I don't know which one thing I should say I am thankful for from yesterday! So, I guess I'll go with Dave Ramsey. I first learned about Dave Ramsey in the spring of 2008. Some ladies at a Bible Study I was attending were talking about him. When I got home that day, I looked him up online and the rest is history! Dave lives completely debt free and has a method called the 7 Baby Steps that he teaches to help others get out of debt. I started listening to the first hour (of three) of Dave's podcast that you can download free on iTunes to learn all I could.
Baby Step 1 is $1000 in the bank as a starter emergency fund. We got that easily because we already had a few thousand in the bank from a couple money market accounts we started when we got married and lots of savings bonds from Isaac's childhood. Check!
Baby Step 2 is the debt snowball. You are supposed to pay off all your debts except your house as quickly as possible, starting with the smallest payoff amount to the largest, and turning old minimum payments into a "snowball" effect on the next debt. We had a few credit cards, a small student loan, and a larger van loan. This is where we had to decide to get serious if we wanted to get out of debt. We cashed in the money market accounts except $1500 in savings bonds, we got a couple insurance payments from hail damage (although we did have to replace our house roof), and we started our debt snowball. We tried to get out of debt without making a budget and we weren't doing very well. In January 2009, we made our first real budget and started using cash envelopes for quite a few spending categories. Over several months, we kept tweaking it and by May 2009, we were debt free except our house! During this time, I was learning more about Dave's program called Financial Peace University, which is a 13 week video series of him teaching almost everything you can know about money (or at least everything you can learn in 13 weeks!) We saw that a church 30 minutes away was hosting FPU and we debating on spending all the gas money and extra time driving to it when we decided that we would just start hosting it at our church. We started our first FPU class in the summer of 2009.
Baby Step 3 is a fully funded emergency fund of 3-6 months of expenses. Our monthly written budget and lots of long hours of Isaac re-roofing several houses in the county, helped us along the way. We finished our FFEF in October of 2009.
Baby Step 4 is contributing 15% into retirement. We didn't get this started until January 2010 because I was trying to get our checking account built up so that we always have a one month buffer in our account because of Isaac's unstable line of work. (And, it did end to be a very slow winter)
Baby Step 5 is contributing to kids' college accounts. We haven't completely decided yet what we are going to do for this, so we skipped it!
Baby Step 6 is pay off your house early. In January 2010, I looked at our house loan and made a goal of paying off $10,000 of our house, which had a balance of just over $19,000. We got super gazelle intense and me, being a numbers person figured and re-figured and figured again how we could get the house paid off faster. In July, we decided to temporary stop retirement funding and put it all on the house (which the goal of repaying the retirement fund once the house was paid off.) We scrimped and sacrificed and lowered our FFEF amount a little bit, which brought us up to Monday of this week. Isaac called the bank to get the payoff balance and it was less than I was expecting. So, after he got paid from his work for the first week of November, we had enough money to make the trip to Kirksville and write the final check to pay off the balance of our house!
Baby Step 7 is build wealth and give, and I'm looking forward to it! We have a lot of smaller goals now, like refilling retirement and our FFEF and saving for some things we've put off (new flooring in the living and dining rooms).
If you live in the Unionville area and haven't been through Financial Peace University, we will be starting again in January and would love to have lots of people come. You will learn a ton of things, whether you have a lot of debt or no debt at all. The lesson on insurance saved us a lot of money in our monthly budget. And I will make a yummy cake for our graduation!
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