Tuesday, February 21, 2012

My Refreshed Motivation

I knew I had some fight left in me. My wife has FINALLY reached the point of compromise and agreed to let us drop an avalanche snowball attack on her student loan. On paper, this is OUR last form of debt of any kind owed. And now that my wife has given the green light for me to set my gun scope on OUR last outstanding debt, I am happy to share this tale with you (as it is a story that is a nice example of what I call the APPROVED Dave Ramsey debt snowball exception).

In its full balance this single debt totaled close to $60,000. It is a personal non-interest bearing loan from a single member of my wife’s family. In Dave Ramsey’s debt snowball rules (Baby Step II), once you’ve finished Baby Step I. $1,000 emergency savings in a bank, you pay minimum payments on all outstanding debts, and every extra dollar that you can squeeze out of your budget you throw extra and focus on the smallest outstanding debt, and once that is paid off you move to the next, and then the next and before you know it you have an avalanche of freed up income helping bust you free of debt.

THE EXCEPTION is that you DO NOT INCLUDE any single debt that, by itself, would take longer than 2 years to pay off using the debt snowball method. In my opinion, Dave wants you to use all out and focused effort which includes: selling things, working overtime, working extra jobs, cutting the entertainment budget, all for a set period of time. If you focus on a single debt for longer than 2 years with ALL OUT gazelle intensity you will burn out. Also, 2 years is too long of a period of time to only have a $1,000 baby emergency fund. Life happens, you will get sick, the car will die, clothes wear out and family emergencies will occur. $1,000 can’t cover you for more than a 2 year time period.

So once we completed our debt snowball (which consisted of about 4 credit cards between the two of us and my student loan), we immediately completed Baby Step III. Establishing a 3 – 6 month emergency fund, and consequently completed Baby Step IV. Saving 15% gross income for retirement. Which brought us to the dilemma which until recently has been resolved.

In my eyes we had two goals before us: (1) pay off the last student loan, and (2) save to pay cash for our first home. There were arguments, theological discussions, feelings hurt, lots of yelling, lots of making each other feel guilty, basically a self-taught crash course in Negotiating 101. Ultimately, over time, I came to understand my wife’s wants, needs and desires. I took to heart her reasons for not wanting to snowball the last debt.

In Ramsey world the decision would have been easy: Armed with a fully funded emergency fund and while saving 15% for retirement, above and beyond all budgeted expenses, attack the LARGE loan with unrelenting ferocity. But in marriage I had to weigh this approach, with the needs and concerns of my wife. So together we made the decision to pay minimums on the student loan and begin saving for our house.

A few years have now passed since that decision was made and our “house account” is flirting with the overall number we would like to see for us to make our home purchase. With all things considered, a little luck and a lot of steering in the right direction from God, my wife confirmed with me today that she would like to snowball this last student loan and projections have us, together for the first time in our marriage, being debt free in October of this year.

I have never been more proud of my wife. I know the decision was not easy and she holds a lot of the issues that kept us from snowballing it close to her heart, but her desire to be debt free is simply inspiring to me. And in turn it’s like I received a cortisone shot and am even more amped up to continue on with 2012. I think I foresee a trip to Nashville, Tennessee in the late fall accompanied with a WE’RE DEBT FREE scream/phone call to my favorite radio show in our future J  

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