Getting out of debt

In 1999, I was turned on to Dave Ramsey’s financial philosophy when my sister sent me his first book Financial Peace.  He also had his radio show which I listened to occasionally while living in San Antonio and enjoyed listening to him helping callers around the country get on the right track with their money.  I was carrying a little credit card debt and school loans, maybe around $6000 worth and didn’t think much of it since my thoughts were everyone has some debt.

Month after month, I dutifully and responsibly paid each statement their minimum amount plus a little more.  And each month, the feeling of disgust was building one check at a time.

But that’s the normal adult life…isn’t it??

Apparently those disgusted feelings weren’t enough – In 2002, while STILL having those bills, I had been a few months into new job in Dallas.  Not long after, I went out one weekend and bought a used truck with the big, manly, gas sucking V-8 engine for $14k + 9% interest..giving the small, gas sipping, paid for truck to my dad.

A few months went by of giving all my money to rent, utilities, credit cards, school loans, and truck payments.  Very little was left over to save and was living paycheck to paycheck.  Writing those checks every month just plain sucked and finally got sick enough say I’M DONE!  This crap has got to disappear.

Remembering the Financial Peace book with Dave’s Baby Steps prioritizing how to get yourself out of debt, it was pulled off the bookshelf and started thumbing through it again.  Really liked his step by step procedure in what to achieve, then can move on to the next – in this case, get $1000 saved as a starter emergency fund (and it is NOT to be spent on anything BUT emergencies!), then you can move on to the second step of knocking out your debts.

About 2004, I learned Dave had come out with his The Total Money Makeover: A Proven Plan for Financial Fitness book, which has the same baby steps listed in Financial Peace, but explained in more detail.  Learning to prioritize your debt payoffs by smallest amounts first (excluding mortgages, that is a later step), it was different than most financial advisors philosophy of paying off highest interest rate debts first.  He

Behavior economists have noted most people aren’t motivated by what’s rational, but by what feels good.  And Dave’s advice of creating quick wins by hitting your smallest balances first definitely hits these feel good moments when you knock out smaller debts right away.  He calls it the Debt Snowball.

So my first credit card was knocked out first that had about a $500 balance on the first month.  That little load off my shoulders felt huge and created a surge of intense energy to tackle the next card.

The extra money saved the following month was added to the minimum amount on the second credit card.  It was knocked out 3 months later.  The school loan was completed a few months later then put all earnings used for those bills to tack on to the truck payment, plus any monthly or quarterly bonuses I received from work.

To knock out this bill of $14,000 + interest was going to take a while, but now had the ability to send $1000 checks.  There were a handful of months I was able to write a $2000 check with a mental note saying “Don’t EVER do this again”.  Writing out checks for a few hundred dollars was painful, writing checks for 1 or 2 thousand dollars was gut wrenching.  Dave proved his point about the amount of pain involved when paying with cash vs using credit cards and won’t spend as much while using cash.  The pain didn’t happen at the dealership near as much as when the money actually had to be handed over.

Around early 2005 that last truck payment was mailed.  I sat on my couch with a big sigh of relief, enjoying that euphoric feeling of knowing next month those paychecks will hit my bank account and some will be able to stick around for a while.

I am debt free and luckily was able to pull off not having to get a second job.

There’s no freakin’ way I’m going to owe people like that ever again.  If there’s something that needs to be bought, it will be saved and paid for up front (except a house, but will save at least 20% down payment).

At this point, there are 5 more steps to complete to put yourself in a better financial and emotional situation.  Having this new, non-debt money plus an ongoing intensity brewing inside accelerates your ability to get there – the hardest part paying off debts has been completed.  Now on to Step 3 continuing on with the $1000 emergency fund to build it up to an amount that would cover at least 6 months of expenses.

Those of you who are working extra jobs to pay off debts, I’d like to recommend checking out Dave Ramsey’s book and website if you’re looking for more guidance, as his advice has guided myself and millions of others well through our financial struggles and turned them into financial blessings.

I’m still debt free, don’t carry credit cards, and don’t miss any of that one bit.  Credit scores aren’t even part of my thoughts anymore and haven’t been affected in the least by it.

Dave’s website has lots of free pages and articles that might help your situation.  If you’re overwhelmed by multiple bills including hospital, insurance, big car payments, utilities, receiving collection calls, etc., Dave prioritizes these bills for payment and how to handle bill collectors.

With his help, you could get debts paid off earlier so you can quit your second job or even prevent from having to start one, and possibly give you the opportunity to save up to start your own small business.

DaveRamsey.com – his resource page to help become debt free

MyTotalMoneyMakover.com - his membership site where you can have access to radio podcasts, forums, articles, and other tools.  About $10/mth. (not an affiliate site)