The Total Money Makeover: An Interview with Dave Ramsey

CBN.com -- Immensely popular radio talk show host, nationally syndicated newspaper columnist, and personal finance expert Dave Ramsey is very familiar with financial peace or lack thereof. A true riches to rags to riches story, the Tennessee native seemingly had it all by the tender age of 26. He had successfully built a four million dollar real estate portfolio, only to lose it all within four years. Forced to claim bankruptcy, Ramsey didnt give up as many people do when they begin to flounder financially. Instead, through a great deal perseverance he slowly rebuilt his finances to the point where today he can now call himself a millionaire again.

Ramsey has devoted his post bankruptcy life to helping ordinary, everyday people, understand the root of their financial woes while pointing them toward a series of steps to rebuild their personal finances. He does so with advice that is centered on fundamentally sound financial, emotional, and spiritual principles.

In his latest book, The Total Money Makeover: A Proven Plan for Financial Fitness from Thomas Nelson Publishers, Ramsey teaches others to be financially responsible in a Biblically-based manner. The books sole purpose is to advise its readers on practical steps they can take to acquire enough wealth to take care of themselves, live prosperously into old age and give freely of their wealth to others.

CBN.com Producer Chris Carpenter had the opportunity to sit down with Ramsey recently to discuss some of the pitfalls that many people face regarding their personal finances, how to overcome them, and ultimately how to grow wealth.

CHRIS CARPENTER: Right off the bat, what was the inspiration for writing your new book "The Total Money Makeover"?

DAVE RAMSEY: We had a New York Times bestseller called "Financial Peace" that sold over a million copies. The team from Thomas Nelson came to us and said "Financial Peace" is what to do but you have these people calling your radio show every day and saying 'I'm debt free!". So, I wanted to know how they did it, not the concepts but exactly how they applied them. They said, 'you teach these baby steps and we need to do a "how to" step by step process manual and we need to put some of these people's stories in there. So, "Financial Peace" was what to do and "Total Money Makeover" is how people have done it with 50 stories of those who did it. So, there is some inspiration mixed in.

CARPENTER: Now, you obviously have your own interesting story to tell in your own right. In doing research for this interview, I read that you lost $4 million dollars in real estate dealings. So, you have been at the top and you have certainly been at the bottom of the personal finance heap. What happened? Can you tell our viewers about your own personal financial journey?

RAMSEY: I have done stupid with a lot of zero's on the end of it. I know what it looks like. My wife Sharon and I started with nothing when we got married. I was driving a 1902 Pinto and eating off a card table. We started buying and selling real estate, and you are right, we became wealthy, at least by a kid from Antioch, Tennessee standards. We ended up with about $4 million dollars worth of real estate and then the banks all changed. They all got sold. The short version of my story is that our notes got called and it took about two and a half years for us to lose everything we owned. We hit bottom. That was a little over 15 years ago. We have scratched, clawed, and fought our way back using common sense biblical financial principles. Along the way, we started teaching other people to do that.

CARPENTER: That is truly a great journey to have come all that way.

RAMSEY: It's amazing.

CARPENTER: I say your story is a great journey because so many people never do make a financial comeback. They go down; they bottom out, and remain that way for the rest of their lives.

RAMSEY: I was being interviewed by a reporter on my book tour recently and he asked me (in a big radio talk show host voice) "and how did you bounce back?" I said when you fall that far down you really don't bounce. You just kind of thud. But we did. After sitting around whining and crying for a little while, we finally decided we were going to do what it took to turn it around and make some lemonade out of our lemons. It has not been easy, building wealth never is but it is better than the alternative.

CARPENTER: If I were to ask you what are some practical, solid, basic fundamentals for good personal finance practices, what would you share with our viewers?

RAMSEY: The thing I have discovered about working with personal finance is that the good news is that it is not rocket science. Personal finance is about 80 percent behavior. It is only about 20 percent head knowledge. The problem with money is this idiot that I shave with (points toward himself). If I can get this boy in the mirror to straighten up we can be skinny and rich. But he is a problem child and he struggles with these things. It is a behavior oriented thing. I say this because we all pretty much know what to do. I mean anyone can answer the question you just asked. You do a budget duh. You have got to have a plan. You have to live on less than you make hello? You can't be in debt and win. It doesn't work. This is not really hard stuff but it is hard to do.

CARPENTER: Why then do so many people struggle?

RAMSEY: They struggle because of the person who is looking back at them in the mirror. We struggle because managing behavior on a daily basis for an outside overall goal is tough for anyone. The guy who wrote this book is no exception. As a matter of fact, I think that God makes me teach this every day because I struggle with it. My name is Dave and I like stuff. It is really not hard to understand but it is hard to do because it is about me. And I have to manage me to win. When I can do that I can save money. I can give; I can get on a plan. I just have to spend more time doing a budget than I do figuring out who got thrown off the island (on Survivor).

CARPENTER: This book is filled with people's stories; journeys people have been on regarding their finances. What is the most common personal finance question or situation that you hear about on your radio show, speaking around the country, through workshops, and everyday life?

RAMSEY: The common theme that has run through people who have won if you talk to the people who win, the thing I kept discovering is this unbelievable sense of focused intensity. Les Brown, the great motivator says, "People change their lives when they say 'I've had it!' for whatever reason. You can just be making a lot of money and not have anything to show for it. That can be an "I've had it." You can be deeply in debt and almost bankrupt and losing your health over the stress and say "I've had it." You can lose your marriage over money and say "I've had it." It doesn't have to be traumatic or tragic. It can just be the conscious realization of 'what I am doing is not working. I have to change what I am doing.' They get this change in their voice almost. There is this "Rrrrrrr" (makes growling noise) that is focused intensity that comes out.

CARPENTER: I think I heard my wife do that one time in relation to me spending our money.

RAMSEY: (Laughs) I can remember with my Mom growing up. She would say, "I've had it." I guess it is an old southern saying. I never did figure out what it meant but she would say, "Boy, the worm has turned." I don't know what happened but when the worm turned we were all in for it. (Laughs) But you have to reach that point. And when you do, then you are ready to change. People do it with their health, they do it with their weight, they do it with their relationships, and they do it their money. Those people have all had that "I've had it" experience in common.

CARPENTER: And it is different for each individual to find where that "I've had it" threshold is.

RAMSEY: And different things will activate it. But when you get sick and tired of being sick and tired you are willing to change. As far as I am concerned, none of us like change. We are all like a bunch of little toddlers sitting in our messy diaper. You know it smells bad but it is warm and it is mine so I am going to sit here.

CARPENTER: On your radio show, what is the most interesting personal finance story that you have heard lately? I am sure you have dozens but if you could pinpoint a couple to share.

RAMSEY: We occasionally hear some very, very tragic stories. I had a lady call me this week in tears. She had left her husband because he had not only abused her and beaten her to no end but had threatened to kill her. And so the restraining order and the children were pulled and she is in a domestic violence shelter. She wanted to know what to do about her truck payment, her $400 dollar truck payment. It is just life showing up in her checkbook and she was concerned about her financial situation. I said to her, 'you know what I would do if I had a truck payment of $447 dollars in your situation? I wouldn't worry about it. This is way down the list of things in your life to sweat right now way down the list! We get those types of interesting stories and we get interesting stories of people who are willing to do what it takes to win. Those people are heroes as far as I'm concerned. They look like they are average but they have something down inside that gets their motor started and they won't quit. Those types of people are inspiring.

CARPENTER: So, you are speaking about those who fall down but are willing to stand back up, dust themselves off, and keep moving forward.

RAMSEY: Everybody falls, everybody. I have met with people over the last day who are empire builders. But every one of them is a failure. They just didnt quit. So, now people call them a success. They just made a bigger mess than someone else. These people kept falling down; they kept making ridiculous mistakes, crazy mistakes, but just never made them again. Just dont make the same mistake twice and dont quit whatever you are doing. Sometimes people say about their money, I have tried this budget stuff and it doesnt work. It does work. You have got to do it but you are going to mess up. On a pro football team, if a quarterback drops back and throws a pass and it is intercepted, what if he just threw up his hands, walked off the field, and went home? He would never be in a Super Bowl. Everybody who has ever been a quarterback in the Super Bowl has thrown an interception. Everybody. The difference is you say that one is gone. Next. Lets do it again. You learn from that one. You dont want to throw it that way again. The same thing is true with money. Everybody over the age of 12 has made financial mistakes. The weird thing about money in our culture is that we worship it. So, we think Ken and Barbie are rich. I know Ken and Barbie, they are broke. I know them personally. (Laughs)

CARPENTER: In the same vein of some compelling stories you have heard about on your show, what are some weird or bizarre stories you could share?

RAMSEY: Today, because of the exposure and the size of the stuff that we are doing, we get so much of it, it isnt even bizarre anymore. It is a freak show sometimes because there are so many whacked out things people do out there that I thought me going broke and losing four million dollars in my twenties was some sort of weird thing. But some of the stuff these people do is just . half a million dollars in credit card debt in our office the other day for counseling.

CARPENTER: How much?

RAMSEY: $500,000 dollars on plastic! Wow! At what point did you look up and say, You know, this isnt working. I wanted to stop somewhere around $50,000. $500,000 dollars. That is a new record, $511,000 dollars. We have a lot of people come to us with over $100,000 over the years but this person took the cake.

CARPENTER: I cant even begin to imagine how you could do something like that but obviously it is possible.

RAMSEY: It is pretty easy. All you have to be is breathing for the credit card companies to send you a piece of plastic. My dog got two offers last year so it is easy to get plastic. But at some point you need to look at your plan and say, you know, this plan just isnt working.

CARPENTER: I wanted to discuss your Financial Peace University. It is a very intriguing, interesting concept. Could you just comment on what it is and how people can use it to their benefit?

RAMSEY: As I have said, personal finance is 80 percent behavior. So, what we discovered was we couldnt only teach people, we had to kind of develop an easy going 12 step program. My name is Dave and I like stuff. And so the small group accountability and encouragement (environment) is the most powerful behavior modification tool on the planet. The Bible study, the discipleship group, the Promise Keepers mens group, the Financial Peace University, you watch a video of me once a week for 13 weeks and you have a small group discussion afterwards. You are held accountable for being on a budget. You know what I found out about Weight Watchers? It doesnt work because their food is fancy. It works because I know if I go to Haagen-Daaz and I go there (Weight Watchers) next week I have to step up on a scale. That knowing that I have to look at another person and say, Ha, ha, I kind of goofed up. That accountability changes people. I dont care if you have a masters degree in psychology, it will change you. Instead of deciding I am going to do this in a vacuum, me and Jesus got a thing going on, that doesnt work. You have got to have other people rubbing up against you. This 13 week series will have about 100,000 families go through it this year. It is pretty cool. It is exciting.

CARPENTER: Many of us have had financial planners over the course of time including me. And a test I always give them when I walk through their door for the first time is this. I ask them If I were to tell you I had $5,000 dollars sitting under a mattress in my home, what would you tell me to do with it. I use this question to determine whether this financial planner legitimately wants to help me or whether they are only looking out for their own bottom line and how they can make money off of me. I want to ask you that same question. How would you advise me?

RAMSEY: My answer would depend on what the other parts of your financial situation looked like. I would walk you with the money through the baby steps we teach in The Total Money Makeover. Baby step one, is a beginner emergency fund. A thousand dollars cash in the bank. So, lets get a thousand of it right now and put it in the bank. We are going to call that our Beginner/Starter Emergency Fund. Step two is lets pay off all of our debts except the home. List them smallest to largest. Make minimum payments on everything and attack the little ones with a vengeance with an I have had it attitude until they are gone. If you had under $5,000 dollars in debt we would attack your debts in the smallest to largest order. If you had a little bit left on your car or a little bit left on your student loan that has been around so long that you think it is a pet, lets knock that thing out. If you didnt have any debt or we had money left over then we would go on to step three. Step three is a fully funded finished emergency fund of three to six months of expenses. That is probably going to eat up our five grand if we hadnt already done that. But maybe you already had those three steps done. Then what would we do? We would put 15 percent of your income into retirement, and then do the kids college. If all of that was done and you found that under your mattress, we would pay it on the house. If the house was already paid off, we would just use it to invest in good mutual funds to build wealth and give a bunch of it away.

CARPENTER: Good stuff. Changing gears, you are a talk show host, an author, you do public speaking; which one do you enjoy the most?

RAMSEY: I like all of it, different parts of it. I also run a business with about 100 team members. So, leadership is a blast and working with our team. I like all of it in different doses. If I dont do my three hour talk show every day I get a little bit woozy. After about a week of vacation, I am ready to come home. It is part of the rhythm of my life now. I just thoroughly enjoy that on a day and day out basis. I love speaking too. I dont like being gone. I dont like to travel. But I like to do public speaking. We do about 16 live events per year that will run between two and 5,000 people and I love those. I come off the stage soaking wet and I am loving it. Im all fired up. But I dont want to do it every night. After awhile, if you eat enough lobster it begins to taste like soap. As far as writing, I am not a very good writer. I have had three New York Times bestsellers but it had nothing to do with my writing ability. It had to do with we had something to say. Nothing we have ever done is a literary piece. I am an editors nightmare because I am not very good at it. I just have a message, a crusade, and an attitude. It does translate into written form but its not critics always trash my stuff and they are right. Im not after any major award; Im just for helping people. If I do a whole bunch of that I dont really care what anybody else thinks. Out of those three things, writing is the one I least enjoy because I am really not as good at it.

CARPENTER: What is the one thing that you want people to take with them when they read The Total Money Makeover?

RAMSEY: Read it in spite of my picture. (laughs) Golly, what an ego. Look at that face on the front. (Jokingly) Go with me, Im Dave Ramsey. I will help you. That was the publishers idea. They thought we should do that because I am well known. It still freaks me out when I see it in the bookstore. The one thing I want you to take away from reading this book is that anyone can do it. Anyone can do it. At risk of sounding like a positive thinking guy, I tell you what, with money stuff, 98 percent of your problem is you. And trying to go too fast. If you will just say, five years from today I am going to be a completely different person financially you can be. Incrementally, step by step, by degrees, frustratingly slow, but that is how you win. If you work your butt off for 15 years you will be a success.

CARPENTER: Well said. Thanks so much for your time.

 RAMSEY: Thank you.