The Debt-Free Plan we followed.
We took Financial Peace University. Dave Ramsey teaches it from the Christian perspective, but is remarkably mainstream in the way he presents it. Basically, he backs up a lot of his teaching with the Bible, but given that the Bible is full of wisdom whether or not you ascribe to the Christian faith, it ends up being quite useful. Things like, "The borrower is slave to the lender," etc.
The class was $100, and we took it at the Methodist church next door. The $100 covers materials, etc. Having paid for the materials once, we can take the class as many times as we want.
Also, the core tenets of the program are on his website and are totally straightforward:
I am especially excited about giving. I can't wait to log on to Modest Needs every month knowing that I can meet multiple needs. To be able to walk around with significant cash, looking for a single mom who needs a break. Ironically, it's the possibility of giving in a huge way that really motivates me to get out of debt and get solvent.
The class was $100, and we took it at the Methodist church next door. The $100 covers materials, etc. Having paid for the materials once, we can take the class as many times as we want.
Also, the core tenets of the program are on his website and are totally straightforward:
- Put $1000 in the bank for emergencies and don't touch it. Forgetting Christmas does not constitute an emergency. Broken down car is an emergency.
- Pay off all debt using debt snowball. List debts from smallest to largest, and throw every spare penny at the smallest debt first. When that one is paid off, take the minimum payment from that and apply it to the next smallest debt. Keep on in this way until you've paid everything off. We've been on step 2 for 32 months with about 8 months left to go. The reason for ordering from smallest to largest (rather than by interest rate and balance) is that personal finance is only about 20% head knowledge. The rest is behavior, and by knocking out the smallest ones first, we build momentum. Basic psychology. With rapid, early success, we want to continue the program (think Weight Watchers).
- Build the emergency fund from $1,000 to 3-6 months living expenses.
It's all downhill from here. I expect that if we don't get pregnant soon, we'll be at step 4 by the end of next year. - Invest 15% of total income in retirement: 401Ks, IRAs, Roth IRAs, etc.
- Save for kids' college (Burgundy's already doing this; I'm so proud)
- Use spare change to pay off home early
- Build wealth and give, invest in mutual funds, real estate, etc.
I am especially excited about giving. I can't wait to log on to Modest Needs every month knowing that I can meet multiple needs. To be able to walk around with significant cash, looking for a single mom who needs a break. Ironically, it's the possibility of giving in a huge way that really motivates me to get out of debt and get solvent.