7 Myths Debunked in The Total Money Makeover

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"Myth: You can get a good deal on a new car at 0% interest."

"Truth: A new car loses 60% of its value in the first 4 years; that isn’t 0%."

"A good used car that is less than three years old is as reliable or more reliable than a new car. A new $28,000 car will lose about $17,000 of value in the first four years you own it. That is almost $100 per week in lost value. To understand what I’m talking about, open your window on your way to work once a week and throw out a $100 bill."

"USA Today notes that the average car payment is $464 over sixty-four months. Most people get a car payment and keep it throughout their lives. As soon as a car is paid off, they get another payment because they “need” a new car. If you keep a $464 car payment throughout your life, which is “normal,” you miss the opportunity to save that money. If you invested $464 per month from age 25 to age 65, a normal working lifetime, in the average mutual fund averaging 12 percent (the seventy-year stock market average), you would have $5,458,854.45 at age sixty-five. Hope you like the car!"

In his New York Times bestseller, The Total Money Makeover: A Proven Plan for Financial Fitness, author Dave Ramsey, host of the nationally syndicated radio program, The Dave Ramsey Show--which has over 4 million listeners each week--says:

"I am positive that personal finance is 80 percent behavior and only 20 percent head knowledge. Our concentration on behavior—realizing that most folks have a good idea of what to do with money but not how to do it—has led us to a different view of personal finance. Most financial people make the mistake of trying to show you the numbers, thinking that you just don’t get the math. I am sure that the problem with my money is the guy in my mirror. If he will behave, he can make the money thing work. The math of wealth building is not rocket science; it is simple—but you have to DO IT!"

"Albert Einstein said, “Great spirits have always found violent opposition from mediocre minds.”"

"I know it may be hard for you to believe, but I get a lot of hate mail and criticism. This book and what I have or have not said in it has generated a lot of negativity and name-calling. That is fun. Not fun because I set out to offend or because I love reading the nasty things people often say. It is fun because the negativity means two things: One, for some people we are touching a nerve that needs to be touched in order for them to change their lives, and two, I am actively and passionately pursuing the truth. (Aristotle once said “To avoid criticism say nothing, do nothing, and be nothing.”) I can’t help millions of people change their lives by saying nothing, doing nothing, and being nothing. So I take the anger, the criticism, and even the hate mail as encouragement."

"I stated earlier that personal finance is 80 percent behavior. To properly view behavior and to understand how to change behavior intelligently, we must consider several things. Behavior intelligently viewed takes into account the emotional, the relational, the family history, the socio-economic impacts, and the spiritual. To ignore any of these while discussing behavior change about money is incomplete and very naive. So I openly discuss the spiritual in this book."

"This book is NOT getting any complaints or criticism . . . . . from people who do it. I have never had someone write me or write about me saying, “I got on a budget, got out of debt, got on the same page with my spouse, built wealth—and I HATE IT.” For those who have followed this plan and discovered a new life of financial freedom, their lives have been changed forever! Wouldn’t you like to experience the same transformation? You can be the next success story people hear about. You can have a Total Money Makeover starting today!"

Dave continues,

"After losing everything, I went on a quest, a quest to find out how money really works, how I could get control of it, and how I could have confidence in handling it. I read everything I could get my hands on. I interviewed older rich people, people who made money and kept it. That quest led me to a really, really uncomfortable place—my mirror. I came to realize that my money problems, worries, and shortages largely began and ended with the person in my mirror. I realized also that if I could learn to manage the character I shaved with every morning, I could win at money."

"I have a challenge for you. Are you ready to take on the guy or gal in your mirror? If you are, you are ready to win. I rediscovered God’s and Grandma’s simple way of handling money. Wealth building isn’t rocket science, which is a good thing for me (and probably you). Winning at money is 80 percent behavior and 20 percent head knowledge. What to do isn’t the problem; doing it is.Most of us know what to do, but we just don’t do it. If I can control the guy in the mirror, I can be skinny and rich. We will let other books work on the skinny, and I will help you with the rich part. No, there are no secrets, and yes, this will be very hard."

"It is human nature to want it and want it now; it is also a sign of immaturity. Being willing to delay pleasure for a greater result is a sign of maturity. However, our culture teaches us to live for the now. “I want it!” we scream, and we can get it if we are willing to go into debt. Debt is a means to obtain the “I want its” before we can afford them."

"My Total Money Makeover begins with a challenge. The challenge is you. You are the problem with your money. The financial channel or some tape sets aren’t your answer; you are. You are the king of your future, and I have a plan. The Total Money Makeover plan isn’t theory. It works every single time. It works because it is simple. It works because it gets to the heart of your money problems: you. If you keep doing the same things, you will keep getting the same results. You are where you are right now financially as a sum total of the decisions you’ve made to this point."

"History also teaches us that debt wasn’t always a way of life; in fact, three of the biggest lenders today were founded by people who hated debt. Sears now makes more money on credit than on the sale of merchandise. They are not a store; they are a lender with some stuff out front. However, in 1910 the Sears catalog stated, “Buying on Credit Is Folly.” J. C. Penney department stores make millions annually on their plastic, but their founder was nicknamed James “Cash” Penney because he detested the use of debt. Henry Ford thought debt was a lazy man’s method to purchase items, and his philosophy was so ingrained in Ford Motor Company that Ford didn’t offer financing until ten years after General Motors did. Now, of course, Ford Motor Credit is one of the most profitable of Ford Motor’s operations. The old school saw the folly of debt; the new school saw the opportunity to take advantage of the consumer with debt."

Below are 5 myths, selected from the over 30 popular myths, that Dave dispels in his book, The Total Money Makeover:

"Myth: If I loan money to friends or relatives, I am helping them."

"Truth: If I loan money to a friend or relative, the relationship will be strained or destroyed. The only relationship that would be enhanced is the kind resulting from one party being the master and the other party a servant."

"We have all experienced loaning someone money and finding an immediate distancing in the relationship. Joan called my radio show one day complaining about how a loan had ruined her relationship with one of her best friends at work. She had loaned the lady, a broke single mom, $50 until payday. Payday came and went, and her friend—someone she used to talk to at lunch every day, someone who was her confidante and sounding board—now avoided her. Shame and guilt had entered the scene with no provocation. We don’t control how debt affects relationships; debt does that independently of what we want. The borrower is servant to the lender; and you change the spiritual dynamic of relationships when you loan loved ones money. They are no longer friend, uncle, or child; they are now your servant. I know some of you think that is overstated, but tell me why Thanksgiving dinner tastes different when a loan has been served. Eating with your master is different from eating with your family."

"Myth: Debt is a tool and should be used to create prosperity."

"Truth: 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." 

"Only after losing everything I owned and finding myself bankrupt did I think that risk should be factored in, even mathematically. Life hit me hard enough to get my attention and teach me. According to Proverbs 22:7: “The rich rules over the poor, and the borrower is servant to the lender” (NKJV). I was confronted with this Scripture and had to make a conscious decision of who was right—my broke finance professor, who taught that debt is a tool, or God, who showed obvious disdain for debt."

"Risk denial takes several forms in the world of money. Sometimes risk denial is a kind of laziness, when we don’t want to take the energy to realize that energy is needed to win. Other times, risk denial is a kind of surrender in which we settle for a bad solution because we are so beat down or beat up that we wave the white flag and do something stupid. At still other times, risk denial can have an active component when we search for a false security that simply doesn’t exist."

"Myth: “Ninety days same as cash” equals using other people’s money for free."

"Truth: Ninety days is not the same as cash."

"Nationally, 88 percent of these contracts convert to debt—a debt where you are charged a rip-off interest rate of 24 to 38 percent, and they back-charge you to the date of purchase. Please don’t tell me you are the one who is actually going to pay it off."

"The second underlying problem is the quest for easy wealth. Quick, easy money is one of the oldest lies, or myths, in the book of the human race. A shortcut, a microwave dinner, instant coffee, and dot-com instant millionaires are things we wish would give us high quality, but they never do. The secrets of the rich don’t exist, because the principles aren’t a secret. There is no magic key, and if you are looking for one, you’ve set yourself up for pain and the loss of money. One of my pastors says that living right is not complicated; it may be difficult, but it is not complicated. Living right financially is the same way—it is not complicated; it may be difficult, but it is not complicated."

"Myth: Cash Advance, Payday Loans, Rent-to-Own, Title Pawning, and Tote-the-Note Car Lots are needed to help lower-income people get ahead."

"Truth: These rip-off examples of predatory lending are designed to take advantage of lower-income people and benefit only the owners of the companies making the loans."

"Lower-income people will remain at the bottom of the socioeconomic ladder if they fall for these rip-offs. These “lenders” (or, as I like to call them, “the scum of the scum”) are bottom-feeders and legally make themselves rich on the backs of the poor or those soon to be poor. The lending rates of these types of operations are over 100 percent interest, and if you want to stay on the bottom, keep dealing with these guys. You know why these types of operations are located only at the poor end of town? Because rich people won’t play. That is how they got to be rich people."

"Today I drive very nice, very expensive, slightly used cars, but it wasn’t always that way. After going broke, I drove a borrowed 400,000-mile Cadillac with a vinyl roof torn loose so that it filled up with air like a parachute. The predominant color on this car was Bondo. I drove the Bondo buggy for what felt like ten years during one three-month period. I had dropped from a Jaguar to a borrowed Bondo buggy!

"Myth: If no one used debt, our economy would collapse."

"Truth: Nope, it would prosper."

"What if every single American stopped using debt of any kind in one year? The economy would collapse. What if every single American stopped using debt of any kind over the next fifty years, a gradual TOTAL Money Makeover? The economy would prosper, although banks and other lenders would suffer. Do I see tears anywhere? What would people do if they didn’t have any payments? They would save and they would spend, not support banks."

"Spending by debt-free people would support and prosper the economy. The economy would be much more stable without the tidal waves caused by “consumer confidence” or the lack thereof. (Consumer confidence is that thing economists use to measure how much you will overspend due to your being giddy about how great the economy is, never taking into consideration that you are going deeply into debt. If the consumer were out of debt and living within his means, the confidence he would have would be well-founded.)"

"Saving and investing would cause wealth to be built at an unprecedented level, which would create more stability and spending. Giving would increase, and many social problems would be privatized; thus, the government could get out of the welfare business. Then taxes could come down, and we would have even more wealth. As that great philosopher Austin Powers said, “Capitalism, yeah, baby!” Ahhhh, capitalism is cool. Those who are worried about polarization, the widening gap between the haves and the have-nots, need not look to government to solve the problem; just call for a national Total Money Makeover."

"Debt is not a tool; it is a method to make banks wealthy, not you."

 

"Imagine you buy a $130,000 home, for which you take out a $110,000 mortgage at 7%. The final cost after all is said and done and paid would be $283,520 after 30 years or $197,840 after 15. The difference? Just $256 extra per month. Over 97% of people don’t systematically pay extra on their mortgage. Get the 15 year mortgage!"

--Dave Ramsey, The Total Money Makeover, Revised 3rd Edition. Edited.