Last year, The Accountant and I went to the library and picked up a great new book. It's called The Total Money Makeover by Dave Ramsey. While we are not completely debt free, this book helped us pay down a significant amount of our debt and stay focused on our goals of living sensibly. In a nutshell, here are Dave's 7 Baby Steps:
1) Create an $1,000 Emergency Fund
2) Pay off all debts with Debt Snowball
3) 3 to 6 months of expenses in savings
4) Invest 15% of income into Roth IRAs and pre-tax retirement.
5) College funding for your children
6) Pay off home early
7) Build wealth and give
At this point, we are still on step two, working hard to pay off our student loans. This is our only debt other than our home. This past summer, we paid off $5,000 on one of my student loans. You can only imagine the happy dance we did!
Dave recommends cutting up all your credit cards. We just could not do it. Although, we went down to one card for each of us and it's only used for gas and emergencies. Nine in a half times out of 10, we use debit, cash or check for purchases. It just feels more significant paying with these methods and I found that we used our credit card less often.
Another concept we just couldn't get on board with was Dave suggesting another job or source of income to pay off debt. Our family has one car, two kids under three and The Accountant works at least 50 hours a week. It just was not possible. However, The Accountant interviewed and was offered a new position out-of-state. Therefore, we decided, for financial and many other reasons, to make the big move.
On Monday, I'm going to go deeper into budgeting: what exactly is in our budget and how we decided on the dollar amount!
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