Taking charge of YOUR debt -before IT controls you

By Sarah Brinker (Guest Article)

In my previous article, I mentioned that we decided to follow the Dave Ramsey plan to get out of debt and live a debt free life.  So how did we make this happen?  Dave has 7 Baby Steps to guide you through the process.  For the purpose of this blog, I’d like to talk to you about Baby Steps 1 and 2.

Baby Step 1 – Save $1,000 for your starter emergency fund.

Baby Step 2 – Pay off all debt (except the house) using the debt snowball.

Baby Step 3 – Save 3-6 months of expenses in a fully funded emergency fund.

Baby Step 4 – Invest 15% of your household income in retirement.

Baby Step 5 – Save for your children’s college fund.

Baby Step 6 – Pay off your home early.

Baby Step 7 – Build wealth and give.

The first step we took was to cancel our credit cards and cut them up.  For me, this was very scary.  We did not carry balances on our cards but it was always nice to know that they were there.  I once heard Dave tell someone who was hesitant about canceling their cards, “How hard would it be for you to get another card if you felt that you could not live without it?”  That totally put things into perspective for me!  We use credit cards as a crutch and I was ready to step out in faith and trust that God would provide if we trust in a plan to better our future.

Paying off existing debt

Once we saved our $1,000 emergency fund, we began paying off our debt starting with the smallest debt.  As we paid off our debts we would immediately roll the money we were paying for that debt into the next largest debt – this is known as the snowball method.  As you gain momentum paying off your debts you find that you gain more energy.  It honestly became very addicting to see how fast we could pay something off!

There are a few things that were important to us for staying motivated while we were paying off our debt.  It took us 10 months to pay off our $30,000 in non-house debt.  During this time it was important for us to focus on our mission and the “why” of what we were doing. 

We wanted to be in a position to make decisions for our family that were not restricted by finances and we wanted to be able to bless as many people as possible in the future. It was also important for us to reward ourselves as we hit milestones.  It can be hard to sacrifice daily coffees, eating out, random weekend road trips, etc, so once we hit certain goals, we made sure to celebrate in some way. 

My advice to you

The biggest advice I can give you about working to become debt free and building wealth is to make a plan and FOLLOW THE PLAN!  Build a budget and stay within it.  Live within your means and stop living a life of instant gratification – taking out credit cards and debt at every turn. 

And finally, find a great mentor who has successfully built wealth over their life and ask them how they did it.  Study millionaires and replicate what they have done!  If I want advice about my marriage, I’m not going to ask the person who has been married 5 times.  I’m going to look for the person who has been married 50 years and ask them to give me their secrets!

In the same sense, you would not ask a broke person for advice on how to handle your money! Take control of your life and your finances and watch the success of your actions change your life forever!