Whose Cash Is It?
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It doesn’t matter how big a house you live in , or how fancy a car you drive, or how many designer names you have in your closet – if you owe money to somebody, you are not wealthy.
Dave Ramsey
This is a hard concept for some people to get. I know it used to be hard for me. I would say, “Well at least I’m paying cash for this (insert item here).” If you have debt, “paying cash” doesn’t mean squat. You are just using money that belongs to someone else – your debtor.
To put a personal spin on it, let’s say you loaned me $500 and I have not paid you back yet. After a few weeks, I call you and say, “Great news! We were able to save up $500 so we bought airline tickets to Vegas! Wow, it feels great to pay cash for it. We are so responsible with our money.”
How would that make you feel? Wouldn’t you think that you should get your $500 before I use it for a vacation? Doesn’t it seem like I’m going to Vegas with your $500?
Get your debts paid off so your cash belongs to YOU. Then when you pay cash for something, you truly are paying with your cash.
Don’t Let Your Life Be An Embarrassment
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I heard a story on Dave Ramsey’s podcast last night that blew me away. Unfortunately, it’s probably more “normal” than I even realize.
The caller went on and on about how he had a great income, they lived a good life, always had money to pay for everything they needed, went on fancy trips, bought great gifts for each other…you get the picture. His income was $250,000 and from what he said I’m guessing they looked every bit the part of the “wealthy” family that most people have in their heads. The truth, however, was totally opposite.
They had a $390,000 mortgage, $70,000 in car loans, $75,000 in credit card debt, and a $40,000 heloc. This family was making a ton of money, but their “fabulous” lifestyle left them completely broke. He admitted that he had nothing in savings. From the tone of his voice, I still don’t think he understood his situation because he was still using words like, “We are doing well” and “We can pay for everything we want”. Well obviously he can’t pay for everything he wants. Dude, look at your debt!
Dave said to him, “If you wake up 5 or 10 years from now and still have no money, that would be an embarrassment.”
I laughed out loud at his comment, but it’s actually true for all of us. The knowledge you need is here on this website. It’s in books. It’s on the radio. It’s in your own head if you would step back and think about what makes sense.
If you – yes YOU – wake up 10 years from now and have no money, it will be an embarrassment.
Overspending
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An excellent quote from a Dave Ramsey caller yesterday:
I’m scared of a government that continues to reward people who overspend.
All We Need Is Just A Little Patience
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I love technology that makes life easier. I have a PDA, a laptop, an iPod, and more email accounts than I care to tell you about. I wonder what I did before these things even existed.
While technology is great, it has made this an extremely impatient society that we live in. If we want to talk to someone, we call their cell phone and expect them to answer. Or we email them and expect a response within a few minutes. If they don’t answer their phone or email us back almost immediately, we call/email again. “Where are you?”. If still no answer, we text them. If we want something or need someone, it must happen now!
Unfortunately, this is not the way money works. Money does not, in fact, grow on trees. I know because I’ve gone outside to look several times.
By the time my husband and I get out of debt, it will have been two years since we started. That can seem like a long time to some people – too long for most. But it must be looked at a different way. Two years of spending cutbacks is absolutely nothing compared to spending the rest of my life with plenty of wealth, no money worries, the ability to take my family on vacations whenever I want, and the ability to give away money like I’ve never been able to before.
A lifetime vs. two years. I’ve chosen lifetime.
Extra Money
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A major key to us getting out of debt was looking for any extra money we could. This month I have two examples that have affected us that may give you some ideas on where to look for extra money.
Extra Money Example #1 – Extra Paychecks
For our monthly budget, we expect 2 paychecks for me and 1 paycheck for my husband. My company does payroll every two weeks, which means there will be 26 paychecks throughout the year. If you calculate that out, I will receive two extra paychecks than I have budgeted for, so it’s like getting an extra month’s pay!
Years ago, I wasn’t even aware of these extra paychecks. I did not keep track of paychecks. As long as there was money in the account, I paid the bills. End of story.
Now all extra paychecks go directly toward our debt. What a difference it has made! I can’t wait until we are out of debt and I get those extra paychecks all to myself.
Extra Money Example #2 – Changes in Fixed Payments
We got a surprise notice from our insurance company last month. Our monthly insurance bill was reduced by $13.00! Normal people would say, “that’s nice” and forget about it. People who are not normal, like myself, do something intentional with that money. Each month when the insurance payment is made, I will also be making a $13.00 principal payment toward our debt.
I do something similar with paychecks. Each time our paycheck amount changes, I figure the difference and send that extra amount to debt as soon as I’m paid each time.
Take a look at your own finances. Where could you find some extra money?
Getting Money vs. Keeping Money
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Your alarm goes off. You roll over and think, “Monday. Ugh.” You force yourself out of bed, get in the shower and go through the motions of getting yourself ready for work.
While you are at work, you may have children in daycare. Or your kids may have to be home all by themselves for a short time either before or after school.
Your work may prevent you from attending your kids’ concerts, games, or coaching their little league team. Work may keep you from spending holidays with extended family.
Work most certainly adds an extra amount of stress to your life. It can cause you to be in a bad mood when you get home, which then ruins valuable family time. It can keep you awake at night with worry.
All of this for what? Money. Moola. Cha-ching. Oh, I know they are other benefits, but mostly we work for money.
So my question is this: Why do people put so much effort and sacrifice into getting the money, yet almost no effort or sacrifice into keeping the money?
Have a Story To Tell?
Filed Under People You Should Know | 1 Comment
I’ve been pretty open about my financial story for the sole reason of getting others inspired to take ownership of their financial lives. But there are more stories out there.
If you have an interest of sharing your financial story or “lightbulb moment” when you realized debt was dumb, leave me a comment or email me. I’ll highlight your story in an upcoming post. You can write anonymously or I can link to your blog if you have one.
Easy Way Out or Behavior Changing Way Out?
Filed Under Debt | 2 Comments
In today’s society, we want everything to be easy. We want television watching to be easy so we get a big screen and make sure we have enough remotes so we don’t have to get out of our chair. We want driving to be easy, so we buy a GPS system so we don’t have to follow a map. We even want eating to be easy, so we rely on microwaveable meals and quick fix meals.
We also want our finances to be easy.
What would be the best way to get out of debt?
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Winning the lottery?
Having a family member give you money?
Having all your lenders decide to forgive your loans?
File bankruptcy?
Cut back your expenses, earn extra money, and pay down your debts a dollar at a time over many months or years?
Of course the first 4 options would be the easiest. A snap of the fingers and you are done. But that’s only a temporary fix. I firmly believe that if you don’t go through the struggle to pay off the debts you owe, you will quickly find yourself there again. The pain of reducing the debt yourself teaches you that you will never, ever put your family in that situation again.
If you give a man a fish he eats for a day, but if you teach him to fish he eats for a lifetime.
I just started reading “How to Have More Than Enough” by Dave Ramsey. It’s a workbook-type book and talks about success in all areas, not just financial. It’s unbelievably good and you should start reading it right away.
Winner!
Filed Under Books, Debt, Personal Development | Leave a Comment
Congratulations to Amanda Chapman! She was the lucky winner of the Dave Ramsey book giveaway. I’ve emailed you, Amanda, so send me your address and I’ll get it sent out right away.
I had tons of comments from people who have heard of Dave Ramsey but didn’t know much about him. A lot of people said they really needed financial help. Get yourself a copy of Ramsey’s book The Total Money Makeover today and change your life. You won’t regret it.
Thanks to all those who participated in the giveaway!
Dave Ramsey - Baby Step 2
Filed Under Debt | 2 Comments
You’ve got your $1,000 saved after going through Baby Step 1. You’ve set it aside in a place where it’s not too easy to access. Now you are really ready to dig into what can be the longest and most painful, yet most satisfying, Baby Step. This step will force you to “live like no one else so that later you can live like no one else.” It’s called sacrifice.
Baby Step 2 – Pay off All Your Debts
To get started, write down a list of all of your debts except for your mortgage. Put them in order of smallest to largest because this is the order you are going to attack them with. I recommend putting this list where you have to look at it every day. When our list was longer, it hung on the refrigerator so it was always in front of our face!
Many people ask Dave, “Shouldn’t I pay off the high interest ones first?” This step is more psychological than mathematical. You need to feel what it’s like to pay off a debt. You need to feel what it’s like to close a credit card account. So no, don’t put them in order based on interest rate. Start with the smallest and work your way to the largest.
Now we’re getting into what’s called the debt snowball. The first step is to get the smallest debt paid off. Once you pay off the first debt, use all the money you were spending on that payment and apply it as additional payment to the second debt. Once you pay off the second debt, use the money from the first two debts and add it to the payment for the third debt. And so on. I can promise you the debt snowball works. You will be amazed at how fast the debts disappear.
We are currently toward the end of this step. Even though we’ve got money flying out the door to get rid of our debts, it feels GREAT. I love looking at my loan balance on line and seeing it drop like crazy.
Depending on how much debt you have, this step could take a few years. Do not get frustrated! A few years of focusing on your debt is so much better than having it hang over your head for 10-15 years.
The sacrifice is worth it. I’ve never heard of someone getting to the end of this step and say, “Wow, I really wish I wouldn’t have paid off all my debts. I felt much better about my financial situation when I was making all those payments each month.”
Good luck, friends!
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Another way to solve the traffic problems of this country is to pass a law that only paid-for cars be allowed to use the highways. Will Rogers
