RaVae EricksonI have tried for weeks to come up with a great blog post. An awe-inspiring, earth-shattering, mind-boggling post. Not because I really think my blog post would change the world, but because it bothers me that I cannot think of anything like that at all. It makes me feel dumb, and like I am wasting that brain of mine (trust me, I KNOW I do indeed have one!).
Well, here is my solution. I am going to share our “Dave Ramsey, Stupid-Tax, Stuck-in-a-rut” story with you. And I hope by sharing it Hubbin and I get out of the rut we are in and get back on board with our master financial plan.
Our story starts in November of 2007 when we bought our house. When we closed on our house our Realtor (and his lovely wife) gave us the book “The Total Money Makeover” by Dave Ramsey. This is the same Dave Ramsey who has done all of the Financial Peace University stuff. This particular book takes all of the information from Financial Peace University and compresses it into an easy-read seven step process. If you have never read it (or even heard of it) PLEASE read it today! This is my review of the book: “Read it. Follow it. Live a changed life because of it.”
When we started to read the book in January of 2008 we both really got into it-it made sense! We rushed through the book and plowed into the Seven Baby Steps (SBS) immediately. All the while making spreadsheets for everything from grocery bills to our budget. We made goal sheets and we celebrated every time we reached a goal.
It is not complicated in any way, it is simple common sense. The SBS (along with our story) are:
1) Do everything you can to get a $1,000 Emergency Fund. This we did before the end of January.
2) Pay off all debt using the debt snowball. This is the step where you either get into it or you quit. We really got into it with everything except Hubbin’s truck being paid off (over $20,000 in consumer debt [or stupid-tax]) before our wedding at the very end of May. We then put everything we could into paying the truck off. But despite our best efforts we made a decision in October (to remodel our kitchen using cash we had been using to pay extra on the truck) that moved that date from being around Christmas to being April of 2009 (3 1/2 months past the one year mark). When we paid the truck off we celebrating with a super-fancy dinner and had a great time!
3) Increase your Emergency Fund to 3-6 months of EXPENSES (not income). We opted to shoot for the six month mark realizing we would have various expenses along the way (which we did). We ended up buying jet skis during the summer and set ourselves back about three months in the process (but is was OH SO WORTH IT!). We reached this goal in December of 2009 and entered 2010 by reevaluating our finances once again.
4) Save 15% of all income for retirement in Roth IRA’s/company matched 401K’s. This was a simple adjustment for us as all we had to do was fill our the appropriate forms to change our contribution amounts for our 401K accounts through work. I have to say this is the absolute best place to put this step in the list of the SBS. It is easy to make this transition when you are used to putting way more money per paycheck away in the Emergency Fund.
5) College Funding for Children. When we started this program our plan was to start a special bank account to fund Hubbin going back to school when we reached this step. While he still has an interest in going back to school I don’t know for sure the “when” of this. In the meantime Nov 2010) we opened three Mutual Fund College Savings accounts with the same amount in each account to be used for either Hubbin or our future children. Since I am pregnant now I am extremely glad we went about this the way we did. The accounts are easily transferable to our future children’s names and we are able to leave one account in Hubbin’s name should he decide to finish out his degree in the future. We will be adding a set amount to each child’s account when that child is born (or right before the Little One makes an appearance) to help bolster the account so it is larger when that Little One goes to college. These accounts are also set up to allow deposits at any point in time so we can add more to each account depending on how we decide to do so in the future ($100 each birthday or every time the child gets a paycheck they have to put a certain amount in the account, etc).
6) Pay off Home Early. This is one we have been working on slowly but surely. We agreed to pay a certain amount over the payment every month from the very beginning and have simply increased that amount now that we are on this step. We have decided to also increase our Emergency Fund with a Little One on the way, so we are splitting our funds between the EF and paying off our house.
7) Build Wealth and GIVE! This is something I suppose we are trying to do at the same time as paying off our house. Of course, we will be able to give more when the house is paid off. When we finally get to this step we will be thrilled!
We have already learned so much along the way. We have learned how to communicate about our finances rather than just each spending according to our different money habits and hoping we come out ahead every month. We have learned what exactly those money habits are. And we have learned how to work toward a common goal. We have learned how to sacrifice together. And we have learned how to both trust each other and not break the other person’s trust by doing to difficult thing. Going through this journey together has made our marriage stronger.
I want to give all the credit to Dave Ramsey and his book with the SBS, but I know he is not the one who changed our lives. I want to give all the credit to our Realtor for blessing us with this incredible book, but I know he is not the one who changed our lives. And I want to take all the credit for actually following through with this plan (and we will finish it by paying off our house!), but we could not have done it had Dave Ramsey not written it or our Realtor not given it to us. We could not have done it had we never read the book. We could not have done it without committing to it from the get-go and never wavering. So I guess it is really a mixture of all of the above. God orchestrated all of it to work together to get us where we are, and I am eternally grateful for that.