Good? Useful? Depends....

When it comes to the fields of finance and investing, relativity is the name of the game. Whether any particular advice is good, bad or indifferent depends largely on one's own situation. I have accordingly given Total Money Makeover [TMMO] a "3" -- it may actually be a "5" for some people, and a "1" for others.

Robert Kiyosaki has written that some people invest to win, and others invest not to lose. It seems to me that TMMO largely targets the latter group, as well as others who aren't even interested in investing. To the extent that his book helps those people, it's valuable. Sometimes we need psychological "permission" to implement the obvious, so if reading a lesson in Economics 101 from an "expert" inspires someone to do that, I'm not going to complain.

My main problem with TMMO is its absolutist approach to debt. Dave believes that all debt is bad, so much so that he several chapters to damning it. This may be fine for people with low financial IQs, but it's overly simplistic; in reality, debt that is taken out to finance the acquisition of an income-producing asset is actually beneficial -- what Kiyosaki refers to as "good" debt. Ramsey actually encourages people who own rental properties to pay off all the mortgages against those properties, even though doing so drastically reduces the return on investment and uses up cash that could go into other investments.

The sections on setting up a budget, building a cash reserve, snowballing debt and then accumulating additional cash are sound advice, but also pretty much common sense. Again, maybe it helps some people to have a respected guru write it all down in black and white for them.

Dave's views on investing once the cash has been acquired are pretty much what you'll find in the standard financial advice columns and magazines: buy shares in mutual funds, invest for the long haul, etc. He doesn't seem to have any room for real estate investments in his portfolio, even though real estate offers advantages that paper investments lack. And even if the stock market gains 12% per year on average, buying in at the wrong time can seriously set back a portfolio; a drop of 33%, for example, requires the portfolio to rebound 50% just to get back to the starting point. Strategies that force investors out of the market before such a downturn will help to preserve capital.

IMO, anyone who is really serious about getting ahead financially needs to read Kiyosaki's Rich Dad series (as well as his latest book, co-authored with Donald Trump) to gain an overall understanding about the big picture; and William O'Neill's books (including his newspaper, Investor's Business Daily), which concentrate on stock investing. All of these men have done extremely well by ignoring the conventional wisdom (e.g., they believe in focusing and concentrating rather than in the conventional definition of diversifying); moreover, although they are all independently wealthy and don't need to write books to make money, they are all trying hard to give the American public a financial education, which our education system has largely failed to do.

A number of reviewers have criticized Dave's use of biblical references. I don't think he quotes excessively from the Bible, and much of the advice is good. We do need to remember, however, that the Bible was written in a pre-modern, pre-capitalist age and that its financial dictums -- useful in an ancient agricultural world -- need to be adapted to the age in which we live. Quoting the Bible without reference to the very different circumstances in which it was written can do more harm than good, especially with regard to practices such as tithing.

To summarize: TMMO will probably help many people who need to get a grip on the basics and get out of debt, but I don't think it's the best choice for those who really want more. For true financial freedom, you'd be wise to supplement it with materials from other authors.

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Financial Freedom Plan

I just finished reading this book. It is light and fun. There is meat and an 8 step program for becoming financially free from debt. It is not for those who do not have the focus or determination to do this. I think is worthy reading to begin changing your mind and behavior with money.


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Complete fluff with annoying religous references

I picked up this book since I was sick of Suze Ormond telling everyone what a moron they are with money. I had not heard of Dave Ramsey. Boy, I wish I had stuck with Suze, at least she leaves God out of it.

The book is complete fluff. It does not contain any real advice. For example, he will say, "Don't lease a car." Then never really give you any pointers on how to get out of an existing lease. However, if you are motivated by stories of unicorns and paved gold streets in heaven with no real roadmap to get there, read on.

The first step in my Total Money Makeover will be to sell this book.

At least his website does not accept credit cards and he follows what he preaches.

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