In case y’all didn’t realize it, Christmas is in 1 week! And I’ve only had two blog posts this month….smh. I always dream big about posting a bunch and life gets in the way. I can’t tell you how many posts I’ve started writing or have started researching, but haven’t finished. It’s seriously a miracle that this post is even getting published! I read this book almost a month ago, it’s been renewed at the library twice, so I need to turn it back in, like, tomorrow. I don’t want to promise that I’ll be more consistent because I can’t make this blog a priority right now. I will promise that I think about my awesome readers daily, and I am working on getting content out there quicker versus ruminating on an idea for like eight years before scrapping it. Anyways, on to the review!
I want to start off by saying that if you have not read this book, drop what you’re doing right now and order it from Amazon, download it onto your e-reader, or put it on hold at the library. That being said, I think I’ve established this is going to be pretty positive review.
Personal finance is nothing new to me. I’ve been crazy vigilant about my finances since turning 23. I budget down to the cent on Mint and split my purchases like a madwoman. I need to know where every last penny is going (even if the penny itself has become pretty obsolete). I purposely read an article, listen to a podcast, or watch a vlog about personal finance every single day. Ryan and I talk about our money on the reg. I talk to the babies about how you save more when you purchase in bulk. I’d like to think James’ response of “dabo rabo rabo rabo” means “I can’t wait to start earning an income and managing it responsibly!” Hopefully.
Overall my relationship and understanding on personal finance is great. I never feel like I’m floundering because I’m constantly teaching myself lessons and staying motivated by reading about what others have done. I didn’t think I needed a Total Money Makeover, but I thought it would be great to check it out the book since one of my high school classmates recommended it. I had the feeling that I would read this book and feel pressured to stop using credit cards and only pay for things out of envelopes of cash. And those are pieces of advice that are recommended, but not in a judge-y “if you ever use a credit card again you will FAIL” kind of way.
The purpose of the first couple chapters is for you to buy into the conception. Every real life situation described pulls you in a little more until you are like “OKAY, tell me these damn steps so I can start NOW”. Then the remainder of the book lays out the steps. And they are nothing mind altering, nothing that you wouldn’t already know is important, but the build up at the beginning plus the simplicity of the steps catapults you into your Total Money Makeover in a way that a lot of financial plans don’t. You will feel excited and motivated. Every completed baby step will make you want to go all over town sharing your success and inspiration with others….or the modern day equivalent which is a Facebook status full of exclamation points, CAPS LOCK, and money bag emojis.
Here’s the breakdown of the baby steps. Remember, I’m sharing these with you as a synopsis, not as a Cliff’s Notes version of the book. READ THE BOOK. I pinned the baby steps on Pinterest over the summer and it provided me zero motivation. But after reading The Total Money Makeover, I’m over here like #gazelleintensity #livelikenooneelse #kickoutmurphy
The 7 Baby Steps
#1 – Save $1,000 Fast
The first $1,000 you save acts as a mini-emergency fund. If you’ve never had this much money in the bank, it shows you what you can accomplish with hard work and dedication.
#2 – The Debt Snowball
Now that you have a little money saved, you start to pay off your debt. Beginning with your smallest debt and working your way up to your largest debt (besides your mortgage). Don’t consider interest rates. Just get that first small victory and keep working your way up. Unless you owe like $100 on a credit card, but $500 on a speeding ticket. Pay your speeding ticket first. Use just a smidge of common sense.
#3 – Finish the Emergency Fund
A fully funded emergency fund should be able to pay for three to six months of expenses. You’re not saving when you’re using your emergency fund, you are surviving. While an emergency fund can be used to pay for medical expenses or car issues, it’s normally thought of as a way to get by if you lose a source of income. The goal is to be motivated to quickly get back on your feet and start replenishing your fund.
#4 – Maximize Retirement Investing
The most common advice I get from my elders (besides enjoy your life NOW) is start saving for retirement NOW. Compound interest is a beautiful thing. Once you start contributing to your retirement savings, especially directly from your paycheck, it’s like you never had the money in the first place and you don’t miss it. Then all of a sudden you retire and BOOM you’re a millionaire (or multi-millionaire if you play your cards right). Retirement investing is all about starting a plan and simply maintaining it for years and years. If you start saving in your 20’s, 15% of your income is all it takes to coast into retirement.
#5 – Save for College
Some people may be able to skip this step because (1) they don’t have children or (2) their children are out of the house. So onto step #6 for you! But some of us accidently popped out some kiddos and now we’re not only responsible for ourselves, but other human beings. Human beings that may or may not be capable of saving a crap-ton of money so that they have the option to attend a vocational school or university. Unless you don’t like your children (if that’s the case, I’ll trade you my Twilight DVDs and this Szechuan sauce that expires in like 06/2016, but was way too spicy for your cute babies), you aren’t going to want them to take out massive student loans for college. You’re most likely still paying off your student loans #thestruggle, wishing your parents had saved something to help you out. The amount you decide to save will vary from person to person. Just figure out the total dollars needed, divided it by the number of months til your child has graduated from high school and start saving. Preferably in a 529 plan or ESA.
#6 – Pay Off the Home Mortgage
I would imagine this is the baby step some people get stuck on. Or they’re riding the wave of success and accomplish it in record time. You argue with yourself, well I’ve gotten this far, my mortgage payment is pretty low, I’ll just keep paying my regular monthly payment so I can get back to living like I was before. But why would you want to do that?!?! You’re so close to living like no one else! A year’s worth of mortgage payments could be a great vacation, a nice pre-owned car, a small kitchen reno, the possibilities are endless. So why not throw everything you’ve got at this last bit of debt.
#7 – Build Wealth
If you’ve made it through the first 6 baby steps, you now have no consumer debt, no student loans, you own your vehicles, your retirement is looking pretty nice, your kids will get some help with tuition, and you own your home. Life is good. So now what do you do? You get to have fun with your money, you get to invest in wealth building opportunities, and you get to give back to others. The best part is you’ve spent also this time telling your money what to do (and not the other way around) so your not going to just blow it all on J.Crew shopping sprees and Kypris face serums (if only in my dreams). You will get to responsibly enjoy your wealth, but it won’t feel like you’re having to reel yourself in because the years of good money decisions have ingrained in you the right choices to make. Buying a $5 Starbucks sugar-free vanilla coconut milk chai latte (yes, this is my REAL order) when you’re on step 7 tastes a million times better than when you were on step 0 and trying to figure out which credit card you could put it on. Except you won’t buy the Starbucks latte. You’ll make it from scratch, for less than 50 cents, in your Joanna Gaines-inspired farmhouse kitchen while you watch your worry-free kids, who know they are safe and secure with a well-funded future ahead of them, play on the in-ground trampoline in your expansive backyard, as you think about how happy you are. Did I paint a pretty picture for you? 🙂
Well I hope I’ve provided you with enough reasons to get this book into your hands ASAP. Also thanks for sticking through my crazy woman rant about the baby steps. I may have gotten a bit off topic, but, hopefully, it was at least slightly entertaining. I’ve started working the baby steps, so I’ll be provided y’all with an update real soon. Thanks for reading!