Personal Finance = 80% behavior and 20% head knowledge. I can agree with that; while I have learned A LOT in the past couple years, I believe I’ve always had the general idea of what should be done with money…I just never did it. My dad would always try to get me to save my money growing up, even telling me that he would match me dollar-for-dollar on larger purchases if I did my part of the deal first. This literally NEVER happened. Money burned the proverbial hole right through my pocket and was typically gone about as quickly as I could get my hands on it. I was constantly buying worthless crap like the boxes full of baseball cards currently sitting in my parent’s attic. Sure, I’ve got a few that may be worth a couple bucks, but I can’t even imagine how many hundreds of dollars I’ve wasted throughout my life. Unfortunately, those habits carried over into my late teens and early twenties, and it wasn’t until I started working as a nurse’s aide during my first year of nursing school in 2010 that I began developing my retirement portfolio as it stands today. My first retirement investing came in 2006, in the form of buying payroll-deducted stock in Walmart while I worked there during my first two years of college, obtaining an Associate’s degree that isn’t worth a hill-of-beans anymore. After graduating from that program, I started a brief stint as an insurance salesman in 2007, eventually having to cash in my savings to pay back some income received on policies that were dropped after purchase. Anyway, investing as a CNA rolled over into my first nursing job and has since carried over into my current position with the federal government.
After reading Dave’s books around the time of our son’s birth in September of 2014, my three recommended readings are The Total Money Makeover, Dave Ramsey’s Complete Guide to Money, and Financial Peace. These books offer an excellent beginner’s step-by-step introduction to personal finance and a simple approach to get yourself out of debt. The seven baby steps are in plain English and easy to understand; while I’ll be the first to admit that we haven’t followed them precisely and actually got away from them over the past year, we are revisiting and working them back into our lives, especially the idea of the debt snowball. If you’re looking to get out of debt, have no clue how to go about doing it, and haven’t read Dave’s books, I encourage you to do so. Before beginning, it is important to develop your zero-based budget, whereby you “tell every dollar where to go” – i.e. your take-home pay minus your outflow (bills and/or savings) equals ZERO. The Monthly Cash Flow Plan form can be downloaded and printed out from the following website – https://www.daveramsey.com/budgeting/how-to-budget/.
After you get your budget hammered out, the Baby Steps are as follows:
Step 1) Save $1000…FAST! Pay only minimum payments on your debts to stay current on your bills and throw every other extra dollar into cash savings for your starter emergency fund.
Amazingly, we were ahead of the game on this. We had bout $3000 in cash saved at the time and, although Dave would’ve had us fork over two-grand to debt, we couldn’t handle the thought of parting with that cold-hard-cash.
Step 2) Debt Snowball time…it is incredibly fun and exhilarating to start scratching debtors off your list! This list is to include every debt you have, with the exception of any mortgage you may have on your house. You can read about Dave’s advice on mortgages if you are inclined to do so. During this time, according to Dave’s advice, you should not be contributing anything to your investment accounts.
Since we started on this step, we started by having a “plastectomy” and cut up our credit cards. Afterwards, I listed out our credit card debts on a Word document and kept track of every payment we were making, scratching them off one-by-one until they were annihilated. I still have that list at the bottom of the Word document I use as our budget and still get a kick out of looking at it . It should also be noted that I couldn’t completely agree with Dave on the no-investing advice. I kept my TSP contribution through work at %5 in order to get the matching contribution. I couldn’t wrap my brain around turning down free money. What you do with that decision is ultimately up to you. Also,we don’t have a mortgage, as we are renting (AND LOVE IT!) Additionally, we still have our Jeep payment, which we bought NEW prior to learning these newfound principles of personal finance. However, throughout my learning process, we reevaluated our situation, refinanced the Patriot from 4.5% to 2.25%, and continue to pay a little bit extra each month, while primarily focusing on my wife’s student loans.
Additionally, I love my job and am incredibly fortunate to be a Registered Nurse working for the Indian Health Service, a division of the Department of Health and Human Services and, due to working and living where we live, my 50+ THOUSAND DOLLARS worth of student loan debt is being repaid with my ongoing time commitment. I couldn’t be happier to have that weight off our shoulders and, if you’re reading this and interested in the IHS Loan Repayment Program, I would love to talk to you more and point you in the right direction, so please reach out to me.
Step 3) After all debts, excluding your mortgage (if you have one,) then you finish building your emergency fund, suggested to be 3-6 months work of expenses.
Sadly, we haven’t gotten to this step yet. As mentioned above, after getting our credit card debt out of the way, we slacked off on the debt snowball and I began ramping up our investing. This came about primarily because I began reading several early-retirement blogs that got me more interested in the idea of doing just that…retiring early. Therefore, over the course of a few paychecks, I ramped up mine and my wife’s Traditional IRA contributions (through payroll allotments directly to E*Trade = NEVER SEEN, NEVER MISSED ) to come out to just shy of the maximum annual contribution and got my TSP contribution up to 15% of my annual pay. I would’ve had to upped it to about 28% to max it out but we hadn’t gotten that high yet. I only recently brought investing back down to the prior %5 with no IRA contributions in November, in order to refocus on demolishing my wife’s student loans – progress of this will be further detailed in a later post.
Step 4) With a fully funded emergency fund, then you up your retirement investments to 15% of your pay. Dave provides further details regarding how this should be allocated in his books.
Step 5) Start funding your kid’s college fund, if necessary.
Step 6) With steps 1-5 complete, then you throw every extra dollar at your mortgage until it is gone.
Step 7) Get rich and spend your time trying to give it away to help as many people as you can.
There your have it. Please note that I’m in no way affiliated with Dave Ramsey, receive absolutely nothing for my opinions, and accept no liability with regards to the information in this post. I just want to put the information out there, encourage you to see if his methods can have a positive impact on your financial situation, giving you a place to start making changes in your family tree. While my wife and I veered from the path for a little while over the past year, we are working on getting back on track, and I’m here to tell you, at least from this guy’s perspective, the system is working. Just for a little perspective, we got back on the Debt Snowball on November 9th and, in just 44 days, we have paid off $3000 of my wife’s student loans!
While we haven’t followed Dave’s plan to a T, we have altered our finances in many positive ways, thanks in major part to the ideas and principles he has put forth. We have taken them, tweaked them to fit our situation, priorities, and goals, and could not be happier with the path we are on. Our son will be forever fortunate that we have implemented the changes with regards to our money and he will be immensely benefited by the knowledge that we will have the opportunity to instill in him, thanks to Dave Ramsey and the numerous personal finance blogs that I now follow on a regular basis, all of which, as previously stated, will be discussed in a later post. Thank you for reading. I hope you have learned something or, at the very least, gotten the spark to do your own research and look further into how you may benefit from implementing these ideas. Please reach out to us to discuss anything.
Frugal RN and Family
“IF YOU WILL LIVE LIKE NO ONE ELSE, LATER YOU CAN LIVE LIKE NO ONE ELSE.”
– Dave Ramsey