Our Review of Total Money Makeover by Dave Ramse Essay

Chapters six through eight make up the second part of The Total Money Makeover. In these chapters, Dave Ramsey tells us how we are to start the process of building that foundation to financial peace. This process is a series of 7 Baby Steps, which focuses on one step at a time and must be done in numerical order. The power of focus and priority are the grounds on which the Baby Steps are to succeed. "Each of these steps... build on one another therefore, if done out of order, they do not work". (Ramsey, 2007, p. 94) There are two basic things that must be done before starting on Baby Step #1.
1. Monthly written budget before the month begins (called a zero-based budget).
2. Get current with all your creditors.
Once these two prerequisites have been met, then it's time to move on to Baby Step #1.
Baby Step #1 Save $1,000 Cash As a Starter Emergency Fundamental
This step needs to be done as quickly as possible and the money needs to be liquid (readily accessible). "It is going to rain. You need a rainy-day fund. You need an umbrella." (Ramsey, 2007, p. 102) Cars break down and need repairs, jobs get laid-off and heating elements in homes burn out in the middle of winter. Emergencies happen and we need to be prepared. "The beginners fund will keep life's little Murphies from turning into new debt while you work off the old debt." (Ramsey, 2007, p. 105)
Baby Step #2 Start the Debt Snowball (except the home)
In this step, you will first need to list all of your debt's payoff balance(s) in the order of smallest to largest. Next, make only the minimum payments on all but the smallest debt making the largest payment you can on the smallest debt. When the smallest debt is paid off, move on to the next smallest debt in line applying everything that you were paying on the previous debt toward this debt until you have this one paid off also. Keep moving down the line, applying the previous debt's payments to the next, until it too is paid off. Eventually, all debts will be paid. "When you start the Debt Snowball and in the first few days pay off a couple of little debts, trust me, it lights your fire." (Ramsey, 2007, p. 114) "Pay the debt thou hast contracted with the printer. Release thyself from bondage." (D&C 1935) "And again, verily I say unto you, concerning your debts-behold it is my will that you shall pay all your debts." (D&C 10478)
Baby Step #3 Finish the Emergency Fund
Now that all of your debts are paid off (except for the house), the next step requires you to continue building up your emergency fund. In this fund, you should have the funds equivalent to what it would cost you to live at least three to six months with no income. All of the money that was being used in