Read Your Way to Financial Freedom

March 2, 2016

There are two famous authors of personal financial planning information whom many people turn to for advice: Suze Orman and Dave Ramsey. Some folks even become disciples of these “financial gurus,” following their advice religiously. How many times have you heard from one of your friends or coworkers that they are getting on the plan and working towards their “financial freedom”? They've bought the book, the training seminar, or attended classes, and now they're working on the multi-step plan that will take them to financial nirvana. Should you go along? How do you choose which path is right for you?

First of all, what is the “financial freedom” that they are promising? Is it free money so you can continue to go out and spend money on everything you desire?

No. The financial freedom that they are promising is the freedom from the stress and strain in your personal life cause by the failures to manage your financial lives. No more worries about living paycheck to paycheck, freedom from maxed out credit cards and overdue bills, confidence in your ability to provide for yourself and your family. Peace of mind in the certainty that your financial future will not be a train wreck and that you can live a good life. Financial freedom is mastering the control of your financial life so that you can fulfill your relationships in family, social, and spiritual lives.

The two financial gurus used here address similar methods providing a multistep plan illustrated with personal examples and testimonies from converts. The differences are more in their tone and temperament. Choosing your guru should be based upon the style that appeals to your tastes and personality.

Suze Orman—“The 9 Steps to Financial Freedom
Suze Orman was one of the first in the financial planning field and set the pace for all other popular financial planners. Her TV shows have run on PBS for years and her books are bestsellers. Orman’s professional path into financial planning was the direct result of initial financial misfortune which lead her towards personal financial reform and liberation which she shares with her followers.

The first three of the nine steps are designed to look at why you don’t do the things you know you should do, and how to take action to change your behavior.

  • Step One: Sort out the confused ideas you got about money when you were young and how they affect your thinking now.
  • Step Two: Create new truths and shape a new reality for your life.
  • Step Three: Move towards being honest and empowering yourself to get control of your money.

The next three steps cover the nuts and bolts of handling your money.

  • Step Four: Be responsible to yourself and your loved ones. This requires evaluating insurance, wills, and retirement savings, and thinking about estate planning.
  • Step Five: Respect your money and yourself. Orman points out that there are only three ways to get money: work for it, inherit it, or invest and save. If you don’t have a rich relative you had better work on your ability to earn, save, and being efficient with your money.
  • Step Six: (I found this one to be particularly interesting) Trust yourself more than others. In this step, Orman encourages the reader to develop their own financial wisdom and only very carefully hire advisors and managers.

The final three steps are directed towards how you manage your wealth and your life.

  • Step Seven: How to share your wealth.
  • Step Eight: Examining the money cycle and how to live with the ebb and flow of fortune.
  • Step Nine: Recognize true wealth and learn how to appreciate your life.

Completing the program yields a better understanding of how we feel about money, how we use it efficiently, and how money plays a central role in our lives and shapes our wellbeing.

Dave Ramsey—“The Total Money Makeover
Ramsey takes a much more in-your-face approach of examining and changing how you handle your finances. Similar to Suze Orman’s life story, Ramsey had to fall down before he found the techniques to pull himself by his financial bootstraps. Ramsey’s primary tenant is that winning at money is 80 percent behavior and 20 percent knowledge. If this sounds like a bombastic high school sports coach you are correct. Ramsey wants to fix the guy in the mirror. To him, you are the problem with your money and you have to clear two hurdles to fix the problem.

The first is ignorance: No one is born financially smart so you need to be educated in the ways of finance.

The second is entitlement and striving to “keep up with the Jones’”:  This gets you into debt and makes you a slave to your debts. You need to get out of debt to gain financial freedom.

Ramsey has a seven step program that reads like a guidebook and is embellished with personal stories and testimonies of successful followers.

  • Step One: Build an emergency savings account of $1,000 which will give you some stability when the inevitable financial storm clouds appear and enable you to be less reactive in a financial crisis.
  • Step Two: Get out of debt with his “debt snowball” technique. Ramsey recommends paying off the small debts first to build your sense of efficacy, then tackling the big debts like student loans and mortgages. He recognizes that it isn’t complicated but it is difficult.
  • Step Three: Behavior modification. Make a budget, reduce debt, and build a larger emergency fund covering three to six months of expenses for that inevitable day when a major life crisis hits.
  • Step Four: Save 15 percent of your income for retirement.
  • Step Five: Save for your child’s college fund. Here Ramsey is adamant that student loans are a cancer that once you get one you can never get rid of it. To avoid student loans save aggressively with 529 accounts and adjust your expectations to meet your savings.
  • Step Six: Pay off your home mortgage to achieve final freedom from debt payments.
  • Step Seven: (This is the icing on the cake) Build wealth, invest, and finally give it all away to your favorite charitable cause.

The Verdict
Both books are similar in that they use a step by step method to instruct you and lead you towards your goals. As I said above, the differences are in the temperament and style.

Orman has a holistic approach that encourages you to look at your feelings toward money and recognize your potential mistakes. Once you know how your personal views have been leading you astray she shows you how to use your money efficiently and use it as a tool to improve your life.

Ramsey takes the approach of a fitness coach who shows you where you mess-up and gives you step by step instructions on how to fix your problem. In the end you will be a better you and will be able to control you money through control of yourself.

So which style is right for you? A thrifty way to get a look is by checking out their books at your library. Another way of deciding is by taking one of their classes to see which one fits you better.

Either way, both styles are solid in helping you with your personal finance issues. It will feel good to get your personal finances under control and maybe through one of these books, you’ve found a new mentor who can help improve your life. If you want to become a total devote there is a plethora of information available on the authors websites.