I was 32 years old, making $75,000 a year, constantly worried about money, and always feeling broke. My wife and I had a mortgage, a home equity line of credit, a car payment, and two student loans. We lived paycheck-to-paycheck, never able to save, never able to give, never able to live, and constantly playing catch up every time the unexpected happened. Sound familiar? It should because we were normal Americans.
That was in 2013. Today we’re debt-free except for our mortgage. We have an emergency fund that will cover our expenses for 3-4 months. We give to our church, we give to causes that are important to us, and we save, both for retirement and for future expenses. Most importantly, we live, and we are now in a position to choose how. Because of all of that, we have more financial peace than we would have thought possible before.
I’m not bragging. We are well aware that we would never have gotten here on our own. We needed God’s prodding and help, and we needed instruction and encouragement from someone smarter than us. So I’m not boasting, I’m trying to show you that it’s possible. We paid off over $50,000 of consumer debt in 30 months. You can too. You can probably do better than that. So how did we do it? What is our secret? We found financial peace through Dave Ramsey’s Financial Peace.
While I consider myself a pretty smart guy, at some point I had to admit to myself that my plan wasn’t working. We needed a new plan. A process that would give us different results. In 2013, I finally admitted to myself that it was time to follow a method that had some proven results, even if I didn’t agree with everything about it. The imperfect plan that you follow will always beat the perfect plan that you don’t execute.
I’m a Christian, and my church at the time had held some Financial Peace University courses. I had also listened to The Dave Ramsey Show on the radio, and our small group went through a short video series of his. I’ve always been more of a reader, so I read Dave Ramsey’s Financial Peace, The Total Money Makeover, and The Money Answer Book, all in a few weeks. Dave’s no-nonsense practical advice based on Biblical foundations of money management seemed like a good place for us to start. We decided to give it a shot (my wife, perhaps a bit more reluctantly than me at first).
With my wife now on board, we decided to follow Dave Ramsey’s famous baby steps to financial peace.
- Save up and set aside $1000 as a starter emergency fund.
- Pay off all debt except for the house, as fast as you can, using the debt snowball method.
- Save up and set aside 3 – 6 months of expenses as a full emergency fund.
- Invest 15% of your income to retirement.
- Save toward your kids’ college fund.
- Pay off your mortgage.
- Build wealth and give.
It seems pretty simple when laid out in a nicely contained bulleted list, right? It is simple. Not easy, but simple. That’s one of the reasons why it works. I originally planned on laying out a series of extremely detailed posts about how it works, but do a quick web search and you can find hundreds of posts that cover that already. If you felt the need to read this article, then you should absolutely do that too. What’s important for you to know now is that you can use these steps yourself. I know you can do it because I’ve done it. I also know that the baby steps work. I know because they worked for me. It’s not easy, but it’s simple.
There are a few things that are important to getting started. Things you may not hear as much about in other places. There are 2 baby steps that Dave leaves out of his outline. He talks about them quite a bit in his books and his videos, and they deserve a place as baby steps 0.1 and 0.2.
Baby step 0.1 is giving. I’ve got an entire book’s worth of thoughts on giving, but for now, it’s only important to know that it was key to helping us get to where we are today. There’s something powerful about acknowledging that what you have was provided by God. When you not only acknowledge that, but show your appreciation for it by giving some of it away to others, it releases a lot of the tethers that keep you stuck.
There’s a ton of research on this topic, not just from a Biblical standpoint, but psychological as well. I know that for our family, giving was a catalyst that helped us move in the right direction. Even when it didn’t make sense and the numbers didn’t quite add up, once we decided to give first, everything else because to fall into place.
The next step to getting started, step 0.2, is budgeting. This is where I was an intelligent idiot for nearly a decade. I thought I had this part down. I had spreadsheets and I was tracking every penny we spent in about 50 different minute categories. I could probably tell you how much money we spent every month on aluminum foil. Despite the fact that it wasn’t all that helpful, it also wasn’t budgeting.
Budgeting is deciding ahead of time to give yourself limits and having the discipline to stick to those limits. That was the part we were missing for a very long time. With the help of Dave’s process, we finally started to set limits on our spending. As Dave likes to say, we started telling our money where to go instead of just wondering where it went.
The world has sold us this idea of what life is supposed to be like. We’re all supposed to drive new cars. We’re all supposed to own our own home. We have to take 2 major vacations every year. We have to keep up with the latest fashion trends. We have to go to college if we want to be successful. Our culture also tells us that it’s fine, necessary even, to borrow money to do all of those things. We can’t buy used cars, rent our home, skip vacations, buy things second-hand, or skip or put off college. That would be shameful, right? We need to reject the messages that our society has been feeding us. Success comes by redefining what success looks like for you.
We were once normal Americans when it came to our finances. We had a larger mortgage than we could afford because I convinced myself that it was smart to get a tax deduction with my interest payments. We had a car payment we didn’t need because I convinced myself that it was smarter to buy the brand new car and keep it for 20 years, even if I had to borrow to do it. We had school loans because we believed the lie that they were necessary to get our degrees. The only area we differed from most people is we had managed to stay away from credit card debt. We had a decent middle-class salary, and still felt broke and frustrated with our finances.
Financial Peace helped us to change all of that. With the help of Dave’s advice (and God’s blessings), we were able to:
- Pay off our car loan early
- Pay off my student loan
- Pay off my wife’s student loan
- Save 4 months’ expenses for emergencies
- Pay cash for:
- Multiple major car repairs
- Car replacement after an accident
- Over $10k in deferred home repairs
- New A/C Unit on our home
- Pay off our Home Equity Line of Credit
- Start working toward paying off our home by age 50
Give, save, live on on the rest, in that order. It’s really that simple. Not easy, but simple. It’s also possible. You can do it, just like we did it. You just need to swallow your pride, admit you need some help, and then go get it. If you want me to write more about giving, budgeting, or paying off debt, send me an email and let me know.
I highly recommend taking a Financial Peace University course. Find a church near you that offers it and sign up. While you’re waiting for the class, go to your local library and check out The Total Money Make Over. Get started on your own by reading the book and taking some baby steps. The book is practical and actionable and was all that I used to get started.
The baby steps work. It may not be the perfect plan, and it probably isn’t as good as the one you think you’ve come up with. It’s simple and it aligns with biblical principles that have proven their wisdom for thousands of years. Remember, the imperfect plan that you execute will always beat the perfect plan that you never do anything with.
