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Wednesday, April 24, 2013

Spending Smart: Dave Ramsey

I hate that I can't remember who first introduced us to Dave Ramsey...I seriously have thought and thought about it and can't put a finger on it! If you were the one who first told me about him, please remind me so I can give you the props you deserve ;)

Anyways, a few years ago I read The Total Money Makeover and I was pumped about it. His method for paying off debt is awesome. Again, this is one of those posts where you NEED to read the book FOR YOURSELF. But basically he suggests writing down all of your debts and how much you owe for each one. Do not consider how much interest you have to pay, just the amount you owe. You list them with the smallest debt first and the largest debt last. You pay the minimum payment on each debt every month and put EVERY extra penny towards the first (lowest) debt. Once that is paid off then you take the amount you were paying on that debt and put it all towards the second one then the third etc etc etc. It's a snowball effect and it WORKS.


Zach and I didn't have a ton of crazy credit card debt or anything like that. We had a small student loan, a couple personal loans (one was with my mom which we paid back in full with interest regardless of what some people may have heard), one credit card, and a LOT of medical debt. Using Dave's snowball system we paid it off and paid it off FAST. It's SHOCKING how quickly you can pay things off using this system.

I read all of the book and thought we were living a modified version of the Dave Ramsey lifestyle. I loved the book so much that started giving it as graduation gifts. The first person who has REALLY taken it to heart though has been Casey. We got it for her for her college graduation and she and Jordan have been AWESOME with it. It makes me GLOW with pride for them as they begin their lives together with a clear goal for financial freedom. Jordan has been on fire about it and talking to him inspired me to re-read the book and REALLY take a good look at our spending.


As ya'll know Zach and I aren't crazy spenders. We really do a great job of saving! And when I read the book I realized we are doing awesome on the percentages...Dave suggests spending a certain percent of your income on each thing every month and we spend less than he suggests (especially on our house!). But also when I read the book I realized we were doing ALL of Dave's "seven steps" at once. Instead of having a narrow vision on each step one at a time, we were spreading ourselves too thin trying to attack every step, each month. I was paying extra on our house payment, saving for retirement, saving for the kids future, saving to have 3-6 months of living expenses, and paying off medical debt (the only debt we have remaining other than cars and house) all at once! After reading the book I wrote out EXACTLY what Dave's plan is and discussed it with Zach. By doing one step at a time we could have the same snowball effect of the debt paying off we saw before and we wouldn't feel SO stressed being spread too thin. While Zach is an amazing provider for our family, I'm the one that manages our finances. I pay the bills and I divide up the accounts and such. He trusts me completely to handle everything and trusts that consolidating all of our efforts into ONE step at a time is the best route to go.

By following Dave's plan many people who start off with WAY more debt than we have end up paying off their house (the last step of the seven step system) within seven to ten years and being completely debt free. Um, even if it takes us 10 years we will still be under 40 years old! Under 40 and NO DEBT???? Sounds AWESOME to me!!!


Since Zach is self-employeed it's tougher for us to have a budget because we have no clue how much money he will make in a given month. It's a feast or famine situation majority of the time. I went through and figured up a hardcore budget. Every bill. Every expense. An average we spend on things like groceries, gas, eating out, "fun money", etc. We decided to have March be our trial month. We were just going to track our expenses but not worry too much about how much we were spending to kinda see what we typically spend and to know what to set for the budget. 


At the end of March I gutted ALL of our savings accounts and put $1,000 into an emergency fund and the rest into a car savings account. We officially have ALL of our medical debt paid off (for now...we are about to be SLAMMED with my foot bills (just the use of the hospital room cost us $4900 out of pocket...) but I have the money in that savings to pay for it!) and our next step in paying off debt is to get rid of having a car payment. Dave says to sell your car and buy a junker with the money until you can afford a nicer car, etc. We have two kids. I do NOT feel safe with me driving a junker! So we decided to just keep my car for now and continue making the payment then next year hopefully we'll have enough saved to trade in my car and straight out BUY a new car for me and plan to drive it till it dies. We decided for now to continue having a car payment for Zach's car. He drives SO MUCH that it just doesn't make sense to pay his off. We can't justify it! But my car payment is much larger than his so being rid of mine would be awesome! Then we can take all the money we are saving for my car and the money we currently spend on my car each month and put that into Step 2 (which will be to have 6 months of living expenses for our family in a savings account..we have disability insurance to cover Zach but it doesn't start paying until 6 months after an accident).


I also took enough from the savings to live off of for ONE month. So during the month of April we would live off the money I transferred from savings and that way we could be a month ahead instead of always having to guess how much money Zach will make. We figured up how much Zach will need to make each month for our needs and he likes having a specific goal to work towards. Now that we have this in place we will KNOW how much we have to live off of each month. If he has a "famine month" in April, for example, then that means we will have to tighten up our spending in May. If he has a "feast month" then we will probably leave a little of the extra money in the checking account to have as a cushion for the famine months but once we get in a good grove and feel comfortable with the system then I plan on transferring extra "feast money" into the car savings/debt paying off account :)


Dave talks about having an envelope system for spending and use cash for everything. Again, we aren't doing that. I know that he is mega against credit cards and says not to use them for the thank you points...but we TRULY pay ours off each month and TRULY use the points strategically. I'm NOT suggesting that most people should pay with credit. But for us, we are VERY disciplined and I think it's okay. We treat it like a debit card and have only carried a balance ONCE (it was the month I had Kye and I just forgot to pay the bill so I paid it off in full the following month). We downloaded a budget app on Itunes/Google apps and are sticking to it. We have it set up with a certain amount allotted for each area and track our expenses as we spend. It's awesome b/c it syncs to all of our devices and tells us how much we have left in each category. At the end of each month whatever extra money we have left over we will put towards the car savings. I also called the credit card company and had them adjust our billing cycle to reflect an entire month rather than mid-month like it was before.


I also downloaded the prep and pantry app and went through ALL of our food to have an inventory of everything we have. I make sure to update it as I use things and to add in things after I go grocery shopping. I did a lot of research and found tips from other bloggers about saving money on groceries. We have cut eating out down BIG TIME (props to Zach for packing those lunches!) and I've focused BIG TIME on not wasting food. I make sure to use things before they expire and I have learned how to freeze EVERYTHING. I now go grocery shopping ONE time a month and make it all last the entire month. No joke!!! We are still hardcore about our Advocare lifestyle and products and have fit that expense into our budget as well each month. We have found a good balance of saving money but also eating healthy!


In thinking about our spending and talking about it together we both agree that EXPERIENCES matter more to us than anything else. We want to make memories with our kids and do fun things together. Our family vacations are SO important to us so I made sure our budget included savings for those trips. We are both willing to sacrifice in other areas to make sure our children don't sacrifice in the experiences we can give them. We both are super motivated to pay off our home and since that is the LAST baby step in Dave's plan, that gives us more motivation to stick to it and see it through so we can get there sooner! Our goal is to pay off our home and then buy a beach house in St Augustine :) We've always wanted to do that and still have that for our dream someday. How cool would it be to have a beach house in 10 years time? Kye would only be 14!!! I LOVE thinking about that! We always thought the beach house dream wouldn't probably be achievable until Kye was well grown and out of the house, so we are PUMPED about this!!!


Whenever we think about spending money we each try to ask ourselves if that purchase benefits us as a family. When we first decided to do all of this I had two trips planned for the month of March. One was a girl's trip with Mrs. Charlotte and the girls and another was to Atlanta for Danielle's baby shower. Neither trip benefited anyone in my little family other than me and it would cost us a good penny for me to go. I just didn't feel okay about it at that time so I ended up backing out of both trips. Saying NO is so important and is something this system has allowed me to work on. Neither trip benefitted our family unit so I backed out (SO unlike me) and I would much rather save the money I would have spent and spend it on other things that would benefit our family.  I've also had to take a good look at my spending and I tend to go overboard with buying gifts for others. Like, for example, whenever we have a baby I go nuts buying "thank you" gift cards for anyone who helps us out during the early newborn days...that's kinda silly haha. I LOVE giving and Dave encourages to have a giving heart, but I need to be mindful of that spending.


While it's been a BIG transition...and a tad scary (hello, gutting my kids savings accounts that we have been putting money towards since Kye was born? Scary!!!) but I am a person who sticks to a plan and can be very hardcore about things (duh, Babywise haha). I am a TRUE Dave believer (and have mad respect for him since he gives glory to the LORD all throughout the book!) and KNOW that his system will bring financial freedom to our family. Already we FEEL a difference. It's freeing to KNOW how much we can spend each month and to KNOW where our money is going. It's even kinda fun! It's like Casey said, it brings out a competitiveness to save money :) Zach has even said it has already helped him feel less stressed b/c he KNOWS what he needs to do to provide for us and he has a realistic goal each month.


I'm SO proud of Casey and Jordan and thankful for their example to US in this adventure. I wish we had read the book straight out of college and could have started this process sooner, but majority of the success stories in the book are from people who are much older than us with a lot worse financial situations than ours so I feel very confident that we'll be beach housin' it up even before 10 years from now :)

Now that we have started being SERIOUS about taking control of our finances I have to say, I KNOW we're doing the right thing because the Devil is just attacking us lately in the financial department. We thought we'd be getting a big chunk back from taxes and instead we owed a big chunk. Zach had two car accidents where we had to pay the deductible on each wreck. My foot surgery is costing us an arm and a leg. It seems like we just keep getting slammed with more and more bad financial news. It makes it hard sometimes to keep our eye on the prize, but I have SO much faith that this is the best way for us to be good stewards with our money and with what God has blessed us with. I know the Devil is hitting us hard and that he only works on people who aren't in his grasp already so the harder we get hit, the more determined I become!


When you read the book Dave has TONS of success stories from people who are financially free. It is SO inspiring and I promise you that no matter how far in the hole you may be, there IS a way out and you CAN and WILL find that financial freedom!!! 

Have you read any of Dave's books? Do you have a success story from using his system? We have paid off over $50,000 worth of debt (yup, you read that right...medical debt is SUCKY) already by using his snowball technique just in the past four years! Now that we are working on our car debt I'm super excited to remain debt free for life!!! I'd love to hear your success stories to help me stay motivated on our journey! I'm sure I'll be referencing our money makeover plan in many posts to come so I wanted to go ahead and write this post so yall would know what I was referring to! If you've never read the book, it's only $15 on Amazon and it WILL change your LIFE. (and his facebook page is a great resource too, especially when you see those motivating quotes popping up on your newsfeed!) I think it makes a wonderful gift and I always write on the inside cover that I know it's not as fun as getting cash for graduation but that it's an opportunity to be a millionaire instead...teach a man to fish right?

5 comments:

  1. Personal question, but doesn't Aflac help cover *some* of your medical expenses?

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  2. Amber KanzelmeyerApril 24, 2013 at 2:07 PM

    I am a firm believer of Dave Ramsey. Someone got us tickets to see Dave for our wedding present and then someone else from church bought us the total money makeover to do with our church a few months after we were married and we have been doing it since. We love living on a budget and we have been able to pay off 2credit cards, my car loan, and Kevin's school loans. It really benefited us in 2011 and 2012 when Kevin decided to go back to school full time so that meant we were living on just my salary which was not much at all 35k. Luckily we had money in our savings and our emergency fund so we did not have to worry about money and just trusted God would provide all our needs. Since we are use to living on that budget and Kevin works now our income has more than doubled and I am able to be a SAHM.

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  3. One of my college classes is based off Dave Ramsey's book Foundations in Personal Finance (college edition). It has been SO great for me. But I tried to do all the steps at once and found myself stressed and spread WAY too thin as well. I'm in the process of starting over and tackling the steps one at a time. It's really cool to see you post on something like this! I'm excited to hear more of what has or hasn't worked for yall.

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  4. We are Dave Ramsey believers too! He helped us pay off ALL our debt, we only have a mortgage payment to make every month, and we pay extra on that (I WISH we could double it, but not at the moment). It is SO comforting to have a solid savings account, and be able to give. I feel like once you realize that your paycheck isn't yours anyways, God shows you how you can use it for His glory! We've been blessed with opportunities to give that I know even a year ago I would have thought we couldn't have afforded to give. I know I blogged about what changes we saw once we began tithing (which was super hard for me), but I'll name them here too for anyone reading: our mortgage was lowered, we received money back from our mortgage company, we were given TWO free vacations, a medical bill was reduced drastically for us, Heath got a raise at work, you introduced me to Advocare, and I'm sure there is more that I'm forgetting!!

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  5. Oh, btw Can you please make a blog post on how you shop once a month? Including meal ideas and coupons?

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Thank you for sharing your thoughts! Reading your comments makes my day!



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