Thursday, July 28, 2011

Dave Ramsey

There are several descriptions that fit the bill: guru, sensei, sage, counselor…I simply call him Dave Ramsey. Dave’s overall finance philosophy is my bread, butter, main course and dessert when it comes to personal finance and in a way my general outlook on life. If you want to understand me, then you have to understand Dave’s philosophies and teachings.
In a cliff notes kind of way I’ll try to summarize: Dave teaches that simple, slow and steady planning wins the race. Through a seven baby step process, I learned to budget my life together and tell my money where to go rather than wonder where it went. The baby steps are:
I.                   Save $1,000 baby emergency fund
II.                Pay off all debt with the debt snowball
III.             Save 3-6 months of expenses in a fully funded emergency fund
IV.             Save 15% of pre-tax income to retirement
V.                Save for kids’ college
VI.             Pay off mortgage
VII.          Build wealth, give, have fun

Through Dave’s plan I have learned to hate all forms of debt, pay myself first and live below my means. As a couple, my wife and I have cut our living expenses down to $1,681.41 per month, or $20,176.92 per year. We save and allocate the rest, period. This is a difference that we consciously choose to use for ourselves every year instead of paying payments and interest to: banks, auto dealers, furniture stores, credit card companies, sallie mae, etc, etc, etc, etc…
Did this lifestyle encourage me to live like a hermit…ABSOLUTELY!! But thanks to my wife, the free-spirit, we’ve become crafty and rather sly at re-learning how to enjoy and have an active social life. I already can’t wait to get into detail about every aspect of this, but I’ll do my best to stick to a general overview for now.
Dave’s message is simple: live below your means and pay yourself first. I have learned that wealth is not built with get rich quick schemes, day trading or even having an exorbitant income. It is built with steady and small steps that incrementally change the way you look at your own life and money.
For me growing up in Southern California I had a sense of entitlement that limited where I could see myself in life. My parents sent me to mediocre private schools, essentially paying (extra on top of taxes) for public school education. I “was destined” to go to college, get a great paying job and never go wanting. Well I came out with 20 grand in debt, unable to “find” a job and scared. I dreamed of marrying my college sweetheart and buying a home together, but after crunching numbers wondered where I was going to get $400,000 from. “Job hunting” for that perfect white collar job left me feeling hopeless, desperate, depressed and worthless. This diploma I was “entitled” to, what was supposed to be my ticket to success, seemed to never have a boarding call.
Somewhere in the flurry of online resumes being sent out I was recruited to work as a temporary employee through a firm that provided temps for what is now my current employer. I hit and hustled from the first day I stepped foot in the building, and after a month was offered full-time employment.
A year of working had passed and I went from near-suicidal to feeling like a hamster on a wheel. I worked hard, put in serious overtime, but still only had student loans and a pathetic bank account to show for it (less than $1,000). I revisited again the numbers I would need to marry my girlfriend and buy a home together, and I was nowhere close to it. It was this frustration being revisited that helped my mind to be open to any and all possibilities that could help me reach my goals. Thankfully, I didn’t open a newspaper or click a get rich quick link, because believe me, I may have done it. But instead that year for Christmas, my girlfriend’s (FYI the woman now my wifeJ) parents bought me a copy of one of Dave Ramsey’s books, “The Total Money Makeover” and man did I read that thing. I think in the span of three months I read it about 20 times and knew it cover to cover. The next thing I knew I listed the baby steps on my fridge along with all of my outstanding debts and started attacking with a sharpie, in a timely manner that is.
Looking back on it, it had all happened so fast. I had my $1,000 emergency fund, then I had paid off all of my credit cards and student loans, sliced and diced my credit cards never to be re-opened again, and in a split second had 6 months worth of expenses sitting in the bank and had the freedom to invest 15% of my income for retirement. I know all of this happened within a period of less than a year, but I was so focused, so intense like a gazelle J, that all I did was eat, sleep and dream of financial security. And man, even now looking back, it brings a smile on my face to know where I was, where I am and where I am going.
We did get married (more on that in a future post) and are still working hard for our goals. Only this time we have our marks set and a solid plan of action to get there. And this time if my world is flipped upside down, I will not have the sense of entitlement that held me back like before. As long as I am breathing, I will always be working, earning and striving to live like no one else, so that I can live like no one else.

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