Becoming Debt Free

With all the worry in the economy and my own increasing pessimism about the government’s ability to solve this crisis, I’m reminded of a Dave Ramsey thought I first heard some time last year:

We are responsible for our own personal economies.

Here’s how that works (I’m borrowing some of Dave Ramsey’s Baby Steps):

  1. Save $1000 cash in a highly liquid emergency fund, and DON’T TOUCH IT! It is for emergencies and emergencies only.
  2. Pay off all your consumer debt (everything except the house) and ditch those credit cards.
  3. Build a 3-6 month liquid emergency fund, and DON’T TOUCH IT! It is for emergencies and emergencies only.

Dave Ramsey includes an additional 4 Baby Steps that help establish greater financial peace and independence, but for the purpose of taking care of your own personal economy, the above Baby Steps are sufficient.

There is something magical about having $1000 in cash for emergencies that causes a sense of well-being and peace to happen in your home, your marriage, and your life. If you’ve never had $1000 cash for emergencies, you’ll find that many of your common money fears just go away. Courtney and I have had $1000 cash for emergencies since day one of our marriage, and it is the single greatest financial blessing we have ever had.

For Baby Step 2, I want you to do a little exercise. Pull up your mental calculator, and, as I read off these items, do the math in your head:

  • How much do you pay monthly on credit cards?
  • How much do you pay monthly on your car?
  • How much do you pay monthly on student loans?
  • How much do you pay monthly on installment plans for furniture or other items?
  • How much do you pay monthly on any other kind of debt?

What number did you come to? Now close your eyes and imagine what life would be like if you didn’t make any of those payments? What could you do if you had that same amount of money to do with as you please? Did you smile, even just a little? Next, remember what your life is like because you do make those payments? How do you feel knowing that you are in bondage? Are you mad yet?

If you didn’t get mad or at least feel a touch of regret or recognition of the danger of your situation, you can stop reading. I’m sorry to say it, but you just don’t get it and nothing I say will change that. And that’s fine, but you’ll never know what it feels like to look in the mirror and scream, “I’M DEBT FREE!!!!”

For those of you who at least recognized the problem, it’s time to really get mad at debt. First, realize that debt didn’t happen to you. You happened to debt. Debt just doesn’t seek you out. You seek debt out. Every debt you have (with a few notable exceptions like medical debt) is the result of a concious decision on your part to buy something that you couldn’t afford, and as Dave Ramsey points out, that is so very infantile and immature. You need to realize that you are the problem.

But you have a choice: you can pout about it or you can get rid of it. Maybe to help you along, the financially immature among us are now pouting and planning on buying something to make them happy or they are trying to justify their actions by reasoning that it was all good purchases or they needed it or whatever. If you truly believe that, okay. Whatever. But you’re still in debt, and debt is still dumb. To borrow again from Dave Ramsey, you’re kind of like the toddler sitting in a poopy diaper: “I don’t care if it stinks; it’s warm and it’s mine.”

The next step is to pay it off. All of it. Pick the smallest debt first (not the highest interest rate) and pay that off. That’ll give you a fast immediate success to inspire you and motivate you. And then go after the next one and the next one, combining previous payments. Use a trick called the Debt Snowball (do a Google search on that one) to rapidly increase your payments from one debt to the next until you are done.

But get done.

When all the debt is gone, save 3 to 6 months of living expenses. You’ll be amazed at how quickly you’ll get it now that you aren’t paying money on any debts. But more than that, you’ll relax.

Last summer, my wife and I had our 3 to 6 months emergency fund built up when, suddenly I was laid off. My wife was 2 months shy of giving birth, our roof needed to be repaired, and I was out of work. What would you have done?

Want to know what I did? I went home and I planted a garden. I grew tomatoes, cucumbers, and some of the hottest peppers this side of the Gates of Hell. I sodded my back yard. I played daily with my daughter. I took long walks, relaxed, and helped Courtney through those last months of pregnancy. I wrote in my book. I took time off to ponder life and my situation. And I chose the job I wanted rather than the first job offered. And I never once worried about debt, the mortgage, taking care of my family, or anything else financial because my own personal economy had a rainy day fund that covered and protected us when my income disappeared.

Don’t you want that? Well, go get it. You can.

A couple related thoughts…

  • Cut up the plastic. Seriously. You don’t need it, it will not help you, the rewards are not worth it. My wife and I cut up all our credit cards totalling almost $60,000 in available credit last February. Despite the predictions of doom from those around us, we are better today than we were then. We haven’t needed them, we don’t need them, and we won’t need them. Oh, and the idea that credit cards are essential to having a good credit score is an absolute myth. We cut our cards up and saw our credit rating soar to its highest point ever.
  • Credit cards are not an effective emergency fund plan. The last thing you need in an emergency is to add debt to the situation.
  • If, after paying off your debt, you go back into debt, you have missed the point entirely.

If you take care of your own personal economy, you find that the economic events of the world surrounding you are largely meaningless. You find that your emergency fund acts as a levee against the surging tides of doom and gloom. You find that being debt-free gives you a nimbleness and mobility that others don’t have, and that you can respond to situations with courage and faith instead of fear and doubt.

Become debt free.

For the men, no gift you can give to your wife and children is worth more than the gift of being debt free. Your wife in particular will love you more because she knows you are truly protecting and providing for her and her children.

For the women, no gift you can give to your husband and children is more valuable than being debt free. Your husband will recognize the lack of stress in your life and the ease with which you handle your home. He will adore you and love you because he knows you are safe, protected, and cared for.

My wife and I are steadily working that direction, we’re happier for it, we’re healthier for it, and we love each other more for it. To borrow one last time from Dave Ramsey, we are living today like no one else so that tomorrow, we can live like no one else.

Administrator note: Many of these thoughts are principles taught in Dave Ramsey’s Financial Peace University courses. For details, go to I am not paid or compensated for promoting Dave Ramsey or any of his services; I do this because I have seen the value of it in my life and the lives of my family.

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One Response to Becoming Debt Free

  1. Pingback: Becoming Debt Free « the prodigal

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