Yeah, I ripped that phrase from Dave Ramsey, but I don't think he minds. Truth is, my wife and I have committed 100% to a "Total Money Makeover". Another truth is, we have not handled our finances in a Godly manner - in any aspect.
We're sick and tired of being sick & tired.
Tired of living paycheck to paycheck, wondering when the next emergency is going to strike and how we will pay for it.
I make too much money to be this broke.
Trust me when I say this, this is not me being pretentious, or entitled, or whatever noun you want to use to describe someone who makes a statement like that!
In my mind, that statement means I am finally going to start winning with money. I am no longer going to be victim of my own wrongdoings, rather, an intentional, wise, grounded spender of what God has so graciously blessed me and my family with.
We are going to start telling our money what to do rather than wondering where it all went.
How does one do this?
First, as fast as you can, save $1,000. This step is crucial is creating a little gap between you and Murphy. Murphy is the guy who strikes when least expected. Broken down car, utility at home goes out, etc.
It starts with a budget. A budget is the foundation towards financial freedom. A budget is a plan. A budget is telling your money what to do instead of wondering where it all went.
We started with an in depth Google Sheet that breaks down everything in an extremely detailed manner. We had a short stint with the Everydollar App, around 15 days (one pay period) and realized that wasn't for us. It does work for some, just not us. I would be happy to share my Google sheet with you, just write me an message here and I will share it with you.
Next is the Debt Snowball. This is the step we are currently on. Throwing as much money as we possibly can towards our smallest debt, while continuing to pay minimum payments on all other debts. After getting on a budget, we are able to throw as much as $3,900 towards our smallest debt per month.
Once that smallest debt is wiped off the face of the earth, you move to the next smallest one, and repeat. Rince, Clean & Repeat.
On this plan, we will be debt free at the end of August - paying off over $25,000 in consumer debt. Again, I am not bragging, just proud that my wife and I are battling through this together.
Next step, after your debt is all gone not including your home, you want to grow that starter Emergency Fund (currently $1,000) to a Fully Funded Emergency Fund of 3-6 months of expenses.
What does that mean?
It's simple...
What does your household require on a monthly basis to pay all your bills? Take that number and multiply it by 3, 4, 5 or 6. If you are self employed, you'll lean more towards the 6 months of expenses. If you have a job you have been at for 20 years, you are much less likely to be let go, you can lean more towards the 3 months. This all depends on your comfort level. What amount of money would you be comfortable having in the case of an emergency.
The next three steps go hand-in-hand depending on your situation.
Step 4 is to start investing 15% of your income. Your income is your annual salary before taxes are taken out. So if you make $100,000 per year, you would need to invest $15,000 in a 12 month period, or $1,250 per month.
Step 5 is to save towards kids college. There is a student loan crisis in America where kids are borrowing more than they will EVER be able to pay back. Save for your kids college, it's a legacy thing.
Step 6 is to pay off your house early. This means, any money you can scrape together, above your 15% investments and saving for your children's future, you throw at your mortgage.
Step 7 is to BUILD WEALTH and GIVE. There are three things you can ever do with money... Give it, Enjoy it & Save it. And you should always be doing all three during this step.
This may seem like A LOT. That'e because it is. It's not a lot to understand, rather, a lot to live out. The steps are simple. Follow them one by one, focusing on one individual step at a time. When you focus on one thing at a time, in life in general, you are more likely to succeed in that one thing than when you try to tackle 3-4 things at any given time. When you aren't making progress, or things are moving slower than you would like, you just give up, because that's the easier route.
But when you choose to focus solely on saving $1,000 or you choose to stop retirement savings to focus only on your debt snowball, you win. And a small win is still a win no matter which way you look at it.
Lastly, it's hard to go at this journey alone. Tell someone, tell multiple someones. I sure do! I tell everyone things that Dave says about certain topics that come up on a daily basis.