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In order to win with money you’ve got to have a plan. People who successfully lose weight and reach fitness goals usually follow some sort of exercise or diet plan. The same is true for your money. If you want to get financially fit you need a plan for your money. This is the plan that worked for us.
Finding A Plan For Your Money
About 9 years ago while driving home from work I happened to stumble upon a radio program that caught my interest. A young girl had called in with a problem and I listened as the radio host patiently and practically walked her through the problem and led her to an answer that seemed pretty basic and simple.
He called her out on any excuses she tried to come up with for not achieving the solution to her problem and reaching her end goal. That was the first time I heard of The Dave Ramsey Show and the man who has been at the top, down to the bottom and right back up again. After listening for a while I bought his book “The Total Money Makeover”.
The book lays out a plan to help you be intentional with your money. The basic premise of The Total Money Makeover is following the 7 Baby Steps:
- $1,000 Emergency Fund
- Pay off all debt using Debt snowball
- 3-6 months expenses in savings
- Save 15% for Retirement
- Save for Kids College
- Pay Off the House
- Build Wealth & Give
Putting The Plan In Action
Being a systematic person I love following a program. Reading the book and listening to the debt free screams on the radio got me really excited.
To get my husband on board we went to one of the live events, since he’s not much of a reader. He reluctantly came along but was just as excited as me and ready to get started when we left.
Our Total Money Makeover Story
We started our Total Money Makeover with $74,600 in debt, not including our house. As young adults we didn’t know much about money. We would buy things and finance them because that’s what everyone else did. Our debt included a car, a truck, an acre and a half of land we eventually wanted to build on, a mattress and some other random stuff on credit cards.
Step 1 – Emergency Fund
We quickly completed the first baby step and saved up $1000 for an emergency fund.
Step Two -Debt Snowball
Then we started the debt snowball. The idea behind the debt snowball is paying off your smallest debts first so you can add that payment to your next debt, and once you’ve paid that off you have more money to tackle the next. It really does give you a sense of accomplishment to have those small wins and start to see the process work.
It took us about 18-24 months to complete our debt snowball and get everything but our home paid off. Let me tell you, not having payments really opens up what you can do with your money. I also believe that when you manage your money well you are given more to manage. My husband and I both went from making modest salaries to now making very comfortable salaries. It’s nice to have control of our money and be able to help others with what we’ve been given.
We try to only purchase things with cash but, sometimes I say we’re on the Dave Ramsey Lite program, since we’ve occasionally borrowed to make big purchases which we try to pay off within a year or so. I think we like the thrill of the debt snowball.
Step Three- Emergency Fund
After completing our debt snowball we saved up our emergency fund of 3-6 months of expenses, more on the 3-4 side, very quickly since we no longer owed money to anyone but our mortgage. Now if we have to buy new tires or fix the air-conditioner a $500 expense is no big deal.
I’m currently working on building our retirement percentage and have started B’s college fund through an Educational Savings Account.
Do What Works For You
The key for getting financially fit is finding a plan for your money that works for you. Find something that you understand and that gets you excited. Just like staying in shape you have to continue to be intentional and stick to your plan to see results.