Searching for Financial Peace
06/14/2004 19:40 Filed in: Personal
How I finally gave up and shaved my head and drank the Kool-Aid...
The only thing that has ever interested me about money is the ability to spend it. However, if you think about it, that attitude has all the maturity of a nine-year-old. A few months ago I began to grow up in regard to handling money. However, it was not an easy journey; it's one that I went into kicking and screaming until I finally gave in.
I used to make fun of people who did the "whole Dave Ramsey thing." I always said that I wasn't going to join that cult. It's funny I would say that because the joke about giving into his principles is that you've "shaved your head and drunk the Kool-Aid."
Why did I do it? It's really pretty simple.
1. I was tired of being broke all the time in spite of having a pretty good income.
2. I was tired of living paycheck to paycheck.
3. I was tired of watching my debt increase month by month.
4. I was afraid to look at a future in which I might not have any retirement saved meaning no financial security when I grow old.
If you can relate to that or if you're just plain interested, keep reading.
The thing I like about Dave Ramsey's plan is that it is manageable. You don't do everything all at once, but you go in what he calls baby steps. Here they are:
1. $1,000 in a "starter" Emergency Fund ($500 if income is udner $20,000/yr)
2. Pay off all debt (except the house) utilizing the "Debt Snowball"
3. 3-6 months expenses in Emergency Fund savings
4. Invest 15% of household income into Roth IRAs and pre-tax retirement
5. College Funding
6. Pay off home early
7. Building wealth! (Mutual Funds/Real Estate)
Kathy and I finished the full-blown Financial Peace University a little over a week ago. When I look back on how far I've come, it's been a long journey. Here's my story...
The fact that I've been irresponsible with money is strictly my fault. I was definitely taught better. My mother was a banker who always stressed saving and not getting into debt. However, I never really heeded her advice. I remember going through the registration line my sophomore year in college and getting my first credit cards. At the end of the line there was a table set up right in the way of students leaving the building. You actually had to walk around it to get out. They were signing students up for Visa cards and Sears cards. If you signed up for both, you got a t-shirt! Who-hoo! Well, guess who got a t-shirt? Yeah, that and a whole lot of misery.
I never really used those cards in college though. It was actually in the first month out of college in my first real job that I took on my first debt. I charged a $1400 laptop (it had 728K of RAM, a 720K floppy and a 20MB hard drive, and a monochrome CGA screen--this was 1990). It's crazy to think that the very first thing I would do out of college is leverage 10% of my yearly salary from my first job, but I did. A couple of years later I remember charging software to that Visa I got in college to the tune of about $200 and the snowball started rolling from there, but it was rolling up hill and getting bigger.
Flash forward a decade later and now I owe...well...I'm kinda embarrassed to say how much. But at last I'm finally growing up and starting to do something about it.
Dave Ramsey says that a sign of maturity is the ability to delay gratification. A friend counseled me a year and a half ago that my problem was that I want what I want when I want it. Gluttony takes on more forms than just food, and I was guilty of this sin. Heck, I was the poster child. I had the best computer, best laptop, best digital camera, best PDA/cell phone, and like the guy says on the TV commercial, "And I'm up to my ears in debt!"
I first put my debts in order from least to greatest with the idea to do a Dave Ramsey snowball well over a year ago. He says to list all your debts from least to greatest and start attacking the lowest one. Once you've paid that one off, take that amount and add it to the next debt. By the time you get to your last debt, you will be making huge monthly payments to get rid of what you owe.
I’d been tracking the debt for a while, and I am a Quicken junkie, so I have minute by minute scrutiny on my finances. However, my debt was not going down because I was still not changing one little (okay, actually big) habit--I was still charging. And, of course, there was no written budget, so when I didn’t have enough money at the end of the paycheck, I would charge meals or groceries or whatever I needed to get by. So I was watching my debt climb higher and higher—but, hey [input sarcastic tone here], at least I was tracking it, right?
Well, I finally got to the point that I had had enough. That was about the last week of December, 2003. I drew a line in the sand that said I wasn’t going to charge anymore. I remember sitting in a Starbucks that morning during the second week of my Christmas break. And I was resolved. No more charging...that was it. Dave Ramsey talks about having some kind of test after you’ve decided not to charge and usually it comes in the form of some kind of emergency. Mine was much worse. I’m telling you I was still in the Starbucks and it had not been but about two hours since I set my resolve before my phone rang and it was Apple Computer! They were calling to remind me that my year’s warranty would soon expire on my PowerBook and it would only cost $300 to renew it for another two years. I said that I didn’t have that much, to which she replied that she could just add it onto my Apple loan! And can you believe that for a split second, I almost did it! I have always bought extended warranties on laptops because the risk of breaking them is so much greater. But all of a sudden my resolve came back and I hung up the phone. I watched the deadline for my renewal come and go and that was that. Of course then a couple of weeks later, the strap on my laptop bag broke and it fell and now my PowerBook won’t close properly, but it still works (I'm writing this blog on it), and I don’t think that kind of accident would have been covered anyway. Regardless, I haven’t charged anything since the first week of December. My credit cards have all been torn up so now I can’t charge even if I want to.
Then a month later, I actually was able to track my debt go DOWN for the first time since...well, as far back as I can remember. Mind you it wasn’t much because I was only making minimum payments, but it was something. A year earlier my stepfather had offered to sponsor me through Financial Peace University if I would take it. So in February, I called and signed up and found a little church in Georgetown, Indiana offering it on Sunday nights (which was what I needed so that I could still continue to teach night classes at IWU on weeknights which I had started in January). They let Kathy take the classes with me at no extra cost.
I gave into this thing one step at a time. First, I was willing to do the debt snowball—a year ago. Then I signed up for the class after deciding not to charge anything else. I was going to do that, but I didn’t know if I wanted to do a written budget. THEN I decided to do the written budget, but I didn’t want to do that cash system/envelope thing. But I listened to all the CDs ahead of time and started reading the books, and decided to just do the whole thing. Kathy and I did separate written budgets in the month before we got remarried. Then after we married we were able to combine our budgets. And although Dave says it takes three or four months to really get your budget right, ours has been pretty solid from the get-go. We tweak it a little bit at our monthly family budget meetings, but it’s working well.
By working extra jobs such as teaching night classes at IWU and Kathy teaching summer classes at her school, and by selling quite a bit of stuff we weren't using anymore, we've been able, on average, to pay an extra $1,000 on our debts the last three months. I don't think we can keep up the momentum for an extra $1,000 of income coming in every month, but that was enough to get the whole snowball rolling and now three of the debts on the snowball are gone and those payments can now be applied to the next debt. It's rolling!
Dave says that normal in America = BROKE. I decided I don't want to be there anymore. If you're in similar straits, I really recommend this program. Plus, it's about much more than getting out of debt. It's comprehensive in regard to finances such as saving for your children's college the right way so that it will be completely paid for. He shows you how to properly invest your retirement savings and explains insurance and how to buy things cheaper than regular retail prices.
And the whole program is rooted in the Judeo-Christian principle of stewardship--that is, properly managing the things you've been entrusted to so that you use your resources to their best potential.
I will tell you that the plan is pretty simple, but it's not easy. It meant for me that I had to grow up, I had to be disciplined, and I had to be a man--but it's worth it.
As Dave says, "If you live like no one else, LATER, you can live like no one else..."
The only thing that has ever interested me about money is the ability to spend it. However, if you think about it, that attitude has all the maturity of a nine-year-old. A few months ago I began to grow up in regard to handling money. However, it was not an easy journey; it's one that I went into kicking and screaming until I finally gave in.
I used to make fun of people who did the "whole Dave Ramsey thing." I always said that I wasn't going to join that cult. It's funny I would say that because the joke about giving into his principles is that you've "shaved your head and drunk the Kool-Aid."
Why did I do it? It's really pretty simple.
1. I was tired of being broke all the time in spite of having a pretty good income.
2. I was tired of living paycheck to paycheck.
3. I was tired of watching my debt increase month by month.
4. I was afraid to look at a future in which I might not have any retirement saved meaning no financial security when I grow old.
If you can relate to that or if you're just plain interested, keep reading.
The thing I like about Dave Ramsey's plan is that it is manageable. You don't do everything all at once, but you go in what he calls baby steps. Here they are:
1. $1,000 in a "starter" Emergency Fund ($500 if income is udner $20,000/yr)
2. Pay off all debt (except the house) utilizing the "Debt Snowball"
3. 3-6 months expenses in Emergency Fund savings
4. Invest 15% of household income into Roth IRAs and pre-tax retirement
5. College Funding
6. Pay off home early
7. Building wealth! (Mutual Funds/Real Estate)
Kathy and I finished the full-blown Financial Peace University a little over a week ago. When I look back on how far I've come, it's been a long journey. Here's my story...
The fact that I've been irresponsible with money is strictly my fault. I was definitely taught better. My mother was a banker who always stressed saving and not getting into debt. However, I never really heeded her advice. I remember going through the registration line my sophomore year in college and getting my first credit cards. At the end of the line there was a table set up right in the way of students leaving the building. You actually had to walk around it to get out. They were signing students up for Visa cards and Sears cards. If you signed up for both, you got a t-shirt! Who-hoo! Well, guess who got a t-shirt? Yeah, that and a whole lot of misery.
I never really used those cards in college though. It was actually in the first month out of college in my first real job that I took on my first debt. I charged a $1400 laptop (it had 728K of RAM, a 720K floppy and a 20MB hard drive, and a monochrome CGA screen--this was 1990). It's crazy to think that the very first thing I would do out of college is leverage 10% of my yearly salary from my first job, but I did. A couple of years later I remember charging software to that Visa I got in college to the tune of about $200 and the snowball started rolling from there, but it was rolling up hill and getting bigger.
Flash forward a decade later and now I owe...well...I'm kinda embarrassed to say how much. But at last I'm finally growing up and starting to do something about it.
Dave Ramsey says that a sign of maturity is the ability to delay gratification. A friend counseled me a year and a half ago that my problem was that I want what I want when I want it. Gluttony takes on more forms than just food, and I was guilty of this sin. Heck, I was the poster child. I had the best computer, best laptop, best digital camera, best PDA/cell phone, and like the guy says on the TV commercial, "And I'm up to my ears in debt!"
I first put my debts in order from least to greatest with the idea to do a Dave Ramsey snowball well over a year ago. He says to list all your debts from least to greatest and start attacking the lowest one. Once you've paid that one off, take that amount and add it to the next debt. By the time you get to your last debt, you will be making huge monthly payments to get rid of what you owe.
I’d been tracking the debt for a while, and I am a Quicken junkie, so I have minute by minute scrutiny on my finances. However, my debt was not going down because I was still not changing one little (okay, actually big) habit--I was still charging. And, of course, there was no written budget, so when I didn’t have enough money at the end of the paycheck, I would charge meals or groceries or whatever I needed to get by. So I was watching my debt climb higher and higher—but, hey [input sarcastic tone here], at least I was tracking it, right?
Well, I finally got to the point that I had had enough. That was about the last week of December, 2003. I drew a line in the sand that said I wasn’t going to charge anymore. I remember sitting in a Starbucks that morning during the second week of my Christmas break. And I was resolved. No more charging...that was it. Dave Ramsey talks about having some kind of test after you’ve decided not to charge and usually it comes in the form of some kind of emergency. Mine was much worse. I’m telling you I was still in the Starbucks and it had not been but about two hours since I set my resolve before my phone rang and it was Apple Computer! They were calling to remind me that my year’s warranty would soon expire on my PowerBook and it would only cost $300 to renew it for another two years. I said that I didn’t have that much, to which she replied that she could just add it onto my Apple loan! And can you believe that for a split second, I almost did it! I have always bought extended warranties on laptops because the risk of breaking them is so much greater. But all of a sudden my resolve came back and I hung up the phone. I watched the deadline for my renewal come and go and that was that. Of course then a couple of weeks later, the strap on my laptop bag broke and it fell and now my PowerBook won’t close properly, but it still works (I'm writing this blog on it), and I don’t think that kind of accident would have been covered anyway. Regardless, I haven’t charged anything since the first week of December. My credit cards have all been torn up so now I can’t charge even if I want to.
Then a month later, I actually was able to track my debt go DOWN for the first time since...well, as far back as I can remember. Mind you it wasn’t much because I was only making minimum payments, but it was something. A year earlier my stepfather had offered to sponsor me through Financial Peace University if I would take it. So in February, I called and signed up and found a little church in Georgetown, Indiana offering it on Sunday nights (which was what I needed so that I could still continue to teach night classes at IWU on weeknights which I had started in January). They let Kathy take the classes with me at no extra cost.
I gave into this thing one step at a time. First, I was willing to do the debt snowball—a year ago. Then I signed up for the class after deciding not to charge anything else. I was going to do that, but I didn’t know if I wanted to do a written budget. THEN I decided to do the written budget, but I didn’t want to do that cash system/envelope thing. But I listened to all the CDs ahead of time and started reading the books, and decided to just do the whole thing. Kathy and I did separate written budgets in the month before we got remarried. Then after we married we were able to combine our budgets. And although Dave says it takes three or four months to really get your budget right, ours has been pretty solid from the get-go. We tweak it a little bit at our monthly family budget meetings, but it’s working well.
By working extra jobs such as teaching night classes at IWU and Kathy teaching summer classes at her school, and by selling quite a bit of stuff we weren't using anymore, we've been able, on average, to pay an extra $1,000 on our debts the last three months. I don't think we can keep up the momentum for an extra $1,000 of income coming in every month, but that was enough to get the whole snowball rolling and now three of the debts on the snowball are gone and those payments can now be applied to the next debt. It's rolling!
Dave says that normal in America = BROKE. I decided I don't want to be there anymore. If you're in similar straits, I really recommend this program. Plus, it's about much more than getting out of debt. It's comprehensive in regard to finances such as saving for your children's college the right way so that it will be completely paid for. He shows you how to properly invest your retirement savings and explains insurance and how to buy things cheaper than regular retail prices.
And the whole program is rooted in the Judeo-Christian principle of stewardship--that is, properly managing the things you've been entrusted to so that you use your resources to their best potential.
I will tell you that the plan is pretty simple, but it's not easy. It meant for me that I had to grow up, I had to be disciplined, and I had to be a man--but it's worth it.
As Dave says, "If you live like no one else, LATER, you can live like no one else..."