Last year, my husband and I took Dave Ramsey’s online Financial Peace University course. Prior to FPU, we thought we were doing well financially and never considered that we had too much debt. We didn’t have credit card debt, we paid off our car notes early, and the interest rate on the student loan was at a low 2.75%, so we thought we were doing okay.
But Dave Ramsey’s view of debt is very different.
“Debt is Dumb and Cash is King.”
“…and the borrow is the slave of the lender”, Proverbs 22:7.
We never considered all debt to be dumb. We thought credit card debt wasn’t very smart, but a car loan? That’s a necessity. A student loan? It was for my husband’s career. A business loan? It was to pay for necessary equipment.
But I personally don’t want to be any body’s slave and the total debt payment we make every month is astounding. There is so much we could do with that money other than pay the lender. After the FPU class, we looked at our debts differently. Becoming debt free became appealing and the idea of being able give more, save more and live more took my breath away.
But we needed a plan.
Using Dave Ramsey’s 7 baby steps, we created our Debt Freedom Plan. We are self-employed small business owners and felt we needed to adapt Dave’s baby steps slightly to include our business. Our personal finances are so interwoven with our small business finances that they must be seen as one.
Our freedom plan has become my guiding light. I refer to it often when we need to make financial decisions. It is a big hairy audacious plan and at times it can feel intimidating.
I’m sharing our plan with you because the direction of our finances has changed. Instead of spreading ourselves too thin and trying to do everything at once, we are now focusing on one step at a time.
Our Debt Freedom Plan
**Exact numbers have been omitted at this time.
- Save $$$ Home Emergency Fund – Dave suggests to start at $1000, but being self-employed, ours is much higher, but it is not quite 3-6 months of expenses. The purpose is to cover any sudden expenses so that we don’t go into more debt when dealing with them. | DONE
- Increase business emergency savings to $$$. | DONE – 6/1/2014.
- Cash flow necessary business expenses. The server in our office is about 10 years old and has reached capacity. Unfortunately they’re not cheap. We also have some renovations that we need to cash flow. | DONE 2015.
- Pay off all Non-Mortgage Debt. Our non-mortgage debt is in the six figures and includes a student loan and business loans. We will use Dave Ramsey’s debt snowball method. |
We estimate that we will be done by end of 2016.Update: 2016 has not been kind to us, so this goal has moved into 2017. - Non-Mortgage Debts are paid! WOO HOO! We will cash flow a FAMILY TRIP TO DISNEY. But SHHHHH, don’t tell our girls!
- Increase our emergency funds for the home & office to 3 – 6 months worth of expenses. The payment that was going to our non-mortgage debt will now be used to build up our emergency funds.
- Save 15% of gross income in retirement plans. We took a big step this past year and have stopped contributing to our retirement plans at this time, so we can focus on steps 2-4. This is a huge leap of faith and change of mindset for us. I had been regularly contributing to my retirement funds since I was in my mid-20’s–a lady doesn’t disclose her age, but I’m north of 40. The good news is that through consistency over the years, we have built up a substantial amount in our retirement. The bad news is that we are in our prime earning & investing years…just more motivation to pay off our non-mortgage debts as soon as possible.
- Start college funds for our two girls. Our girls are currently in 2nd grade and Kindergarten.
- Pay Off Mortgage Debt. We have two mortgages: our home and the building where our business is located. We will use Dave Ramsey’s debt snowball method. The good news is that by the time we start this step, our home mortgage will almost be paid off, so we will just have our commercial mortgage to focus on.
- Cash flow a FAMILY TRIP TO HAWAII. The location could change by the time we get to this point, but the trip will be EPIC.
- Cash flow a FAMILY TRIP TO DAVE RAMSEY in Nashville to scream, WE’RE DEBT FREE!
- Breathe & Invest
This will be a long road, but we have a plan to reach our goal of being debt-free. It might be a big hairy audacious goal, but I’ve never met a goal that I couldn’t achieve.
“If you don’t design your own life plan, chances are you’ll fall into someone else’s plan. And guess what they have planned for you? Not much.” ~ Jim Rohn“Setting a goal is not the main thing. It is deciding how you will go about achieving it and staying with that plan.” ~ Tom Landry
Do you and your spouse have a written financial plan? It’s going to look very different than ours, but please do yourself and your marraige a favor and sit down together to create your own freedom plan.
I am not a financial professional, just a wife and mom who would rather read personal finance blogs than watch Real Housewives of (Insert City), so please consult a professional if you and your spouse are in need of professional advice.
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I recently wrote about our credit card and auto loan debt. The journey is often long and difficult, but just take it one step at a time and remember how far you have come. Congratulations on step 1 & 2! Keep up the good work. We, too, are self-employed and it does create its own challenges because it is harder to plan. Our next goal is to be mortgage free. I’m looking forward to reading more of your posts. Thanks for sharing your journey!
Heather @ My Overflowing Cup recently posted…4 Tips to Saving Time in the Kitchen
Thanks for the comments, Heather. Good luck with your mortgage free journey! I hope to be there some day too.
Stumbled on your blog on Pinterest (because Pinterest is the “knower of all things”) and I totally love it! My husband and I are in the snowball process ourselves. Our debt is my car and school loans (ugh). But we are so motivated! My sister started the Dave Ramsey method about 4 years ago and they just finished paying off cars, college and grad school 🙂 Yay!!! She was my motivator for getting my finances in check! We co-blog and she has has written about their journey as well. But I love that you are writing this as it happens and while you are in the trenches! I’m right there with you friend!!! I am currently writing out financial goals for 2017 right now so thanks for the extra motivation today!!
Thanks for stopping by, Keri, and introducing yourself. It’s so nice to meet other people who are in the trenches–you don’t feel alone in the battle against debt. I’m working on my 2017 financial goals too. Here’s to an awesome and successful 2017!