The two most important things we learned from financial guru Dave Ramsey weren’t practical at all; they provided the emotional energy we needed to put behind the practical steps.
What were those two things?
2. Temporary deprivation
It’s very easy to become defensive about “depriving ourselves” of things–“Life’s not worth living without fill in the blank.” And while I think we need a heavy dose of perspective when it comes to needs vs. wants, I’m talking here of a temporary delay of gratification, not a permanent state of deprivation.
If you have consumer debt, temporary deprivation is especially important. Consumer debt is bondage and MUST be eliminated as quickly as possible.
But without fierce determination (which Dave calls “gazelle intensity”), it is nearly impossible to delay gratification. It takes setting a goal, making it very visible and revisiting constantly the goal and the means by which your family plans to achieve it.
(By the way, if you are more excited about paying off debt and achieving some financial goals than your husband, I highly recommend giving him the book, Total Money Makeover, by Dave Ramsey. He’s got a powerful way of motivating–that’s really his gift.)
Are you really saving all you can?
Earlier, I mentioned keeping track of every expense. I think one of the biggest mistakes we make is not counting the little things. A few dollars here and there seem insignificant until you begin to add it up. This was the secret to the Tightwad Gazette’s author that enabled her family to save $48,000 in seven years from one income!
To give you a picture (and I challenge you to try this with your own expenses), consider the following hypothetical expenses:
John and Mary’s budget is tight. They don’t have cable, they have one cell phone for emergencies, they don’t eat out much and are careful with their spending. They also have some credit card debt that haunts them. They really need to get it paid off but just don’t have any EXTRA money….or so they think.
But when they kept track of every purchase in June, they came up with these “extras”:
Gift certificate for her parents’ anniversary. (She had meant to make them a scrapbook.)–$30
Two extra trips into town, a lunch out during one of those trips, and snack cakes bought on sale–$11.00
Husband’s purchased lunch for 12 days in the month (Mary forgot to pack)–$48
Days Mary didn’t use the clothesline–$16.00
John’s McDonald’s coffee 14 mornings in June because the coffee pot had not been prepared and preset and he was running late–$28
Two dinner dates–$60 (Creativity will still enable a couple to keep these important dates without as much expense. My husband and I just had a fantastic date at Ruby Tuesday last week with a buy one entree, get one free–$15.99)
Mary’s thrift store purchases (Super-great deals…I’m talking, “Honey, who could pass these up? I saved you money buying $400 worth of clothes for less than $60!!! Huh? Did you say, ‘What about the overflowing closets and drawers’? “ (Have you figured out by now that I am Mary?)–$58
In June, John and Mary leaked out at least $251.00 that they could have saved with a “gazelle intensity.” Remember, temporary restraints, not permanent deprivation. In reality, this is very small leakage. If they leak that much every month that is a total of $3,012 a year that could have been put toward paying off debt. If you count the interest rate they are paying, that amount is actually worth more in dollar value.
We are John and Mary many months. You probably are too because it’s just hard to keep focused and pinch pennies so hard! (I didn’t even count the Mocha Frappes!!)
Of course, some purchases are wise. If a purchase will save you some money, that’s probably not considered leakage.
We are coming down the home stretch with our credit card debt now and it is so exciting! I’m beginning to feel more intense in an urgency to get rid of them and realize, typing this, that we could have paid them off before now had we been more scrupulous.
Just to encourage you, we struggle. Life does cost a bunch. But our struggles have been some of our greatest blessings, both in learning to trust the Lord and in having our creativity so inspired. I wouldn’t trade it.
(Note: Since the original writing of this post, just before we had our consumer debt paid off, our home (the one we were renting-to-buy) was destroyed by a horrific tornado that devastated much of our neighborhood. That tragedy took the shape of allowing us to be able to pay the rest of our debt and build our house back debt free! God is a God of miracles.)
Dave has a slogan to help people keep focused: “Live like no one else now so you can live like no one else later”.
A practical word about paying off debt:
- If you have medical bills, call and ask for a reduction. They almost always offer a reduced rate, sometimes up to 50% if you just ask! Sometimes they ask you to pay it off sooner in exchange for the rate so be prepared if you can.
- Don’t go hungry paying your credit card bills. Another of Dave’s famous lines is: “If it’s not above the red line, it doesn’t get paid.” If your income simply isn’t enough to pay all your bills, prioritize them in the following order: Food, Shelter, Utilities, Everything else. They won’t come after you, they only harass. Be aware, too, that you are protected under the “Fair Debt Collection Act” that prevents them from undue harassment or threats. I had to learn this the hard way.
- If you are really behind on your credit card bills, you are probably at an advantage. It wasn’t until we fell so far behind that I thought it was hopeless when our creditors began their “magical solutions”. One card knocked $2,000 off our balance and reduced our interest rate from 24% to .99% in an exchange for automatic deductions, which were lower than the monthly payments we had been trying to make. That card has one more payment on it until we’re FREE!!!
- Pay the lowest BALANCE card off first, not the lowest interest. Momentum is better than saving a few dollars on interest.
- Calculate what your interest is costing to give you added incentive to become INTENSE.
- Label a jar “Becoming Free” and put everything you can into it and pay that much on your debts extra every few months.
- Make sure you print off on paper a list of all your cards, their balances and a column with months of the year. Every statement, cross out the previous balance and write in the new. We have done this for five years, and the closer we get the more motivated we feel!
Our ebook Finding Financial Freedom goes into a bit more detail about how we handled our creditors and began our journey to becoming debt free.