Total Money Makeover!

Hey Lovelies! I have Bonnie from The "Sometimes Single" Mom today and I am EXCITED!! She's here to share what she's learned from Dave Ramsey and if any of you have questions, she is up for doing a Q&A post in the future so feel free to ask questions!

"First I would like to thank Mrs. S for having me as a guest. I love reading her blog and was so excited that she asked me to be a guest!

Thanks, Mrs. S! ;-)

Ok, before I get into my post I’m going to give you a moment to get yourself situated. Get comfy, grab a cup of coffee (or whatever your pleasure is) and enjoy!

Over the last few months I’ve become a little obsessed with our finances. My husband “brings home” a pretty decent paycheck and I just couldn’t see where we were spending so much money. I’ve known about the “Dave Ramsey” program for quite some time, and when I first found out about the program I was in major denial.

Yes, we are in debt… just like most Americans. We have little consumer debt, I have some “stupid teenager/young adult” debt, we have a car payment, I have student loans from my Associate’s degree (Thank you Post 9/11 G.I. Bill for giving me what I paid into! But that’s another post for another day). Total, we are about $50,000 in debt. That’s a lot of money to owe people, and I’ve finally had enough.

The Dave Ramsey Program is really just a common sense kind of deal. One of which I am proud to say that I am ready to begin!

Let me go ahead and break down the program for you. The steps are broken down into “Baby Steps” (that makes it much less over whelming in my opinion).

Keep in mind that before you begin the baby steps, if you are behind on any bills try to get current on the ones you are behind on, and make a budget.

Baby Step 1 – Baby Emergency Fund – Save $1000 as fast as you can. This little savings is just in case Murphy decides to pay a visit. You’ll have the cash to pay for whatever the emergency is. Keep in mind, this is for real emergencies… like if your hot water heater goes out, car needs repair, etc… not for a cute pair of shoes that are drastically marked down that you must. have.

Baby Step 2 – Pay off all your debts (except your mortgage if you have one). List your debts from smallest to largest (not the smallest interest rate). The smaller the debt, the quicker you get it paid off. Then you use the money that you would have used to pay off the previous debt and apply it to the new debt. And any “extra” money you find, put it towards your debt.

Baby Step 3 – Start your Emergency Fund – this is separate from your BEF (baby emergency fund).
This is for 3 – 6 months of living expenses. It’s completely up to you how much you want to have in this fund, but in case you or your spouse loses their job (or for us military folks, something happens and we can no longer rely on the military for a steady paycheck), you want to have enough saved so that you can live for a few months if you and/or your spouse can’t find a job right away.

Baby Step 4 – Start saving 15% of your income for retirement. You can put this money in Roth IRA or if your employer will match your funds, go through their retirement program. If you aren’t sure about investing, get with an ELP in your area to help you out.

Baby Step 5 – Save for your children’s education. I think that speaks for itself. Put as much money away as possible to help pay for your kids to go to college. You don’t have to save enough to put them completely through, but in this day and age, anything to help them out with college is awesome.

Baby Step 6 – Pay off the mortgage early. Dave Ramsey recommends that you only buy a house when you can put 20% down and get a 15 year mortgage… but if you didn’t do it the “Dave Ramsey way” then that’s ok too. Since most people will combine BS (baby steps) 4, 5, and 6 just put whatever extra a month towards the mortgage payment. Whenever you have a loan and you pay more then what the monthly payment is, the “extra” money you send in goes directly towards the principle loan. That means, the quicker you pay on the principle, the less money in interest the finance company is getting from you. Sounds good doesn’t it?

Baby Step 7 – Build wealth… and give!

I hope that makes sense. If you’re really interested in starting the program, remember that you don’t have to do everything “by the book.” A lot of people slightly vary from the program and still manage to get their debt paid off fast! You can get “Total Money Makeover” from your local library (which I’m sure Dave would absolutely approve of) or you can buy it. DaveRamsey.com usually has some pretty good sales on a lot of the things that will help you become debt free, but the only thing I have bought is TMMO (Total Money Makeover) on iTunes. I definitely recommend reading his book… and if you aren’t very religious, be prepared because he makes a lot of (totally relevant) references to the Bible. For me, hearing him compare the gazelle and cheetah to finances, completely made sense.

For my family, we are putting all of the hubs “hazardous duty pay” in savings and not touching it since we’ll be moving back to the United States after this deployment. (By the time we leave Germany, we’ll have been here for 4 years… and while I know I am going to miss it, I am ready to get back to America!) The only extra money we aren’t putting away is the Family Separation Pay. We’re starting our snowball with that and I’m hoping to have the majority (if not all) of the consumer debt and my “stupid teenager/young adult” debt paid off. And since we don’t have a mortgage, I’m thinking we will talk about buying a house and how much we want saved before we start looking.

Well, I hope you enjoyed this post as much as I have enjoyed writing it. =) I really enjoy sharing what I’ve learned with others in hopes that it may help someone else."


Sherri Romney said...

Very interesting! Thanks for posting this.

annoyed army wife said...

Great post! Great tips! I was actually quite proud to see we do quite a few of those.

Amber said...

I have read his series and agree with it 100%. It's so difficult to actually practice sometimes - but you just have to commit to it. My hubby and I have agreed that we are going to start it in January 2011 - as our new year's resolution. I'm very excited to see what we are able to accomplish once we commit fully! Thanks for sharing!

Skinnie Piggie said...

A lot of the couples in our young married's group have been talking about this book, thanks so much for sharing! =)

Charity said...

I am planning on doing this as well. I am sick and tired of being in debt and having to watch every penny every two weeks. It is not a fun way to live our lives, and I am tired of it. All of our credit cards will be paid off with my husbands enlistment bonus within the next 2-3 months. I cannot wait, then we are going to start on our truck. We have a mortgage for our house back home which causes tons of stress for me, we are hoping it sells within the year.

JG said...

I love the Dave Ramsey principles. We went to a seminar of his before we got married and learned a lot. Some of his points were more extreme then (He advised not buying a house unless you could pay the WHOLE thing in cash!) but overall, they are good rules of thumb.

Jessica said...

We are big supporters of the Dave Ramsey plan! We started 2 years ago and have paid off over $50,000 in debts. Now all we have is the mortgage and are working to have that paid off as well. We now operate on the cash system...if we don't have cash for it, we don't buy it...pretty simple and saves a lot of arguements down the road =)

It's been a great feeling to "live like nobody else so we can live like nobody else" (one of my fav. Dave quotes)

thanks for sharing this!

Julie the Army Wife said...

I really like his program! We need to get back to it.

Ash and Matt | A SoCal Story said...

I'm familiar with Dave Ramsey because I have a good friend who swears by his system. She and her husband took it to the max and use cash only for all of their purchases (aside from their mortgage). They paid off over $20,000 in debt in record time.

Luckily, Matt and I don't have debts to worry about, but we have a savings system that is pretty similar to his suggestions. My favorite thing about his philosophy is the last step--to become really financially stable so you can help others.

Neidy said...

Love LOVE Dave Ramsey :) I'm in college with ZERO debt thanks to him. Still working my way up in the world with his advice! :) What a great post!

Carmen said...

I loved reading this! I've heard about this book and I've been wanting to get rid of our debt. Thanks for the tips!

AF Recruiters Wife said...

I "heart" Dave Ramsey! We did his class at our last base (the Chapel ahd gotten a grant to pay for it). We paid off everything, except our house and his truck... we could have his truck paid off, but we're divertig from the D-Ramsey path, and doing an adoption, so we'll pay for that before we pay the truck off... he really helped us get a plan, and I can honteslty say in 3 years, we haven't faugt about money!

Erin said...

My husband and I are on this program! It's great!

I encourage everyone to give it a try. In the last 6 months we have already paid off some stuff and are well on our way to paying off more!

Thanks for helping spread the word about it. I tell everyone we know. :)