Mr. Wanderlust and I have been doing the pre-workout, so to speak, on our student loans and the big bad adult world as a whole. Part of this journey was putting together a budget. Check. That wasn’t too difficult. It was also confronting our debt. Check. Not difficult in doing, but sucked in actuality. We obviously need a plan to pay off our $144k in debt. So, I bought The Financial Peace Planner by Dave Ramsey.
I have heard about the Dave Ramsey plan in the past. His Baby Steps make sense (I will talk about them in just a bit). What didn’t make sense to me was paying $200 to take a class to learn about his methodology. In theory, we are already struggling, are financially not well off, how is spending $200 going to help? Anyways, I picked up this book at the bookstore one day. We started reading it, and doing the activities inside. To be 100% honest, it’s a lot of common sense, so far. I mean, everyone knows you shouldn’t use a credit card and not pay it off each month. But it happens, people rack up credit card debt. He suggests cutting up your credit cards and closing the accounts. This is a personal decision and if you can handle responsible use while racking up money rewards or airline miles; more power to you! Right now, we don’t use our one credit card that we have. It stays at home. I would like to use it in the future to earn rewards, but not until we prove to ourselves we are disciplined enough to follow our budget.
Honest Review of the Book: If you just need a little encouragement, some extra explanation, examples, and a bit more wording to go off of- this book is a good start. It has budget sheets and other worksheets to help with the whole process. It isn’t a bad book. We are reading the whole thing and going through it. It brought up things that are easily overlooked or forgotten about. If you need more help, I would suggest his Total Money Makeover book, as it seems more detailed.
So, what is the Dave Ramsey plan? Well, it is comprised of the seven baby steps.
- $1,000 in an emergency fund
- Pay off all debt with the debt snowball
- 3 to 6 months expenses in emergency fund/savings
- Invest 15% of income into retirement plans
- College funding
- Pay off your home
- Build wealth and give
On paper it doesn’t look like a lot right?! We saved up our emergency fund from wedding money and selling stuff from around the house. (We had a ton of college textbooks). For a lot of people, this emergency fund is a pain in the butt to put together. They are already behind on bills, their paychecks barely cover the bills that they do have, their spending is all over the place, $1k is a lot of money, etc. There are a million and one different scenarios. All I can offer is to start by making a budget. Where can you cut spending? Can you not eat out for a few months to help build your emergency fund? Can you sell anything? Pick up more shifts at work? Do some odd jobs? Again, there are options for almost everyone. Dave pushes picking up more work if your income doesn’t cover your month. I’m not 100% sure how I feel on this. If you are single, yeah not a lot of reasons that this isn’t an option for you. But if you are in a relationship, you have to give time to your relationship and I’m not sure both people working 50 or more hours a week is going to continue a strong relationship. If you have kids is missing out on their stuff worth it to you? Is that a sacrifice you are willing to make. For some, their relationships are low maintenance and won’t suffer or struggle from not seeing each other much. For some, sacrificing time with their children is worth it. This, to me, is more of a case by case bases. But, I don’t want to see you in the Dave Ramsey groups complaining about how you are behind but are only working part time. Well, at least without a real, real reason.
Speaking of part time jobs, I’m planning on picking up a second part time job this summer. I’m printing out the application on Monday and will put it in the mail on Tuesday! I really hope to get the one I am applying for. It is in my town, the hours wouldn’t be terrible and the work would be moderately fun! It pays minimum wage +tips. It would be on top of my current part time job, so I would be working 40 hours a week at minimum! I’m keeping my eyes out for other jobs as well, but it is a bit early.
We have finished Baby Step #1 and are on to #2. Wednesdays post will talk more about #2 and our current plan for the rest of the school year before our loans enter their deferment period.