At the end of 2013 around Christmas time, I started reading some of the personal finance books I had filled my library with but never made time to read. One of these was Dave Ramsey’s “Total Money Makeover”. I actually got the book for Kevin back in April 2013 but he never read it so for Christmas I got him the “Dumping Debt” video DVD from daveramsey.com and put it in his stocking to give him yet another * hint hint, nudge nudge* It was so important not only for me but for the plan to work that he be on the same page on this. We watched the video and despite not reading the book himself he was on board for the newest and toughest challenge we may face together yet, getting out of debt.
I believe in easing into things, however the very first thing we did when the video stopped was gather the family at the table, bring out our credit cards and had ourselves a credit card cutting party, Caspian got in on the action too. We are currently working on baby step #1, building our $1,000 emergency fund. I know we went a little ahead of ourselves but we wanted to demonstrate some gazelle-like intensity and have no anchors to bring us back to the plastics. Without a doubt Murphy’s Law was about to set it, already this young year we’ve had to dip into our fund to pay some unexpected things that came our way, however it made us that much more excited about the program knowing that we HAD a fund to protect us from life’s blows.
The second step would have been to cut our credit cards but we got a bit ahead of ourselves didn’t we? Next baby step to dumping debt is to sell everything. Dave mentions selling your car but that’s where we lost steam. We can sell things Caspian has outgrown, books I’ve already read, photograph props that are no longer used, random things around the house gathering dust or even the new juicer I got for Christmas that I considered using but then realized how much work it takes to clean it out. But the cars? Not an option. According to Kev even if we sold the car back to the dealer we would have an outstanding balance. I’m not finance major but to have a balance on something I don’t even have the convenience of using seems like a bad deal so we are keeping the cars and instead trying to find a solution with baby step #4 which is what I named finding creative cash.
Creative cash is money that you can make by picking up a few extra hours here and there, working overtime, supplementing your income by finding a part-time job or monetizing a hobby. Kev’s on a salary so most of these were not an option but we are still thinking of ways in which we can earn cash creatively, hopefully my photography and video business can start to pick up here in North Carolina (P.S. Caspian & I love to travel!) All of these extra funds should be used to pay for the last step in the dumping debt recipe and the one that takes the longest time but be the most rewarding, baby step #5, the Debt Snowball. Get an excellent explanation of what the debt snowball entails HERE.
That’s where I will stop because we have a bit to go before we get to this step. According to Dave’s plan you are not allowed to start paying more towards your debts until your $1,000 emergency cash is fully funded. Meanwhile for the first time in our near 5 years of marriage we are now budgeting, using the envelope system. What’s most important I think is that as a family we are being intentional about our present, willing to sacrifice some things we don’t need now for greater things later. We are also thinking ahead and saving for the things we want so as to not feel ‘financially deprived’ including our annual family photography session, Caspian’s homeschool curriculum, next year’s Christmas presents and our dream of a house. We are complete newbies at all of this but we are determined to simplify our living and find financial peace.
Here’s a recap on Dave Ramsey’s baby steps for Dumping Debt:
- Save $1,000 Emergency Fund
- Cut your Credit Cards
- Sell Everything
- Creative Cash
- Debt Snowball
Personal finance has become a recent interest of mine and so I plan to share resources I find, and document bits and pieces of our financial peace journey on the blog . To get more information how you can do it too or purchase the books please visit daveramsey.com