Wednesday, June 2, 2010

We are on 'baby step 3' - I 'heart' Dave Ramsey

Here is a site I cannot recommend enough  - http://www.daveramsey.com/

Some of my readers may remember previous posts singing the praises of finally getting our family on a 'cash only' budget system via Dave Ramsey's Financial Peace University

It is an easy (well not easy to live out but certainly easy to understand) plan made up of 7 Baby Steps that are as follows.

AFTER you get a realistic budget (key word being realistic - you've got to include EVERYTHING - that is where we always got tripped up - we never really saved for Christmas, major car issues, vacations always ended up costing a little (or a lot) more than we originally estimated - etc) You can read more about budget planning on http://www.daveramsey.com/ - you follow these steps...

1. Get $1000 in the bank to start an emergency fund (it surprised me that the majority of Americans do not have at least this in the bank - scary!)

2. Pay down all unsecured debt via the 'debt snowball' - wipe out smallest debts first

3.  Put 3 - 6 months worth in the bank- only for MAJOR emergency (this is not the Cabo fund)

4.  Invest 15% of household income into Roth IRA's & pretax retirement

5. Invest 15% of household income into children's college accounts

6.  Pay off your house early

7. Build wealth and give

We thankfully started our class without nearly as much debt as was average and we started with 'baby step 1' already covered & then some.  We just pounded through 'baby step 2' - we paid off the one Credit Card we had a balance on as well as the only car we owed on - it took 5 very strict months, but so nice to finally have off our shoulders. I want to point out we paid every dime of our debt, we didn't negotiate or wiggle our way out of paying something we promised to pay - harder maybe, but it just feels better.  Now we are on 'baby step 3' with about one month in savings already so we kinda have a head start....we plan to be there before the holidays come around. (side note - when the holidays come around we have them in the budget this year - woot!)

Now this is about the point where (without our new big grown up plan) my husband and I would probably decide that his 99 Camry probably needs to be upgraded (which it does) - where we would have slipped up is we would have gone into a dealership and purchased (with financing) probably a $15,000 - $20,000 car - normal right? And the poor hard working guy is driving a 99 Camry - he deserves something significantly nicer - right?  Here is how we plan on keeping on track - we are going to buy him a new(er) car - but we are buying it cash, so it will be an upgrade - but only what we can save up (outside of our 3-6 month plan) plus whatever we can get for that car - our little side goal is to avoid a car payment ever again - and hey - going from a car worth maybe $2,500 to one that is worth about $6,000 is an upgrade right?

I could go on and on...

I think the hardest part for most people is really just getting through that 2nd step - once debt is gone (and you have a concrete plan to keep it at bay) it is so much easier to do everything else!  We look down the road and while we think it will take several months to get to step 4 - we already have a 'head start' there as well - we aren't investing 15% - but we are investing some & 15% will be no problem once we have a fully funded emergency fund - same with step 5 - we've got a head start there too....it isn't at 15% - but that won't be hard once all the ducks are in a row...and slowly but surely we can start to envision ourselves without a house payment even - man - that is cool to think about!  Ok, we've only been in our house for 5 years & we have a 30 year loan - so even with a hard core system to pay it down early we are still talking a decade plus - but a girl can daydream....

What on Earth would we do without a house payment????

As Dave says.... 'Anything you want'

Kate

5 comments:

  1. I also heart dave ramsey! check out ezmeals, a site he reccomend on his website, we have been doing it for about a year now and LOVE it! it stretches me to try new recipes while actually saving money! soo the big question is.. are you a gazelle?? :)

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  2. I have many people close to me that are living debt free lives thanks to Daves plan!!! Its alot of sacrifice for a few years, but then not to have to worry about any debt for the rest of your life, is something very few experience....cant wait to get out of school to start on this plan (AGAIN)....one of my favorite lines is a friend of mine when they were on the plan would basically eat red beans and rice during the week to save money, her 5 year old son asked her, " Mom are we poor" after serving him the third day worth of beans and rice...lol
    little does he know his parents will pay cash for his college and he get a great start in the real world with no debt :)

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  3. i will check the ezmeals site for sure!
    we are total gazelles - actually we are like 90% gazelle - 10% lazy - ie, we are doing so good - totally doing cash only but we do buy some 'non essentials' when we have left over from our budget (we bought disneyland tix! - a gazelle would never do that - but even still we did really well!)
    we have found lots of ways to still eat very healthy & inexpensively - but havent gone so hard core to total 'rice and beans' - although we do eat quite a bit of brown rice (i buy a big bag at the $1 store & it lasts all week) but we have not given up on white meat chicken, fish, or fresh fruits & veg - we could be more extreme i guess, but so far things are going so well!

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  4. wow! you are just amazing. I have a long way to go, but thank you for your encouragement. Thank you for the time you put into your blog. I check in with you several times a week because I know you have good information and I always share with my friends.
    wishing you much success on your goals.

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  5. thanks Jeanette! we arent really amazing, just one cheap step at a time LOL - i like Dave Ramsey b/c most of his scenerios are really realistic - i like how he shows that a couple making $40,000 a year can (if they invest prudently & dont overspend) can retire multi millionares (without even a pay raise!) - it just makes it seem so much more tangible...anyway - thanks so much for always being so encouraging & thank you so much for sharing! I hope they love it too =)

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