Freedom

Take a trip with me back to the first quarter of 2008. We were in the middle of small home remodel, and Cary was due to give birth at the end of March with our second child. We financed the remodel as a second mortgage using the house as collateral. Payments wouldn’t be a problem based on our recent change from a one income to a two income household. In addition to the mortgage, we had two car notes, and a relatively small amount of credit card debt.

I would run up our credit card paying hospital bills, and an occasional indulgent purchase here and there, but wasn’t serious about paying it off in any particular time frame. We never used the credit card for daily expenses such as groceries or gas. Overall, it wasn’t a ton of money, but added up it came to around $32,000, minus the first and second mortgage. Wait, that is a lot of money when you say it out loud. THIRTY-TWO THOUSAND DOLLARS. But wait, a lot of that is car debt. We’ll always have a car payment, so that doesn’t really count, right? Uh, yeah, you owe it, and believe it or not, having a car payment is a choice.

We were never late on payments, and had “extra” money each month to spend on what we wanted. We regularly contributed money to our 401(k)’s, and even had a few thousand dollars in savings. We are also tithers, so 10% faithfully went to the church. Our financial situation, in comparison to others, wasn’t bad at all. We were pretty much normal, if not a bit above average.

Then, [cue dramatic music -- dum, dum, dummmmm] I ran across this guy by the name of Dave Ramsey. I didn’t actually run into Dave Ramsey, but I did find his book somewhere, probably in that dreaded store that starts with a dubya.

I quickly consumed the book, and began to realize this was the first piece of financial material that gave practical, step-by-step advice on how to handle money. I’m a slow study, so I need some hand-holding. I’m also a very detailed person, so I was pleasantly surprised to find “The Total Money Makeover” breaks down this giant elephant into small manageable, bite-sized, pieces. That’s how you eat an elephant, you know. One bite at a time.

We were doing many of the things Dave suggests, but not with focused intensity. We were tackling to many things at once. We would pay off a credit card, while contributing to retirement, while making car payments, while cash-flowing certain things, while putting debt back on the credit cards, while talking about the need for a college fund for the kids. You get the picture. We never felt like we were making any progress because we had not positioned the magnifying glass in the right spot. I loved burning leaves as a kid with a magnifying glass. This program is much like that. You have to be ‘gazelle intense’, and focus everything you have on one thing at a time until you get out of debt. Then, you can slow down and do other things. But, if you’re in paying-off-debt mode, don’t even think about anything else. More on that later.

Having the experience of being on both sides of this equation, I can tell you it was worth every sacrifice to get to where we are today. The biggest wealth building tool we have is our income. If our income is being taken up by car payments, a house we can’t afford, or the latest tech gadget (hey, I’m a tech junkie), then we will never build wealth, or have financial freedom.

Let me warn you. This program is not easy. This is not a get-rich-quick scheme. This program is built on basic, common sense principles. Dave says personal finance is 20% knowledge, and 80% behavior, and I can attest to that. If you’ve ever tried to change your behavior, you know how hard this will be. You will be required to change. Depending on your situation, it may take years to complete, but don’t get discouraged right away. You can do it. I believe in you. The average person/couple who decides once and for all to get out of debt spends 18 months paying off everything but the house. That’s the average. For some it will be more. For others, it will be less. But, it works, and it’s worth it.

In my next post in this series I’ll explain the basics of The Total Money Makeover, and the challenges we had with each step.