Friday, June 4, 2010
As I mentioned the other day on Facebook, Preston and I are back to living the Dave Ramsey way. About two years ago we first discovered Ramsey's book Total Money Makeover and The Dave Ramsey Show on the Fox Business Network (channel 359 on Direct TV). Preston and I bought the book and tuned into his show every night. We followed Dave's 7 Baby Steps with all of our focus on the debt snowball and worked diligently to pay off all of our debt.
In January of this year we shouted:
WE'RE DEBT FREE!!!!!!
Was it easy? NO, but we did everything we could. We sold a newly bought weight bench and weights on Craigs List. We stopped contributing to our retirement. We held a garage sale. I didn't go shopping. We no longer went out to dinner or to the bars or golfing. We were cheap. We had a strict budget "on paper, on purpose". We told our money where to go instead of the other way around. We ate "beans and rice, rice and beans". But most importantly Preston and I were in this TOGETHER. We were living like no one else, so that later in life we could live like no one else.
In February or March our Jeep started to go out on us. Dave would have told us to buy a car that we could afford with hard-cold-cash. We knew this was the right thing to do, but I convinced ourselves that we deserved a nice vehicle. Now a couple of months into the dreaded car payments, we have come to the conclusion that we need to put all of our energy and focus towards paying off the vehicle. Car payments suck!
This time around, we are doing the envelope system. This is done by writing a category such as groceries or entertainment on the envelope and putting a predetermined amount of money into the envelope. Once the money is gone, you cannot spend anymore on that category until the next month. This works well for categories such as entertainment, gas, groceries and gifts.
The Dave Ramsey system is not for everyone, but it sure has helped us!
DAVE RAMSEY'S 7 BABY STEPS:
1. $1,000 in an Emergency Fund
2. Pay off All Debit with the Debt Snowball
3. 3 to 6 months Expenses in Savings
4. Invest 15% of Income into Roth IRAs and Pre-Tax Retirement Plans
5. College Funding
6. Pay off your Home Early
7. Build Wealth and Give!
1. Shred all credit cards.
2. List all of your debts from smallest balance to largest.
3. Pay minimum payments on all of your debts except for the smallest one. Put every extra dollar towards this debt until it is gone.
4. Then attack the second debt. Every time you pay a debt off, you add its old minimum payment to your next debt payments until all of your debts are paid off.