Financial Peace

I’m guessing at least some people on here are familiar with Dave Ramsey. I was only peripherally so until February of this year, and now I can say I am intimately acquainted with Dave’s principles. The reason I’m writing this is because when I was at Quizno’s the other day picking up some subs for WIFE and myself I used cash from Dave’s envelopes and the cashier commented that it was a “cool way of doing things.” I explained to her what was going on and encouraged her to go to Dave’s website to learn more.

Dave Ramsey is a guy who had it all, lost it all and since then has spent years figuring out what happened and relating the principles he used to get it all back to everyday people like you and me. It’s no surprise that debt is a HUGE issue in the United States; one very plain example is the fact that our national debt rose $1 trillion in just six months under the current administration. It’s safe to say that our country, from the top down and from the bottom up, is in a spending frame of mind.

And why shouldn’t we be? We are taught from a young age that capitalism is the way to go (since that is what brought us into prosperity in the first place), that spending is fun and that when you spend it helps others get paychecks or sales tax can be used to fund programs that help the underprivileged. However, this idea that your life will be better if you go into debt to get something you really want (e.g. that nice car, a fun family vacation, or a couple of nights a week eating out so Mom doesn’t always have to cook) is a backwards way of thinking. If you’ve ever gotten calls from a collection agency, you know what I mean.

So what does Dave Ramsey teach? For those unaware, he teaches basic principles that help you get out of debt and stay out of debt. Nope, it’s not one of those debt consolidation concepts or get-rich-quick schemes. This is using sound judgment and “gazelle intensity” to find ways to pay off existing debts so you can focus on building wealth and not running from problems.

What is “gazelle intensity”? Dave coined this mindset after reading Proverbs 6:1-5, which says thus:

1 My son, if you have become surety for your neighbor,
Have given a pledge for a stranger,
2 If you have been snared with the words of your mouth,
Have been caught with the words of your mouth,
3 Do this then, my son, and deliver yourself;
Since you have come into the hand of your neighbor,
Go, humble yourself, and importune your neighbor.
4 Give no sleep to your eyes,
Nor slumber to your eyelids;
5 Deliver yourself like a gazelle from the hunter’s hand
And like a bird from the hand of the fowler.

That means run like crazy from the debts that are trying to hunt you down and seize you. That means do whatever you have to do to get out of debt so it’s not chasing you forever. In Dave’s words, it’s “living like no one else so later on you can live like no one else.” That is, sacrificing now for the sake of eliminating debt so later on money only goes to savings and not to paying off credit cards, and you can build a better life for your family and not have to wonder where all of your money went.

So how do you do it? Dave has 7 “Baby Steps” that I’ll list here briefly, though I encourage you to go to daveramsey.com to learn even more about them.

1) $1,000 in an emergency fund. This should be done immediately.
2) Debt Snowball. This is knocking out your smallest debt first while paying minimum payments on all others and then using whatever you were paying on your smallest debt and adding it to the next smallest debt to knock that out, then keep that process rolling until you knock out all of your outstanding debts except the house. It’s much better explained by Dave than myself.
3) Build up 3 to 6 months living expenses in the emergency fund. Just in case something happens where income gets halted (e.g. medical emergency, laid off the job) and you need a little buffer to get by for a while. You won’t be worrying how to fund such emergencies because the money’s already there!
4) Invest 15% of your income. This begins the wealth-building portion. Dave recommends Roth IRAs.
5) College funding. Can be done simultaneously with baby step 4. Starting early can ensure your kids have a head start to their lives without having to go into debt themselves with student loans.
6) Pay off your mortgage early. Can be done simultaneously with baby steps 4 & 5. This is getting that last debt knocked out so you can truly call yourself “debt free”!
7) Build wealth and give. Now you’re living like no one else, but in doing this you’ve also gotten to the point where you can GIVE like no one else.

WIFE and I are on baby step 3, having paid off somewhere in the neighborhood of $8,000 in debt during the 13-week Financial Peace University class hosted by our church. It’s not always easy, as our budgets for things are a lot smaller than we are accustomed to. However, I can say without a doubt that this is one of the biggest blessings in our lives, particularly because it has caused us to be continually unified in what we are doing with our money (a big deal since the majority of marriages that end in divorce do so because of financial issues). But we have our minds fixed on the prize, and we’re working on our 3-6 months of expenses right now. Since every dollar has a name in our house, we never have to worry where we are getting the money for this thing or that thing. It’s all part of a plan, and we are well on our way down the road to financial peace. If you’ve never heard of this plan, check it out. You’ll be glad you did.

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