Have you heard of Dave Ramsey? We call him Dave in the Schmidt house. “Dave says…” “Dave would do…” “Dave’s plan…” Here’s a little about Dave from his website.
“After losing everything, I went on a quest to find out how money really works, how I could get control of it and how I could have confidence in handling it. I read everything I could get my hands on. I interviewed older rich people, people who made money and kept it. That quest led me to a really, really uncomfortable place: my mirror. I came to realize that my money problems, worries and shortages largely began and ended with the person in my mirror. I also realized that if I could learn to manage the character I shaved with every morning, I would win with money.”
Who doesn’t want to win with money!?! Here’s a quick disclaimer, I’m going to be as open as possible and if money talk makes you uncomfortable, well, you’ve been warned.
Eric and I were comfortable with our money. We had our debts, ~$20,000 in my student loan (I can’t remember what the exact amount was when we got married), ~$13,000 for Eric’s car, and then $15,000 for my car. That’s $48,000 in debt for two twenty-somethings who didn’t even own a house yet. But like I said, we were comfortable and able to make our monthly payments without much thought. Automatic checking withdrawals made the $775 payments on debt pretty painless.
Then slowly I was introduced to the Dave Ramsey plan through fellow bloggers talking about their Dave journeys. Dave’s entire financial philosophy is centered around 7 baby steps.
1. Save up a $1,000 emergency fund
2. Pay off all debt except for the house from smallest to largest
3. Build up emergency fund to 3-6 months of living expenses
4. Invest 15% of household income into a retirement fund
5. Begin saving for your children’s college fund
6. Pay off your house early
7. Build wealth and give
We are currently on baby step 3 but have modified his steps to work for us. While Eric was deployed I picked up his book The Total Money Makeover and really got in gear about getting out of debt and working to secure our financial future. Working in finance, specifically part of a retirement plan services department, was also a kick in the butt to get things going. I am not going to go into details on how we modified as everyone is in a different situation but slowly we built up a little emergency fund and then threw all our extra cash at our debts.
I’ll be honest, we lost some momentum along the way and would sporadically pay a large chunk of change down on a debt. But finally paying off my car, our last debt, really was something. We have no debt. Zero dollars leave our account each month to pay for something we had purchased months, or years, ago. That extra cash can now go towards things like getting ready for baby Cayden’s arrival and building up our full emergency fund. If the car breaks down? It’s not the end of the world. Getting ready to see a large medical bill after having the baby? Doesn’t really worry us. We are prepared. We have a plan. We will one day have a net worth of over six figures. And I can’t wait to see what good things we can do with that money.
There is more than just the 7 baby steps to Dave’s overall plan. You need to budget every month. He loves to say – every dollar needs a name before the month begins. This has been a HUGE part of our success. He also says to use cash and say goodbye to all your credit cards. Eric and I pay cash for groceries, personal spending money, date nights, the pets, and anything else that might come up during the month. We still use our debit cards to pay for gas and pay all of our utilities online. It’s just easier for us that way and he is okay with that. But credit cards? We don’t use them. I don’t have a single store credit card in my wallet. I cancelled my capital one card. Eric has a capital one card still but it’s not in his wallet and he doesn’t use it. If we want something we save for it and we budget for it. If we don’t have the money? We don’t get it. It’s a weird way to function compared to the “norm” in our society – but weird is good!
I could go on and on about Dave Ramsey, it is something I have become passionate about and there is so much more to his philosophy than what I talked about here. If you want to know more, please ask me! Otherwise go out and start your research and get ready to be weird, but eventually wealthy.
Dave has a website, a handful of books, classes, a radio show (you can listen on the radio, watch on his youtube channel 24/7, watch on his iphone app 24/7, or watch on his website 24/7), and is on twitter and facebook.