Just wanted to start this post by saying sorry that it took so long to get this second post out. Like I said I might be slow to post, and i'm not going to apologize for that, but i've had this one done for a while now, and then I just couldn't bring myself to actually hit publish when the time was right. We had an intense last week that involved a death of a very close person to us. I'm not saying this to gain your sympathy or have you say i'm so sorry of your loss, because honestly the family needs your thoughts more than us. But it really made me stop and think about the fragility of life and how little time we all have on this earth. So here's a post that's not about life or death, but its about something that is critical to my happiness in this life while I have it, and that's trying to help people. Because while i'm here on this earth I want to do as much of it as I can... So with this post I hope I can help make a real difference in your life or that you can pass it on to someone else who it might struggle with these issues like most of us do.
So we all know you're not supposed to talk about religion, politics, or money, but i've just never cared about what you're "supposed" to do. So first up... MONEY!!
Let's start here, what if someone wrote you $1 million+ check? What would you do with that money? Think of your biggest dream and then keep that goal in mind while you read this..
If i'm going to be honest, i'm 30 years old and this is the first time i've EVER felt in control of my finances. I hated money, I hated thinking about it, I hated keeping track of it, and I really didn't even really care about how much I made of it. It was always just a means to an end. So if I didn't have the means to justify a new pair of shoes in my checking account, well no big deal I had a credit card to put it on! I always made the minimum payments and felt like I was responsible since I was throwing a few hundred extra at my credit cards when I could. I was sold the lie like most people in my generation that you needed student loans and that was normal. So when I looked at my small amount of credit card debt compared to my giant student loans, I felt like ehh those are no big deal, I'll be in debt forever anyways... But then my eyes were opened.
Michael and I are huge podcast listeners and I don't remember how or why we started listening to Dave Ramsey, but one day we put on his podcast and I can't tell you how much this man has changed our lives, our spending habits, my perceptions on money, but most of all our future. I felt like I always heard his name tossed around with people like Rush Limbaugh and other religious, right wing conservative groups and I had thought, I knew what he was about and no thanks! But when we put on his podcast I was pleasantly surprised to realize that yes he is a Evangelical Christian, yes he freely admits that he is a Tennessee hillbilly, and yes he can sometimes say some pretty cheesy one liners, but at is core being he is someone, who above everything else, cares about making wise and intentional decisions in your life and in money! Side note: his producer also has great taste in music! Radiohead and Drake in one episode! I about died :) He also doesn't sugar coat anything to his callers and is giving people honest advice, that is refreshing to hear even when its harsh. He can be hard on people, but he also has one of the kindest hearts and when he says that he's proud of someone for the work they have done, it chokes me up every time!
How does the plan work??
Do you have to be in major student loan debt to listen to him or have a shoe/credit card problem like I did? ABSOLUTELY NOT! As you can see on his financial "baby steps", getting out of debt is only step 2! There's so much more you can do with money, but it all starts with getting rid of that debt and allowing 100% of your income to work for you. Because remember that $1 million+ check that was getting written to you to achieve your dreams and goals? This is how you get to that money, it's written by you and its dependent on the choices you make with money!!!
Since i'm only on baby step #2, i'm going to talk mostly about the first two steps, but check out this link for more detailed info on all the baby steps if you have no debt except your mortgage.
- SAVE $1000 FOR AN EMERGENCY FUND: Do you have debt + a savings account somewhere that you've been storing money away in for a rainy day? Awesome! Take ALL OF IT except $1000 and put it towards your debt... Do it. I know it hurts, I know its scary, but this plan works. Or do you not have any savings? Then look at this as the first step to learning how to build wealth. Sell some stuff, pick up a weekend job, do anything you can to get $1000 put in savings in case of an emergency.
- PAY OFF DEBT USING THE DEBT SNOWBALL: So here's where the tree comes in! Debt can be daunting, especially if its a big number. So stop trying to do it all at once! Think if you were to chop down a tree with an axe, you wouldn't try and take the whole thing down with one swing. You have to start with one small hit and be intentional about where your axe lands to make progress. You can't do it all! So start small! .
- Get organized: Start by looking at all your debt and organizing it by the smallest amount to the largest. This is all your debt except the house. So credit cards, car loans, furniture loans, student loans, and any other kind of consumer debt, group those together. This process is called a debt snowball because its huge in helping you gain momentum. Take every other payment down to the absolute bare minimum payment you can make and throw as much as you can towards the lowest debt. You'll be surprised how fast you get through that first debt! Seeing that momentum and that I was making progress is what really got me excited about this process!
- Figure out a plan: Do you only have one debt? And its large? Yes, this is harder because you don't have the snowball to create your momentum, but its still the same concept! Having a budget is absolutely key no matter how you're organizing your debt!! So start by looking through your budget to see what you can cut! Are you living at the bare minimum in all areas of your life, is your clothing budget to zero, is your entertainment budget to a zero, can you lower your cable costs or utilities? Because the higher that number is every month that your putting towards your debt the more traction you can gain! I was making payments of around $400 every month towards my loans and they had my projected payoff date of being 2030!!! You guys seriously, that's nuts... Now i'm making payments that are easily 4-5x that amount and its amazing to finally watch my principal amount go down for the first time since I got the loans in 2005/2006!!! So its all about gaining momentum, because once you see progress it's so motivating.
- Stop multitasking: If you have debt to pay off, you can't try and save for retirement at the same time. You're doing too much and this is why you're not getting anywhere with any of it. So at this point you also need to stop all contributions to your 401K or any other investing you are doing! It won't be for long, just get this debt out of the way as fast as possible and you'll end up having more to invest then once your back to saving for retirement anyways!
Some things that have really helped us gain momentum:
- The absolute #1 thing to figure out is your WHY! Think back to the beginning, what would you do with that million dollars?! Why would you want to get out of debt? What would you do that could really get you excited if you had wayyyy more money? What if you could travel the world and not work full time because you had the financial freedom to do so? What if you had enough money saved to start your own business without worrying if you could afford it? What if you could buy a lake house or a cabin in the woods to retreat to? What if you had the finances to help make a huge difference in someone's life? What if you could stay home with your kids full time? What if you could finally say I have no more student loan payments!! Or god what if you just want to be able to buy a $400 pair of shoes whenever you wanted to? Because this process isn't easy, so if you don't have a reason why you are putting in all this hard work it's easy to fall off track.
- The EveryDollar app. You may have a handwritten budget or you may not have a budget at all, but this tool for me was absolutely HUGE! To have an app on my phone (which is free) that I could input my spending as I'm at the checkout at the grocery store and see in real time what my budget is doing has changed my spending habits completely! It is designed by Dave Ramsey's team so it is designed around putting every dollar to work for you. So to have the power to assign a dollar to a place that is helping me reach my goals has been so empowering! Rather than avoiding my checking account and hoping I didn't have overdraft fees this month, I'm in charge. I'm in the drivers seat and I'm making my money do amazing things!
-Listen to the podcast on a regular basis! When you're driving to work, making dinner, etc just put it on. I have found that having the principles in my ear regularly and hearing other people's success stories is the best way to keep me focused.
- Contentment. An interesting side effect of this process has been experiencing something that i've struggled with for a long time, contentment. In the world full of instagram and pinterest showing you beautiful clothes, beautiful houses, and beautiful products that will make you happier and more beautiful, this process really helped me take a step back from all of that. Once I removed myself from all my favorite clothing stores email lists, avoided pinterest for a few months, and tightened up my budget on those areas, I looked around and realized how much I already had! Once I stopped caring whether or not I had a new exciting dress on and felt happy and content in my old but still good dress my anxiety about always lacking went away. I didn't care about what everyone else was doing because I had a goal, my old jeans felt better on me, my worn in couch was more comfortable, and I walked taller because I wasn't chasing anything anymore. I have a goal in sight and reaching it will feel so much better than having those things ever would've.
So even if debt isn't a big deal to you, even if you're ok with your car lease, your student loan payments, your house loans, etc. just do yourself a favor and throw his podcast on sometime. See if you can find anything in there that might inspire you to think about your life if you had financial freedom. Because that's what it is, its freedom to do what you want with the money you work so hard to make! Why wouldn't you want to keep it for yourself or use it to plan for your future rather than just GIVING IT TO A BANK? Because giving away your money to a bank because you're not willing to change your money habits, just seems crazy when you look at it. Yes it is hard! Yes you say no to really fun or great things, but remember its only temporary! Because once you have reached this goal, the options and possibilities for where your life can go all of a sudden open up wide!
My hope is that you are inspired by this, not just so you can go out and become a millionaire (even though that can also be a side effect of this process), but so you are inspired to take charge of your goals and dreams and see that being financially stable is the easiest way to get you there! If I can do it, trust me you can too!! My amazing friend/yoga teacher, Cordelia, makes us say this all the time in class and I love it, because guess what "YOU GOT THIS!!"