January 11, 2013
Chapter 1 summary
In chapter one, Dave Ramsey covers a lot of material. Mainly highlighting good saving habits and what to do with your money. By introducing the baby steps, Ramsey allows his viewers to set a plan for their money. Step one, putting 500- 1,000 dollars in an emergency fund (depending on their outcome). Step two, pay off all debt. Step three, three to six months expenses in savings. Step 4, invest 15% of household income to IRA and pre-tax retirement. Step 5, college funding. Step 6; pay off your home early. The final chapter 7, builds wealth and give.
Other than the baby steps, several tips on saving money were introduced. Terms that Ramsey mentioned were amoral, compound interest, emergency funds, interest rates, money market, Murphy’s Law and many more. Amoral is when money is neither good nor bad. Compound interest is interest on interest. An emergency fund is 500-1,000 dollars put into a money market or savings account. Murphy’s Law is that if it can go wrong, it will. Ben and Arthur illustrate compound interest. One main thing I learned was that saving is about contentment and emotion.
I also learned that the saving habits of Ben and Arthur help to illustrate the principle of compound interest. Your income level does not affect your saving habits. Another fact is that the correct order for using your money is save, pay bills and then gives. I also learned how to calculate compound interest along with the difference in compound and simple interest. Lastly, I learned that the United States has a negative savings rate. This is because Americans spend their money on unneeded things. Certain fashion labels and popular, trendy items become a necessity. But I learned to save and spend money on more important things.