Wednesday, November 29, 2006

Happy Dave Ramsey Anniversary to Us!


It’s been one year since we began actively implementing Dave Ramsey’s Total Money Makeover program. In this past year we have completely and radically changed how we handle money. The result: in one year we have paid off a whopping $11,113. We have a long way to go (7 years of student loans will do that to you), but we are one year closer to calling Dave and yelling, “WE’RE DEBT FREE!” That is going to be one awesome day in SmallWorld.

So what have we done? First of all, we both read Total Money Makeover. Then we began with Baby Step #1:
• $1,000 to start an Emergency Fund.
And during this past year, we have used that emergency fund for car repairs (twice), a new dryer when the old one finally bit the dust, a new dishwasher (ditto), and oven repair. For all of those things, we paid CASH (which means that we had to replenish the Emergency Fund on several occasions).

Next, we began tracking all of our expenses and created a budget a la Dave Ramsey. After tracking our expenses for a few months, we began using the envelope system for everything except for those bills we pay by mail. This has helped us with Baby Step #2:
• Pay off all debt using the Debt Snowball.
Dave’s system is to pay off the smallest debts first so that you feel successful. It really does work. We paid off several small debts and our van. We have two more debts slated to be paid off in the next few months, and then we can tackle the Biggie (AKA, the student loan). It may be a long time until we get to the next several steps (although we do have some college funding going for the kids):
• Three to six months of expenses in savings
• Invest 15% of household income into Roth IRAs and pre-tax retirement
• College funding for children
• Pay off home early
• Build wealth and give!

So while we still have a long way to go, we have absolutely gotten a taste of the financial freedom—and it so, so delicious. We are about to celebrate our second CASH ONLY Christmas. We have not put anything on a credit card in a year. We planned and budgeted for all of our travels this past year. Randy taught a class this past summer to earn extra money, and, besides my regular teaching at our support group’s enrichment classes, I have been blessed with a regular proofreading job (thanks, Ang!) that satisfies my yearning for a little something extra every now and then. We did not squander away our income tax refund or Randy’s summer salary. Most of all, we have not accumulated any new debt. We changed our behavior, and the fruit has been abundant. I am looking forward to this time next year, when we are even closer to knocking out that nasty debt.

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