the paradoxically dumb things we do is to destroy our finances by buying garbage we can’t afford to try to make ourselves appear wealthy to others.
• The average college student pays $5K more per year to live and eat off-campus than to live in the dorm and eat cafeteria food.
• The typical millionaire lives in a middle-class home, drives a two-year old or older paid-for-car, and buys blue jeans at Wal-Mart.
• Don’t even consider keeping up with the Joneses. They’re broke!
• Peer pressure is very, very powerful.
• To wish for the admiration of others is normal. The problem is that this admiration can become a drug. Many of you are addicted to this drug, and the destruction to your wealth and financial well-being caused by your addiction is huge.
• Radical change is required for a money breakthrough.
• Unless you have had a heart-level Total Money Makeover somewhere, sometime in your life, you are still doing something with money to impress others, and that has to change before you can get on a real plan to fiscal fitness.
• Those of us who have had a Total Money Makeover still know where our Achilles’ heal is and still see that weak spot as a fatal wound if we allow it to grow again.
• Staying away from car payments by driving reliable used cars is what the average millionaire does; that is how he or she became a millionaire.
• 75% of airline miles “rewarded” are never redeemed.
• “Continuing to do the same thing over and over again and expecting a different result is the definition of insanity.”
• What you have falsely believed and acted on or not acted on has brought you to the place you are today with your money. If you want to be in a different place, you must believe and do things differently.
• The change will be painful, but the result will be worth it.
• The way you eat an elephant is one bite at a time. Find something to do and do that with vigor until it is complete; then and only then do you move to the next step. If you try to do everything at once, you will fail.
• The power of focus is what causes our Baby Steps to work. When you try to do everything at once, progress can be very slow.
• Because you attack several areas at once, you don’t finish anything you start for a long time. That makes you feel that you aren’t accomplishing anything, which is very dangerous.
• You must set up a budget, a written budget, every month.
• You have to tell money what to do or it leaves.
• A written budget is your money goal. People who win at anything have written goals. Goals are what you are aiming at.
• Income minus outgo equals zero every month.
• Set up a new budget every month.
• Spend every dollar on paper before the month begins.
• If you’re married, agree on the budget with your spouse.
• If you are behind on payments, the first goal will be to become current. Only when you’re current with the necessities can you catch up on credit cards and student loans.
• Focused intensity is required to win.
• Baby Step One: Save $1,000 cash as a starter emergency fund.
• It is going to rain. You need a rainy day fund.
• Life happens, so be ready.
• The emergency fund is not for buying things or for vacation; it is for emergencies only. No cheating.
• Christmas is not an emergency; it doesn’t sneak up on you.
• Whether the emergency is real or just poor planning, the cycle of dependence on credit cards has to be broken.
• A well-planned budget for anticipated things and an emergency fund for the truly unexpected can end dependence on credit cards.
• The first major Baby Step on your Total Money Makeover is to begin the emergency fund. A small start is to save $1,000 in cash fast.
• No more borrowing! You have to break the cycle.
• Twist and wring out the budget, work extra hours, sell something, or have a garage sale, but quickly get your $1,000.
• Remember, if the Joneses (all the broke people) think you are cool, you are heading the wrong way. If they think you are crazy, you are probably on track.
• When you get the $1,000, hide it. You can’t keep the money handy, because it will get spent.
• Don’t attach the saving account to your checking to protect you from overdrafting, because then your emergency fund will get spent on impulse.
• We are not putting the money in the bank to earn money, but rather to make it hard to get.
• If you already have $1,000 in anything other than retirement plans, get it out. Your emergency fund, limited to $1,000 in liquid, available cash, is all that is acceptable.
• 49% of Americans could cover less than one month’s expenses if they lost their income.
• I believe with everything within me that your most powerful wealth-building tool is your income.
• To build wealth, you will have to regain control of your income.
• If you didn’t have a car payment, a student loan, credit cards out your ears, medical debt, or even a mortgage, you could become wealthy very quickly.
• The key to winning any battle is to identify the enemy.
• “Great spirits have always found violent opposition from mediocre minds.”
• If you really believe that wealth building will no longer be a dream but a reality if you have no payments, you should be willing to do bizarre and sacrificial things to have no payments.
• Baby Step Two: Start the debt snowball.
• The Debt Snowball process is simple to understand but will require truckloads of effort.
• The Debt Snowball is designed the way it is because we are more concerned with modifying behavior than correct mathematics.
• Paying the little debts off first gives you quick feedback, and you are more likely to stay with the plan.
• I have learned that the math does need to work, but sometimes motivation is more important than math.
• The Debt Snowball requires you to list all your debts in order of smallest payoff balance to largest. List all your debts except your home; we will get to it in another step. After you list the debts smallest to largest, pay the minimum payment to stay current on all the debts except the smallest. Every dollar you can find from anywhere in your budget goes toward the smallest debt until it is paid. Once the smallest is paid, the payment from that debt, plus and extra “found” money, is added to the next smallest debt. Keep paying minimums on all the debts except the smallest until it is paid. Every time you pay one off, the amount you pay on the next one down increases. All the money from old debts and all the money you can find anywhere goes on the smallest until it is gone.
• The major elements of making the Debt Snowball work are using a budget, getting current before you start, smallest-to-largest payoff (no cheating), sacrifice, and focused intensity.
• Total, sold-out, focused intensity is required to win. Aiming at the goal and nothing else is the only way to win.
• You have to know where you are going, and by definition know where you aren’t going, or you will never get there.
• You are trying to get out of debt. Period. You will have to focus with great intensity to do it.
• The way out of debt is to outmaneuver the enemy and run for your life.
• An obvious step to working the Debt Snowball is to stop borrowing.
• A permanent change in your view of debt is your only chance.
• You can’t get out of a hole by digging out the bottom.
• Remember, just because one of your is keeping the checkbook, this does not mean that this person makes all the financial decisions.
• If your budget is stopped-up and your Debt Snowball won’t roll on it’s own, you are going to have to get radical.
• I don’t recommend selling your home unless you have payments above 45 percent of your monthly take-home pay.
• I do recommend that most people sell the car with the most debt on it.
• A good rule of thumb on items (except the house) is this: if you can’t be debt-free on it (not counting the home) in eighteen to twenty months, sell it.
• If your budget is too tight to get the Debt Snowball rolling, you need to do something to increase income.
• 60% don’t pay off their credit cards every month.
• Working extra hours can increase income in order to increase the speed of debt payment.
• If you are going to be gazelle-intense and do everything in your power to become debt-free very quickly, then stop your retirement plan contributions, even if your company matches them. The power of focus and quick wins is more important in the long term to your Total Money Makeover than is the match.
• The average person who throws the dynamite and is gazelle-intense will be debt-free except for his or her home in eighteen months.
• If you use the emergency fund, return to Baby Step One until you have refunded your beginner emergency fund, then move right back to your Debt Snowball, Baby Step Two.
• Generally speaking, if your second mortgage is more than 50 percent of your gross annual income, you should not put it in the Debt Snowball.
• You should consider refinancing your first and second mortgages together if you can lower both interest rates. Then put the total on a fifteen-year mortgage, or the remaining years of your current first mortgage, whichever is less.
• Treat small-business debt like any other kind of debt. List is with all your other debts, smallest to largest in the Debt Snowball. If your business debt is larger than half your gross annual income or half your home mortgage, hold the payoff on that size debt until later.
• If you own several, or even just one, rental property, you should consider selling some or all to get the money to pay off the ones you keep or pay off other debt listed in the Debt Snowball.
• Other than the home mortgage, larger second mortgages, business loans, and rental mortgages are the only things that aren’t paid off in Baby Step Two.
• The Debt Snowball is very possibly the most important step in your Total Money Makeover for two reasons. One, you free up your most powerful wealth-building tool, your income, during this step. Two, you take on the entire American culture by declaring war on debt.
• Baby Step Three: Finish the emergency fund.
• A fully funded emergency fund covers three to six months of expenses.
• You start the emergency fund with $1,000, but a fully funded emergency fund will usually range from $5,000 to $25,000.
• It will rain; you need an umbrella.
• Money magazine says that 78 percent of us will have a major unexpected event within the next ten years.
• The worst time to borrow is when times are bad.
• An emergency is something you had no way of knowing was coming, something that has a major impact on you and your family if you don’t cover it.
• Beware not to rationalize the use of your emergency fund for something that you should save for and purchase.
• If you’ve gone to the trouble of creating an emergency fund, make sure you are crystal clear on what is and is not an emergency.
• Before using the emergency fund, back up from the situation and calm down.
• Keep your emergency fund in something that is liquid. Liquid is a money term that means easy to get to with no penalties.
• Mutual funds are good long-term investments, but because of market fluctuations, you are likely to have an emergency when the market is down.
• 78% of Americans said they would borrow on a credit card if a rainy day came.
• Don’t use Certificates of Deposit for your emergency fund because typically you will be charged a penalty for making an early withdrawal.
• Understand, you don’t want to “invest” the emergency fund, just have it someplace safe and easy to get to.
• I suggest a Money Market account with no penalties and full check writing privileges for your emergency fund.
• Wherever you get your mutual funds, look at the website to find money market accounts that pay interest equal to one-year CDs.
• Your chances of winning the lottery are about 1 in 15 million. You’re 10 times more likely to be struck by lighting.
• The purpose of the [emergency] fund is to absorb risk, so the more risky your situation, the greater the emergency fund you should have.
• If you are single or you are a one-income married household, you should use the six-months rule because a job loss in your situation is a 100 percent cut in household income.
• Customize your emergency fund to your situation and to how your spouse deals with the feeling of risk.
• This [emergency] fund is for actual protection and peace of mind, so the spouse who wants this fund to be higher wins.
• We use three to six months of expenses instead of three to six months of income because the fund is to cover expenses, not replace income.
• Clean everything out and become debt-free except for the house. Use all savings and investments that don’t have a penalty for withdrawal like retirement plans.
• To make more money, you have to plan to make more money. Some people’s problem is income, not spending.
• In general, men are more task-oriented, and ladies are more security-based. Guys like to know what you “do,” so some of us don’t understand the idea of money just sitting there causing security.
• Believe me, guys, on of the best investments you will ever make is in an emergency fund. A fully funded emergency fund and a husband in the midst of a Total Money Makeover will relax the security gland and make your life much better.
• The bottom line is that even if you don’t “get” the emergency fund, get one.
• Remember, personal finance is personal.
• As you have better health insurance, disability insurance, more room in your budget, and better cars, you will have fewer things that qualify as emergency-fund emergencies.
• What used to be a huge, life-altering event will become a mere inconvenience.
• When you are debt-free and aggressively investing to become wealthy, taking a few months off from investing will put a new engine in a car.
• Large, out-of-budget emergencies that aren’t job-related do come up and will require the emergency fund.
• Saving for a down payment or cash purchase of a home should occur after becoming debt-free in step two and after finishing the emergency fund in step three. That makes saving for a down payment baby step three (b).
• The good thing about principles is that they make life easy.
• I have heard it said that when someone bases his life on principle, 99 percent of his decisions are already made.
• Simple maintenance will keep your money muscles maintained.
• If you hate your career path, change it. You should do something with your life that lights your fire and lets you use your gifts.
• “People who retire early, die early.”
• You already possess the ability to quit your job, and if you don’t like your work, you should consider doing that. If not today, develop a five-year game plan for transitioning into what God designed you to do; however, don’t wait till you’re sixty-five to do what you love.
• Getting older is going to happen! You must invest now if you want to spend your golden years in dignity.
• Baby Step Four: Invest 15 percent of your income in Retirement.
• The rule is simple: Invest 15 percent of before-tax gross income annually toward retirement.
• I’m not above living in a mobile home, but they are lousy places to put money.
• It is your job to take care of you and yours.
• I don’t count on an inept government for my dignity at retirement, and you shouldn’t either.
• The stock market has averaged just below a 12 percent return on investment throughout its history.
• Growth-stock mutual funds are what I recommend investing in for the long term. Growth-stock mutual funds are lousy short-term investments because they go up and down in value, but they are excellent long-term investments when leaving the money longer than five years.
• The reason you are afraid of investing is because you do not know what you are getting into. Learn about investments.
• The invested 15 percent of your income should take advantage of all the matching and tax advantages available to you.
• When your company will give you free money, take it.
• If you don’t have a match, or after you have invested through the match, you should next fund Roth IRAs.
• The Roth [IRA] grows tax-free.
• The Roth IRA is a very important tool in virtually anyone’s Total Money Makeover.
• Start with any match you can get, and then fully fund Roth IRAs. Be sure the total you are putting in is 15 percent of your total household gross income.
• I would recommend that you have the largest nest egg possible because there are some really cool non-greedy things to do with it later, like giving it away.
• In order to retire with some security, you must aim at something.
• Most of you will have well over $2 million pass through your hands in your working lifetime, so do something about catching some of that money.
• You start where you are, and you do the steps. These steps work if you are twenty-seven or fifty-seven, and they don’t change.
• Start where you are, because that is your only option.
• The investing you do systematically and consistently over time will make you wealthy.
• It is never too late to start.
• Systematic, consistent investing is the tortoise that beats the hare in the race.
• Push with gazelle intensity to bloom, but know that as long as you take the progressive steps, you are winning.
• Ultimately, we are not defined by wealth; however, your Total Money Makeover will affect your wealth, as well as your emotions, relationships, and spiritual condition.
• You are going to win.
• A solid education to begin your adult life and your career will add to the quality of both.
• College degrees do not ensure jobs. College degrees certainly don’t ensure success. College degrees do not ensure wealth. College degrees only prove that someone has successfully passed a series of tests.
• College is great, but don’t expect too much from that degree.
• Because we have turned a college degree into some kind of “genie in a bottle” formula to help us magically win at life, we go to amazingly stupid extremes to get one.
• If we admit out loud that education is for knowledge, which is only part of the formula to success, then we don’t have to lose our minds in pursuit of the Holy Grail degree.
• I will be so bold as to say college isn’t even a need; it is a want. It isn’t a necessity; it is a luxury. This luxury is one of the first on my list, but not before retirement, not before an emergency fund, and certainly not as a reason to go into debt.
• In some areas of study and in a very few careers, where you graduate from will matter, but in most it won’t.
• The first rule of college (whether for you or for your children) is: pay cash. The second rule is: if you have the cash or the scholarship, go.
• Student loans, on average, pay for an off-campus standard of living, and no debt was needed to get the degree, only to look good while getting the degree.
• Student loans are a cancer. Once you have them, you can’t get rid of them.
• Stay away from loans; make plans to avoid borrowing.
• Student loans have become normal, and normal is broke. Stay away from loans; make plans to avoid borrowing.
• Knowledge is just part of the formula to success.
• Baby Step Five: Save for college.
• Virtually everyone thinks that saving for college is important; however, hardly anyone saves money for their kids’ college education.
• College tuition goes up faster than regular inflation. Inflation of goods and services averages about 4 percent per year, while tuition inflation averages about 7 percent per year.
• When you save for college, you have to make at least 7 percent per year to keep up with the increases.
• Remember that when you prepay anything, you simply break even with inflation on that item.
• If something’s worth doing, it’s worth doing right.
• I suggest funding college, or at least the first step of college, with an Education Savings Account (ESA), funded in a growth-stock mutual fund.
• The Education Savings Account, nicknamed the Education IRA, grows tax-free when used for higher education.
• Baby Step Five is handled if you start an ESA fully funded and your child is under eight.
• Start with the ESA because you can invest it anywhere, in any fund or any mix of funds, and change it at will. It is the most flexible, and you have the most control.
• If you want to do more than the ESA, or your income rules you out, you may want to look at a 529 plan.
• In order to have enough for college, you must aim at something.
• One of the problems with a 529 plan is that you must give up an element of control.
• The best 529 plans available, and my second choice to an ESA, is a “flexible” plan. This type of plan allows you to move your investment around periodically with a certain family of funds. This is the only type of 529 I recommend.
• Saving for college ensures that a legacy of debt is not passed down your family tree.
• Plan on your child attending somewhere that is cheaper, living on campus, and eating the cafeteria food.
• Look into companies that have work-study programs.
• If you get a big tax refund, you’ve just allowed the government to use your money interest-free for one year.
• There are benefits beyond just the money awaiting the young person who works to pay for all or part of college.
• Probably my favorite method of funding school, other than saving for it, is scholarships.
• If you want to go to college badly enough in America today, you can.
• If you aren’t really careful, “the good enough” can become the enemy of “the best.”
• Mediocrity with a dose of doubt can keep you from excellence.
• Finishing well can be more important than starting well.
• Baby Step Six: Pay off your home mortgage.
• Tax deductions are no bargain.
• Mutual funds are awesome investments.
• Debt causes risk to increase.
• When your spouse gets the raise you are expecting, don’t raise your lifestyle with it. Save more! Invest more!
• Throughout a lifetime of investing and mortgaging, the debt-free person will actually come out ahead.
• I have to put systems and programs in place that make me do smart things.
• A big part of being strong financially is that you know where you are weak and take action to make sure you don’t fall prey to the weakness. And we all are weak.
• Know where you are weak, and take action to make sure you don’t fall prey to the weakness.
• If you must take out a mortgage, pretend only fifteen-year mortgages exist.
• If you have a great interest rate, it is not necessary to refinance to pay a mortgage off in fifteen years or earlier. Simply make payments as if you have a fifteen-year mortgage, and your mortgage will pay off in fifteen years.
• The best time to refinance is when you can save on interest.
• When refinancing, paying points or origination fees are not in your best interest. Point or origination fees are prepaid interest.
• The math shows that you don’t save enough on interest rates to pay yourself back for the points.
• When refinancing, ask for a “par” quote, which means zero points and zero origination fee.
• The ARM (adjustable rate mortgage) was born to transfer the risk of higher interest rates to you, the consumer.
• It is not wise to get something that adjusts when you are at the bottom of rates!
• 80% of Americans believe their standard of living will go up at retirement. Talk about living in a fantasy.
• Wise financial people always move away from risk, and the balloon mortgage creates risk nightmares.
• Emergencies are precisely when you don’t need debt.
• The home-equity loan is one of the most aggressively marketed loans today. These loans are very dangerous, and an unbelievable amount of them end in foreclosure.
• When asked about mortgages I tell everyone never to take more than a fifteen-year fixed-rate loan, and never have a payment of over 25 percent of your take-home pay. That is the most you should ever borrow.
• I don’t borrow money--ever.
• Paying cash for a home is possible, very possible.
• Our observation of families who stay gazelle-intense is that they pay off the mortgage about seven years from the date they declared war on the culture, from the date they decided to have a Total Money Makeover.
• Putting your college-bound teen to work searching for scholarships could end up paying thousands of dollars toward college tuition.
• Baby Step Seven: Build wealth.
• If you think wealth will answer all life’s questions and make you trouble-free, you are delusional.
• Wealth is not an escape mechanism. It is instead a tremendous.
• After years of studying, teaching, and even preaching on this subject across America, I can find only three good uses for money. Money is good for FUN. Money is good to INVEST. And money is good to GIVE. Most anything else you find to do with it doesn’t represent good mental and spiritual health on your part.
• The problem with people is, they buy things when they can’t afford them.
• “Don’t buy that new car,” is advice you will hear from me so often you’ll be saying it in your sleep.
• Have some fun!
• If you like travel, travel. If you like clothes, buy some. I am releasing you to have some fun with your money, because money is to be enjoyed.
• 19% of the people who filed for bankruptcy in 2002 were college students.
• Be patient with the market while living off the income the nest egg produces.
• You can choose to be a little more sophisticated, but until you have over $10 million, I would keep your investing very simple.
• You can clutter your life with a bunch of unnecessary stress by getting into extremely complex investments.
• Always manage your own money.
• You should surround yourself with a team of people smarter than you, but you make the decisions. You can tell if they are smarter than you if they can explain complex issues in ways you can understand.
• If a member of your team wants you to do something “because I say so,” get a new team member.
• The money manager who loses your hard-earned investments won’t live with the regret and pain that you will.
• A good estate-planning attorney, a CPA or tax expert, an insurance pro, and investment pro, and a good realtor are a few of the essential team members you should get around you.
• I endorse the use of financial planners if they are team members and not the sole captains of their teams.
• When selecting and working with your wealth team, it is vital to bring on only members who have the heart of a teacher, not the heart of a salesman or the heart of an “expert.”
• Also, when taking advice, evaluate if the person giving the advice will profit from the advice.
• Separate checking accounts mean one of two things, either ignorance or problems.
• When your money makes more than you do, you are officially wealthy. When you can comfortably live on your investment income, you are financially secure. Money is a hard worker, harder than you.
• Money works twenty-four hours a day, seven days a week. Money gets its job done, and it asks for only directions and a firm master.
• Giving is possibly the most fun you will ever have with money.
• Only the strong can help the weak, and that is true of money, too.
• Money gives power to good intentions.
• There are only three uses for money: fun, investing, and giving.
• Someone who never has fun with money misses the point. Someone who never invests money will never have any. Someone who never gives is a monkey with his hand in a bottle.
• The problem with becoming wealthy is that you stand a chance of becoming enamored with wealth. We can easily start to worship money, especially after we have some.
• Stuff is wonderful; get some stuff, but don’t let the pursuit of wealth become your god.
• Wealth is not the answer to life’s question.
• Another paradox is that wealth will make you more of what you are.
• To possess riches is to have the right to say how they will or will not be used.