The Program

Without stealing too much of Dave's thunder I thought I'd give a quick run-down of what the "Total Money Makeover" is. The concept is simple. Don't borrow money, ever. If you can't afford it right now don't buy it right now. Dave admits that while the concept is painfully simple, putting it into practice is very, very difficult.

The program is broken down into "Baby Steps." Baby step 0.5 is to make all of you minimum payments and get current with all of your creditors. Once you've done that move on to baby step 1 which is to build up an emergency fund of $1,000 as quickly as possible. Now on to step 2, pay off the debt. In this step you use the "debt snowball" (I'll explain the snowball in another post) approach to pay off all of your debt except your house. According to the book, most people are able to complete step 2 within two years. It's not easy but it's totally worth it. Like Dave says, "live like no one else does so later, you can live like no one else does."

After the second step you're debt free except for your house and you're ready to build up a full emergency fund. Dave Ramsey defines a full emergency fund as enough money to cover your living expenses for 3-6 months.

Once your emergency fund is fully stocked you can move on to step three which is start investing and working on paying off or saving up to buy your home.