Two Steps Down the Road to Financial Freedom

Today marks a significant milestone in a journey my wife and I began just over a year ago. Today we and I jumped from Step 2 to Step 4 of Dave Ramsey’s “The 7 Baby Steps to Financial Peace”. I received my severance check from Micron and as soon as it cleared the bank I started paying off debts and putting money in savings. Here are the steps if you aren’t familiar with them and our status:

Put $1,000 in savings as an Emergency Fund

[Done - $2k – June 2007]

Pay off all debt using the Debt Snowball

[Done – July 2008]

Put 3 to 6 months of expenses in savings

[Done – Four months – July 2008]

Invest 15% of household income into Roth IRAs and pre-tax retirement

[I’ve been contributing for 15 years – Currently at 7%]

College funding for children

[Have a small fund and am contributing a small percentage]

Pay off home early

[Currently paying 120% of the normal payment]

Build wealth and give!

[Giving was first on our list so we’ve been doing that – Building wealth will come last if at all]

Technically, I’m breaking the rules a bit but rules are meant to be broken, right? For example, I’m contributing to a college fund for Brendon even though I haven’t completed Step 4. I figure that it won’t do him much good if I start the college fund 5 years from now.

I wish that I could claim that I had done this the hard way through the sweat of my brow and long years of denying myself (not really) but, in fact, I have to give thanks to the Lord, good old Micron, and the patience and generosity of my new employer. I took my boss out to lunch today and thanked him personally for making this possible. Had he not been willing to wait 4 months for me to start my employment I would not have been able to do this for another couple years.

I am elated to free from all non-mortgage debt. This is the freedom that I know God wants us to live in and I pray he gives us the wisdom and discipline to stay here. If you’re debt-free then congrats! If not, I’d encourage you to start now.

Live Like No One Else

A few months ago I read Dave Ramsey's Book, "The Total Money Makeover" because I had heard so much about him from people who had attended Financial Peace University (FPU). I thought it was pretty good but frankly it didn't meet the expectations that Dave Ramsey aficionados had helped me set. But, I was still intrigued so I watched a couple of the FPU videos.

Wow!

I can see now why Dave has had such an amazing impact on so many people. His energetic and charismatic delivery of financial wisdom leaves you feeling like there really is hope for your financial situation no matter how bad it is. Encouragement of this sort is hard to come by. I left feeling good about some of the wise financial choices I had made in the past and motivated to move myself to the next level by dealing with the poor decisions and completely getting rid of debt so that I can live the life God intended. I've done a good job saving for retirement and giving to God's Kingdom but I've done a less than stellar job of spending wisely, saving for a rainy day, and managing debt.

Dave's guiding principle is: If you will live like no one else, later you can live like no one else.

If you're looking for another get-rich-quick scheme then Dave is not your guy. If you want to learn what it's going to take to have financial peace and you're willing to roll up your sleeves and get to work then he'll give you a step-by-step plan to do so and provide you with the tools to make it happen. Some of Dave's wisdom seems to defy logic. For example, he suggests that you pay of the smallest debts first and then apply the payments from the smaller debt to the next larger. He calls this process the "Debt Snowball". My analytical alerts instantly went off when I read that because logic would suggest that you pay off the debt with the largest interest rate first since it makes more fiscal sense. Other financial advisors I have read in the past would agree. Dave's position is that if you were smart then you probably wouldn't be in debt in the first place. Instead, he proposes that we are emotional beings not purely logical ones and the reward of paying off the smaller debt is what motivates us to tackle the next one. It's hard to argue against that.

The Bible says in Proverbs 22:7 that "…the borrower is the slave of the lender." Dave continually points out just how true this is. I find myself in a position right now where my debt is keeping me in bondage because it is preventing me from being able to make a transition from a secular vocation to ministerial one. Furthermore, it is a source of stress recently due to the uncertainty of my current job. There's not much peace or joy to be found in my current financial position.

I don't agree with Dave on everything though. In fact, I somewhat disagree with the meaning that he pours into the "later you can live like no one else" part of his principle. Although Dave is a strong proponent of tithing first, he seems to have few qualms about what is done with any money left over after you have met your saving and giving objectives. I struggle with this. I can't forget Jesus' admonition to the rich you man: "If you want to be perfect, go, sell your possessions and give to the poor, and you will have treasure in heaven. Then come, follow me." Matthew 19:21 What a hard truth. This is one of those passages that read pretty clearly but we decide to add a lot of shades of gray to. For myself I mean that I create certain boundaries in my mind and call one side righteous and the other side sin. For example, I have certain ideas about what an acceptable car, house, or vacation is right for a Christian and what would be an unacceptably greedy choice. So, in reality it seems I have just drawn a line in a different place than Dave has. I might be more comfortable with Dave's views on this subject if there was perhaps a bit more emphasis on what the Bible teaches about Christian giving. Maybe the deal is that I'm doing poorly at giving out of my need and I'm wanting a Dave Ramsey to encourage and motivate me there too.

In summary, recommend Dave's books and I highly recommend Financial Peace University to anyone who wants to effectively manage their finances. If you don't want to be in a position in your retirement where you are forced to get your recipes from "101 Ways to Cook With Alpo" then a dose of Dave might be a good idea for you. I've already got my emergency fund established and am working away on the debt snowball. I want to be free to serve the Kingdom and leave a legacy for my son and future grandchildren. I want to experience financial peace. Don't you?