Saturday, May 31, 2008

Dave Ramsey (TMMO)

I used to have a really bad case of "stuffitis". Really bad. I used to go shopping at the mall, walking out with BAGS of clothes and accessories. I used to go shopping for whole wardrobes, with matching shoes...just about every 4 to 5 months. I used to get makeovers at Sephora, every 6 months, each time buying every brush, blush, eyeshadow, eye cream, foundation, primer, moisturizer, base coat, lash extender, remover, filler, what ever they put on me. I used to buy the IT purse with the matching wallet every three months. I used to eat lunches at restaurants every day, spending at least $14, minimum. Those "have-it-all" stores, I couldn't walk out of there without spending a minimum of 2 hours and $114.00, even if I went in to buy a bottle of laundry detergent.

But, back in March I had Jury Duty. I didn't get to go home by lunch so I asked Hubby to buy me a book. I had just found this great group of women on Cafemom, raving about some bald guy named Dave Ramsey. So, I did a reading through the threads and decided to buy his "most recommended" book : The Total Money Makeover (TMMO).

At the time, I wasn't thinking that much about my finances, other than that THEY SUCKED!! I've always been good about creating a budget, but never stuck with it. I mean, come on, that's what all my pretty credit cards were for, in my brand new *DESIGNER LABEL* wallet, that fit and matched so perfectly in my *DESIGNER LABEL* purse, that, yes, was the IT bag of the season.

I read through TMMO in two days. Re-read it again, with a highlighter and stickies, just to really drill it in. And then, I re-created my budget. Amazingly, I have managed to stick with it. In almost three short months, I have MIRACULOUSLY managed to get rid of about $4,000.00 in debt. Amazing, since I make $2700 a month. And, I'm still working on it.

"How did you do it?" you ask? Honestly, I'm not quite sure. I have managed to pull up from the depths of my being some unknown form of self-control which has hidden itself from me for over a decade. I don't go in to any store anymore "just to look". If I do go shopping, I make sure I have a list, get only the items on the list, and then I must RUN out of the store. Incredible feats are happening now that I've been introduced to Dave.

I have also sold a ton of stuff both on craigslist and eBay. Almost all of my *DESIGNER LABEL* purses are gone, including the one with the pretty matching checkbook wallet. Some of the kids' toys, workout DVDs, some clothes, CDs. Sold. And each time I sold something, I went straight to the bank, deposited the money, came home and opened up my bill pay and put it all towards my debt. Just like that. Didn't stop to surf my favorite sites, didn't even stop on my way back for McDonald's. Just kept my blinders on and moved.

Dave's advice is simple. Actually, most of it is stuff we all already know. But it's something most of us fail to acknowledge and practice. Dave gives a list of Baby Steps to take on and follow through with. You have to know them, understand them, and then do them, in order. And they are baby steps because no one gets anywhere quickly. Not when it's worthwhile. If you take on Dave's challenge, you are striving to change your family tree. No longer will debt haunt you, your family, or your children's family. Your goal is to become debt-free. Your new motto is "Live like no one else so you can LIVE LIKE NO ONE ELSE". Can you imagine? If you didn't owe those credit card companies, the car financer, the mortgage company...how much money would you have to enjoy your life???? Would you finally be able to sleep at night, not worrying how you were going to pay for _________? How different would your life be?


Think about it. Consider this my challenge to you. Get to know my new friend, Dave Ramsey. Listen to what he has to say. And try being weird. You might just like it.




THE BASICS



First, CASH IS KING!! Cash only from here on out, baby!! Yup, if you don't have the money for it, it's not in the budget, you aren't getting it. WAH!!!!!!



Next, figure out your income (yeah, you would be surprised how many people don't know the answer to this). Then, make a budget. List out all of your debts with their minimum required payments. Then your bills: utilities, daycare, mortgage, phones (cellular and landline), and cable. Then, your "life" expenses: toiletries, gas, groceries, clothes, co-pays and prescriptions. You may have more, you may have less.


Now, are you FREAKING OUT? I was.


If what you budgeted out is greater than what you are bringing in - you need to roll up your sleeves, tighten your boots, and get into that budget and rip it apart. You need to figure out where you can cut somethings down or how to bring more in. Personally, I would see where I could cut out. Groceries are a big one. I reviewed my grocery receipts for a month (I'm a paper hoarder) and figured out how to save a minimum of $50 off my weekly budget by buying only what I needed, getting generic products, and using coupons. Cell phones are next: check into getting a cheaper plan, or even a cheaper provider. I used to have *HIGH DOLLAR PROVIDER*. I did some number crunching and PAID TO CANCEL MY SERVICE. $200 out the window. BUT, I was paying about $100 a month for something that I am now paying a little under $50 for. And, I talk A LOT MORE. It was completely worth it. I'm sure you get the picture. As for bringing more in, I've been doing some GPT sites and selling, selling, selling.



THE BABY STEPS



BABY STEP ONE: Get an EMERGENCY FUND. Get $1,000.00 NOW and put it away...keep it liquid (totally accessible). Dave says to keep it in a box in your house, somewhere where you can get it quickly. Personally, I keep mine at the bank, specifically with ING DIRECT. They give you a great interest rate.
Sell whatever you can to get your EF. Pay minimum on everything until you have it. Now, this is your EMERGENCY FUND. Not for dinner or birthdays or just because you see something you think you need. But for life's emergencies that fly at you just when you think everything is grand; Murphies. Remember Murphy's Law: If Anything Can Go Wrong It Will. Like a broken windshield while you are driving down the coast. Or the AC going out. Things of that nature.


BABY STEP TWO: The DEBT SNOWBALL. Gather up all your bills, your checkbook and your bank statements. Figure out your debts smallest to largest (not including your house). Put all that you can towards the smallest debt to pay it off in the least amount of time possible while still making minimum payments on your other debts. Done? Nope. You have to apply all that money you were paying towards that debt towards the next; keep it going, the more you pay off, the larger your "snowball" becomes.


BABY STEP THREE: Complete Your Emergency Fund. Now, you should be debt free except for your home. Your goal now is to create a fully funded Emergency Fund consistent of three to six months worth of income. You can put this money in the bank; even a money market account that will allow you to get to it if you need it without being penalized.

BABY STEP FOUR: Invest 15%. Yup. Prepare for the Inevitable. You should start investing 15% of your GROSS INCOME (not what you bring home, but before taxes) in a retirement fund.


BABY STEP FIVE: College Fund. Got kids? Now you can start investing heavily into their college funds. And you know what? Did you pay for your college? Did you have a job while you went to school? Guess what? It's okay for your kid to do it, too!! Teach them now the value of hard work and an education. Don't let them waste your money getting into Popularity U.


BABY STEP SIX: Pay Off The House. You got the money, now do it. Can you imagine? Being COMPLETELY DEBT FREE?!?!?!?! No Way. Guess what?? You can do it! And you know what, you aren't getting the tax break you think you are getting.


BABY STEP SEVEN: Build and Give. Now, I don't know about you, but I believe in giving back. Some people, those who belong to an organized religous group, believe in tithing. Some don't. But I believe that if you have something, you should share. I believe in giving back. Help those who need a boost in helping themselves. And continue to build your wealth. Invest in real estate, mutual funds and other financial vehicles. And give back. It will make you feel better.


Best of Luck!!