money by Dave Ramsey

Dave Ramsey is a well-known financial guru who has radio show and other media presence. He has helped millions of people get out of debt and educate them on money management. Ramsey has written more than 15 books. One of the best-selling is The Total Money Makeover.        

The Total Money Makeover by Dave Ramsey

In the book The Total Money Makeover, Dave outlines the personal financial plan using ‘7 baby steps’. These steps came from his personal experience and time spent teaching others.

Below are the overview;

Step 1: Save $ 1000 as a start

This is the first step!

$1000 looks very small. However, in reality 75% of Malaysian has difficulties to raise RM 1000 cash in case of emergency.

In any journey of financial plan or investment, building up emergency fund is a must. RM 1000 is not a lot. But if you don’t take a step to save it, you still end up with nothing.

Step 2: Pay Off Your Debt Except Your Home Loan

Second step is to pay off the debts ie car loan, personal loans, credit card and all of your debt except your home loan. This step is the hardest and where most people struggle with.

The technique proposed is using Debt Snowball Method. It helps you to knock out your debts one by one. Debt Snowball process as below;

  • List your debt from smallest to largest
  • Make the minimum payment on all the debts except the smallest one
  • Put all the surplus money towards the smallest debt until it’s paid off
  • Once done, repeat the same process to the next debt on the list until you are debt free

Illustration as below;

Why this Debt Snowball method works?

When you paid off the smallest debt first, you see a progress quickly. That debt is out of your life. Then you settle the second smallest debt and the rest. This way will build momentum to keep going and give you motivation to complete paying off all your debts.

Step 3: Save 3 – 6 months of expenses

Third step is to build your emergency fund that covers three to six months of your household expenses. This will prepare you for unexpected situation such as major car breakdown, loss of a job, salary pay cut etc , without going back into debt.

Instead relying on credit card or borrowing from another source, having an emergency fund will make you more confident of your financial as well as your life.

Read more on the Emergency fund guideline.

Step 4: Invest in Retirement fund

Dave recommends that you invest 15% of your income toward retirement. You can invest in any types of investment that is secured and comfortable for you.

If you don’t know where to start, I would suggest you look at your budget and determine how much you should start savings for retirement. On the investment place in Malaysia, among the reputable investment institutions are;

  • EPF
  • Amanah Saham Bumiputera (ASB)
  • Amanah Saham Wawasan (ASW)
  • Principal Unit Trust
  • PRS


Related: Proven Ways To Save For Retirement Safely

Be Confident About Your Retirement

Step 5: Kid’s college

If you have kids, this is where you start savings for them. However, please ensure that you save for retirement first, prior savings for the kids.

I would recommend you to save for kid’s  at SSPN (Skim Simpanan Pendidikan Nasional). So far, SSPN gave a consistence dividend at 4% yearly, which is much better than savings account or FD (fixed deposit).  Besides that, parents who save in SSPN will get a maximum tax relief of RM 8,000 per person a year.


How I boost my kid’s savings in SSPN?

  1. My kids duit raya (angpow). From my kid’s total duit raya, 20% I will let them buy anything that they like. It can be toys, books, accessories etc.
    The balance 80%, I will save at SSPN.
  2. Annual bonus from company. From the bonus, I normally allocate 10% – 20% to be saved in SSPN.

Step 6: Pay your mortgage or home loan

By this step, you will probably have paid off most of your debt, and what left is your home loan. Try to make extra payment towards your home loan to pay it off as quickly as possible.


Step 7: Build Wealth and Give

Life is now very good. You have an emergency fund, long-term fund and no more debts. Now is the time to grow your wealth. With no financial burdens left, you can live your life without worrying about money.

Plus, is Giving. Life is more meaningful and rewarding when you are able to help those people in needs. Generosity without any expectation will completely change you.

7 Best Dave Ramsey Money Tips

1. Don’t try to get rich too quickly

Although it’s everyone dream to become rich overnight, Ramsey says it’s better to build a fortune slowly  and sustainably.

Most important is to take action. Building wealth is not something you just stumble upon one day. It’s about hard work and patience.

2. Pay cash (or use debit card) whenever possible

Ramsey says you don’t need fancy apps to help you save. Once you’ve worked out your monthly budget, just be disciplined.

It’s so easy to tap a credit card and forget about it. Cash makes you watch the money leave.

3. Don’t spend when you can save.

People overspend money for many reasons. It can be ;

  • Not tracking your spending
  • influenced by social media
  • shopping therapy and feel better
  • paying with credit card
  • cannot resist sales

Learn to spend responsibly within your income capacity.

Spending does not make you look rich. It’s savings and investing that brings wealth.

4. Avoid brand names

You will save a lot of money not paying for brand names.

Some people are killing their net worth due to financial peer pressure. They spend more time and money trying to keep up with others than appreciating what they have.

"We buy things we don't need with money we don't have to impress people we don't like.”

5. Cut up your credit card

Having no credit card debt means no more minimum payments to add to the budget, zero hassle with high interest rates and less worry.

6. Increase your income

Maybe you are comfortable with your job, but your 5% pay increment every year will not make you rich. You need to push yourself a little bit.

Upgrade your skills  so that you can find a better position. Take a class or read some books. It helps you to move up your career at your current company or find a better spot at a new one.

7. Save, save, save

The common theme in 7 baby steps is SAVE your money. Simplify your life, spend less and start savings.



Dave Ramsey’s The Total Money Makeover gives solid financial advice.

Many people have used his system and it worked greatly for them.

“What you don’t know about money will make you broke and keep you broke”


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