The Total Money Makeover

Winning at money is 80% behaviour and 20% knowledge, but the challenge is you – the guy in the mirror. The book points at you and the series of sacrifices you need to make in order to win at your money game.

90% of the problem is realising that there is a problem. A focussed life and death type approach is required to reset your patterns of spending and the biggest obstacle is denial.

Example – Myth which you have been believing for long - debt consolidation is saving you money because of less interest you are paying – but the truth is that debt consolidation is dangerous because you are only treating the symptom, but not the problem.

One of the most compelling human needs is to want it NOW – like that kid in the grocery store who cries and screams that he wants his stuff NOW; but we must realise that this is a sign of immaturity as well.

And the solution to this craving is provided by “Debt” – Debt is the means to achieve and believe that if you want it, you can have it right now. This prompts a person to buy things which they cannot afford.

Two money Myths are – Risk denial which means that total safety is possible and Easy wealth, a belief that making money is easy. These myths are one of the reasons why millions of people get attracted to Lottery tickets.

a) Ignorance -We must understand that ignorance is not a lack of intelligence but a lack of know-how that can be learned.

b) Keeping up with your standard of living – Peer pressure, cultural expectations, and our own beliefs that we need to keep up with our wealthy friends or neighbours.

Just like starting a fitness regime, you need to start walking before you can run. The first step is to save $1000 and keep it aside as an emergency fund.
Also, every month you need to budget and follow a process- Basically, income minus outgo should equal zero every month.

Just the way that you can’t lose weight quickly, cutting debt may not happen all at once. You need to start – start slowly but surely and start cutting down your debt. List your debts in order, with the smallest payoff or balance first.

A fully-funded emergency fund covers three to six months of expenses. You start the emergency fund with $1,000, but a fully-funded emergency fund will usually range from $5,000 to $25,000, assuming that it’s a typical family that can make it on $3,000 per month.

Simple maintenance will keep your money muscles maintained. You need to keep investing month on month, as an extremely disciplined approach towards your retirement fund. This simple discipline works, and the magic of compounding will take care of your wealth creation too.

Understand the Purpose of a College Education Before You Fund It. Let’s understand this is again a form of debt and this cannot be in the wrong direction. Both as a parent and as a child, you need to understand and be extremely clear about this.