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Dave Ramsey on TMM (Total Money Makeover)

Posted on: March 17, 2008

This is a very quick review on Dave’s tool in his TMM:

Baby step 1: Save approximate RM250 (in the book is US1,000) for your emergency fund. It should be saved in most liquid account like the normal savings account so that we could use it during emergency like when car need repair, etc. Pls note that Hari Raya is not emergency okey.

Baby step 2: Start the Debt snowball. It’s not complicated, but it’s difficult. It requires us to list down our debts and start attacking the debt with smallest to largest so as to have some quick wins. I really love this principle.

Baby Step 3: Finish the emergency fund. A fully funded emergency fund covers 3-6 months of expenses. So, we would have enough money in 3-6 months if we lost our income.

Baby step 4: Invest 15% of your income in Retirement. You tool is Mutual Fund. He suggested to invest in Growth -stock mutual funds for long term. Growth-stock mutual funds are lousy short term investment because they go up and down in value, but they are excellent long terms investments when we are leaving the money longer than 5 years. He choosed mutual fund that have a good track record winning for more than 5 yrs, preferably 10 yrs. He didn’t took 1-3 years because he thinks long term.  He also spread the retirement investment ie: 25% Growth and income, 25% Growth, 25% International, 25% Aggressive growth.

Baby step 5: Invest for college funding. Make sure the Kids are fit too. Dave said we need to do some reasearch on the cost of attending college. Find out the college costs today and predict the costs when our kid is abut to enter the college let say in 10 years time. Stay away from loans; make plan to avoid borrowing. If you have scholarship, go! The first rule will be always pay cash for the kids college fee.

Baby step 6: Pay off your home mortage. You mortage term should be only 15 years duration. It is the best.

Baby step 7: Build wealth. Why we build wealth? The reasons is to have FUN, INVEST and GIVE.

Money Myths(MM) #2

Myth: Debt consolidation saves interest, and you have one smaller payment.

Truth: Debt consolidation is dangerous because you treat only the symptom.

Shocking Stats (SS) #2

Shocking stats : 49% American could cover less than one month’s expenses if they lost their income

My TMM progress

1- Starting last week, I’ve stopped made payment by Credit Card. All payment made by cash and Maybank Debit Card.

2- Today,  we just have a big shopping: 1) RM2000 invest in PISTF 2) RM2000 invest in PIDF. 3) While hubby invest in RM1,600 in PIDF.

3- To get rid off my two credits card: Maybank & Citibank. My Hubby is the lucky one. he don’t own any Credit Card

I was listening to Radio 24 yesterday, while driving back home yesterday. The DJ said something that really caught my attention. Some investors says that “ Bursa Malaysia is like having Mega Sales right now”. The market price is down and therefore, some investors taking this opportunity to buy more shares. I also found one article that I cannot recall the source right now. What Warrant Buffet does when market is in turmoil? He replied, “ Just smile and buy”


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