Saturday, September 10, 2011

Total Money Makeover?

I should start this post with a disclaimer. This is not sponsored, this is all my opinion and I'm not paid in any way by saying this.

About a week ago, I called my Dad to announce to him that I had paid off my first student loan. I was very excited and told him that I was sort of loosely following this Debt Snowball method that I found online by a guy named Dave Ramsey (I had never heard of him before). My Dad, a very laid-back guy and not much of a talker, interrupts me, full of emotion "Dave Ramsey! I've been listening to him for the past year and it has totally changed my life! You know, when I started following his program, I had 20 accounts (debts owed), and now I have only 5! It feels so good! I'm getting there."

Picture found here.

I still can't believe we had this conversation. I congratulated my Dad and he congratulated me, and we're both so proud of one another. It's now something we have bonded over, which I love. He mailed me the Dave Ramsey book that he had read, Total Money Makeover, and I just finished reading it last night (I read it in two days...I couldn't put it down).

This book has been a huge wake-up call for me. I tend do be a dreamer and have big goals for myself, and let me tell you, debt is not one of them. But right now, I feel chained to student loan debt. I have to make some changes in my life, so that in the future, I'm in a better place than I'm in now. I'm excited and scared to death to get started, but I've already paid off my credit card (a while back-it felt GOOD!), built up emergency savings and paid off my first student loan. Now I'm gunning for the next one!

If you're unfamiliar with the Total Money Makeover, it basically breaks down everything by steps. Before you start, you need to have a written budget. Every single cent should be allocated before you get paid. This helps stop you from spending that extra money and to keep a close eye on your finances. You also need to make sure every debt owed is current. Then, the book breaks everything down into baby steps, so you can take it one step at a time.

Baby Step #1: Save $1k cash as a starter emergency fund. This is only to be used in emergency. Getting pizza is not an emergency. Your car breaking down and preventing you from going to work until it gets fixed counts as an emergency.

Baby Step #2: Start the Debt Snowball and use it to become debt-free except for your home. Start paying those debts off! Arrange them smallest to largest and pay them off one by one. (This is where I'm at. I'll be here a while).

Baby Step #3: Finish the Emergency Fund. Save 3-6 months of expenses, or about $10k.

Baby Step #4: Invest 15% of your income in retirement.

Baby Step #5: Save for College (for your kiddos).

Baby Step #6: Pay off your home mortgage.

Baby Step #7: Build Wealth.

Have you ever felt bogged down by debt? Anyone tried the Total Money Makeover? I'll update you on how it goes for me, but I'd love to hear anyone else's opinions as well! As for me, I'm excited for the day when I get a paycheck and the majority of it doesn't go to Sallie Mae.

And I promise to post more Panama updates soon, I've just gotta keep my nose out of these books long enough to edit the pictures!

Rachel May