If you live like no one else, later you can live like no one else
The line that scrolls across Dave Ramsey's book The Total Money Makeover. Both my husband and I have really been inspired by this debt free guru's words and advice. It has become a way of life for us and I can't begin to tell you how good it feels to pay off debt (minus our house, the only acceptable debt in our eyes)
We live in a culture that uses the love of money to solve all of their problems. Everywhere you look there are offers for buy now pay later or someone is trying to sell you something you can't afford. Even in college credit card companies lured naive students in by offering a beach towel and a free pen just for signing up for a credit card. Did you know that 80% of graduating college students have credit card debt even before they have a job? People are up to their eye balls in debt, they feel the need to spend...just look at our National debt!! Holy buckets.
We have taken some of Dave's advice, along with common sense and put together simple and (usually) painless rules for spending. We haven't been able to follow his plan to a T, but we're trying!
1. Stick to a budget (I am married to the budget Nazi, the holder of all receipts, the keeper of the books, this man knows about every penny spent...and if I try to keep some cash to myself...he sniffs it out....I kid you not) Our budget is pretty straight forward but we budget for every day spending such as groceries, gas, utilities along with unexpected spending such as a trip to the doctor or a package of new socks. If you know you only have, "x" amount of money to spend on groceries a month, it makes it very hard to over spend when you are at the store. It also teaches you to be more frugal with the things you have.
1.5 Pay with cash. Have envelopes with the budgeted amount of money for the expense. For example, if you budget $300 for groceries a month, you put $300 in the envelope. When it's gone, it's gone. No going to the bank and withdrawing more money. I have to say that we don't do this but we do know how much we have budgeted for certain things and when it's gone, it's gone.
2. Do not buy things you can't afford. Pretty much a no brainer.....I know it sounds simple, but for some people it's not. When you have a big purchase, such as a car, you save until you can pay for it in cash. If it means driving a clunker while you save for a newer car to avoid a car payment, then by all means...drive that clunker!
3. Be smart about purchases. Do you really need those top of the line shoes or expensive name brand diapers? Pack a lunch instead of going out to eat. If needed, cut out extra unnecessary monthly expenses (cell phones, Internet, cable t.v, etc) to help your debt snowball (I'll get to this in a second)
4. Create an emergency fund that is two month's salary. You never know when someone might lose a job, get hurt or something tragic can happen.
4.5 Credit card is for emergencies ONLY. You can still have one, but it's only for emergencies....and by emergencies I don't mean new jeans on sale. I'm talking toilet geyser, lots of stitches or smoking engine emergencies.
4.75 Plan for retirement and save. This is Lonnie's department.....I glaze over at the mention of the words 401k.
5. Use the debt snowball idea. You use any extra money (you say you don't have extra money, but it's there....it just might be painful to find) to pay off the smallest debt first or the one with the highest interest. Once you pay that one off you use what you were paying towards that debt plus the extra money to pay off the next. This process continues until you have paid off your debts!! (FEEEEELLLLSSS SOOOO GOOOOODDD!!)
When we first started this money makeover we didn't have any children, we were both working full time and we had about $35,000 in debt. This debt included three student loans, a car payment (don't do it!!!) and a little credit card debt. Seven years later we have managed to pay off almost ALL of that debt.....with ONE very modest income!! It can be done! It wasn't easy and believe me there were times when it was pretty painful, but in a few months we can call ourselves debt free. It might mean giving up vacations, shopping at fancy stores, buying new things or even driving one car for a little bit, but it's totally worth it. I have to admit that I love to spend but I love saving even more and I love paying off debt the best.
We try to teach out children good rules for spending, saving and giving and hope that they can grow up in a society that is deeply in debt and not be sucked in.
I hope that you check out Dave's book and really take it to heart. There is no debt that is too big that it can't be tackled and just think of the end result.....LATER you can live like no one else!