Our Total Money Makeover

Okay, so this is an advertisement. Or maybe it is a testimonial. Not sure, but it is information for you. :)

A few members of our family have recently started reading and following the Dave Ramsey book, Total Money Makeover. They found some success and suggested we go borrow the book from the library.

I like to think that I have a fairly good financial brain due to great teaching and leading by my mother as well as a great class in college by Mrs. Janke. Thankfully, Mike and I grew up in the same type of environment, so we have been likeminded on financial issues (which I know is a huge blessing). However, this book was kind of an eye-opener to me. We've lived on a budget before. We do work to keep our expenses down. Still the book and principles therein have really been a source of inspiration to us.

His entire theme (in fact it is watermarked on the bottom of every page of the book) is "Live like no one else so that one day you can live like no one else." He does also point out that it gives you the freedom to give, which should be a goal. His point is that you should count pennies, save in every area and work to accomplish a series of baby steps. You start with building a $1000 emergency fund. The goal is never to borrow on credit again, so the emergency fund is there so that when Murphy's Law comes along, you don't have to use a credit card to deal with it.

Once done with that baby step, you work to pay off all debt other than your mortgage and home equity line if it is more than half of your annual salary.

I get fuzzy on the next because we aren't done with the first two yet, but they include setting aside for retirement, college fund, paying off the mortgage and etc. There is also so much more, but you have to read the book to get the full effect and to avoid my misquoting anything.

Anyway, how this has helped us:

1. We have a goal. We have a plan. We are working on it together, so it becomes a bonding thing. We rejoice together over the slightest victory.
2. We are officially on a tight budget and watching where every penny goes right now. Little things that add up normally are not adding up because we are working to avoid them. It is exciting to see the potential to scrimp and make progress towards our baby step. One of our decisions was to ditch the cable television and save that money each month. That will save us time and money, so we are happy about that.
3. One of his statements was to sell things you have now that you don't really need, in an effort to get your debt paid off and not have that burden. He said you should be so aggressive about it that your kids start to wonder if they are going next. In that light, we've been putting stuff on Craigslist and Ebay and Amazon as well as planning a garage sale soon. We are using that money first to pay for our vacation and if there is any left over, to apply it to our debt. It is actually fun and exciting to get rid of stuff and see how it adds up quickly towards your goal.
4. We are using his envelope system successfully. I can testify that it is true that if you are scrimping and saving and then pay for your groceries in cash, you pay much more attention to what you are getting and the value thereof than you do when you put it on a credit or debit card. We set our grocery budget for the month. After receiving Mike's check, we took that amount out in cash and once that money is gone, we will have fun eating out of the pantry until his next check when we can re-fund the envelope.

I'm sure there will be many more posts regarding this in the future, but I hope it is an inspiration to you that if you need some guidance about money, or even if you think you don't, it is a good book to read.