Financial Freedom

[Ishmael]

Many of you know that I am an Army Chaplain. I spend a good deal of time helping young soldiers work out their finances.

I use the material offered by financial counselor and Christian Dave Ramsey. I don't get paid at all for mentioning Dave Ramsey nor is this an advertisement for his Financial Peace Program. I am just a person who has had their life changed by learning to think about finances in a different way.

That being said...

I posted this on another website sometime back:


Recently I have gotten ZEALOUS about getting out of debt and building some wealth.

My testimony is that I make about $4000 a month take home and was always broke. But one of the fellow officer turned me onto Dave Ramsey and his Financial Peace University system. I sponsored a FPU in my unit and it has changed my life. I am now never broke and will be debt free next Christmas, or a lot sooner if I get deployed...

Here are Dave Ramsey's baby steps to financial peace:


1. $1000 in the Bank, Cut up all credit cards and cancel them. Make a written plan for cash flow and use the cash envelope system.
2. Pay Off All Debt using the "Debt Snowball System" (ecept the household morgage which should be on a 15 year fixed rate mortgage)
3. Expand Emergency Fund to 3-6 months of Income
4. Invest 15% of household income into Roth IRAs and pre-tax retirement
5. College Funding
6. Pay off Home Early
7. Build Wealth!

Yes, this is a shameless plug for a system that has changed my life and NO I don't get any money from that rich guy Dave Ramsey.


Now I am not a professional counselor and I don't claim to be a lawyer or anything, but I have learned a lot about finances and use this knowledge in my real life minstry daily... I am willing to help anyone that might need a little advice... after all, it's worth as much as you pay for it.

[Rubia Warren]

Calvinist,
What exactly is the debt snowball system?

[Ishmael]

The debt snowball:

Take all debts except the Home mortgage and list them largest to smallest. Each month pay the minmum on all but the lowest payoff debt....

Example:

DiscoverBondage Owe=$1000/Min Pay =$20 New Pay=$20
MASTERcard 500/10/10
AmericanEXCESS 250/250/250

That makes min debt payment per month =$280. But you pay off the AmerEXCESS card so you add the $250 payment to the MASTERcard...

DiscoverBondage 980/20/20
MASTERcard 490/10/260

And so on...

DiscoverBondage 960/20/50
MASTERcard 230/10/230

See how I added in the extra $30 from the payoff of the MASTERcard...

Now apply the full $280 to the DiscoverBondage Card until it's paid off.... YAY!!! FREEDOM!!!

[Rubia Warren]

Hey, that's a good idea! I think I'm going to try that. I don't have credit cards anymore (I have a shopaholic problem ;) ) but I have other bills that I can apply that system to.
Now, is the emergency fund apart from the $1000 in the bank?

[Ishmael]

The $1000 is the start of the emergency fund.

[Em7add11]

How long does it take to reach some sort of stability?

At my point in life right now I'm basically broke, but with no debt. I'd love to have some sort of security even on my meager salary.

[Ishmael]

Em7add11:
How long does it take to reach some sort of stability?

At my point in life right now I'm basically broke, but with no debt. I'd love to have some sort of security even on my meager salary.

WRITTEN GAME PLAN
The key to being able to save is to have a written game plan. Spend all of your money on paper before you get it. This should be a "zero-based budget" that shows where everything is going.

CASH ONLY SYSTEM
Also, you will want to use cash most all the time for daily expenses like gas, auto-maintenance, shopping, groceries, entertainment, etc. Use the checks and visadebit card for bills and the occasional large purchse (which you saved for). I cannot understate the power of using cash like this. Me and my wife separate the money into envelopes each payday. The envelopes have categories like the ones I mentioned... when the money from an envelope is gone, we stop spending in that area.

15% Savings/5-10% Giving
If you have no debt and you are willing to give up some of the "Stuff" you think you need, you ought to be able to save 15% and tithe without giving up a normal lifestyle... even if you make 20k or so a year. I know it sounds crazy but its true.

Savings should go into a normal savings account until you have saved at least 3-6 of normal living expenses. And then fund your 401k or company plan, if they match, then your Roth IRA. If your company does not match then reverse the savings distribution to Roth IRA first and then 401k.

DISCLAIMER: I am not a finance professional and I don't intend this advice to be anything other than my opinion. Some people disagree, but I have found this data to be very helpful in my life and in the lives of some of the soldiers that I work with.

[Jade]

Thanks! This sounds very rational. I'm going to try to implement this into our budget plan. :)

[Pilgrim]

They only thing it misses is the fact that as you only pay the minimum you are arcruing intrest. So paying $20 dollars on your Discover does not mean that the principle goes down by $20.

In fact, on some cards, paying the minimum leaves you with a bigger balance in the next month depending on how much you owe.

I'm not sure that matters in the long run. The snowball system will still pay it all off but it's better to pay twice the mimimum if you can so that you are actually cutting into your principle. Paying twice the minimum is also a good way to pay of auto/school loans and mortgages as well.

[Ishmael]

Pilgrim:
They only thing it misses is the fact that as you only pay the minimum you are arcruing intrest. So paying $20 dollars on your Discover does not mean that the principle goes down by $20.

In fact, on some cards, paying the minimum leaves you with a bigger balance in the next month depending on how much you owe.

I'm not sure that matters in the long run. The snowball system will still pay it all off but it's better to pay twice the mimimum if you can so that you are actually cutting into your principle. Paying twice the minimum is also a good way to pay of auto/school loans and mortgages as well.

Don't try and be a math expert. If we were so good at Math we wouldn't have any credit card debt. ;)

The reason you pay the debt this way is because you can make some progress and it gets emotional... it's fun this way when you see the debt drop off, card by debt.

[Ishmael]

Get debt free and do it now! Huah?

[Ishmael]

Read this thread and get weathly! DUMP THAT DEBT!!!!!!!

[ollie]

Calvinist:
Many of you know that I am an Army Chaplain. I spend a good deal of time helping young soldiers work out their finances.

I use the material offered by financial counselor and Christian Dave Ramsey. I don't get paid at all for mentioning Dave Ramsey nor is this an advertisement for his Financial Peace Program. I am just a person who has had their life changed by learning to think about finances in a different way.

That being said...

I posted this on another website sometime back:


Recently I have gotten ZEALOUS about getting out of debt and building some wealth.

My testimony is that I make about $4000 a month take home and was always broke. But one of the fellow officer turned me onto Dave Ramsey and his Financial Peace University system. I sponsored a FPU in my unit and it has changed my life. I am now never broke and will be debt free next Christmas, or a lot sooner if I get deployed...

Here are Dave Ramsey's baby steps to financial peace:



Now I am not a professional counselor and I don't claim to be a lawyer or anything, but I have learned a lot about finances and use this knowledge in my real life minstry daily... I am willing to help anyone that might need a little advice... after all, it's worth as much as you pay for it.


I am not familiar with Dave Ramsey, but you have given some very good advice here; which you say comes from him. The snowball payment plan should be taught in all our schools. Perhaps all of this should be. The public schools do not really prepare us for the reality of real life. They "teach us to think" as my teachers always told us. Hmmmmmm!

[Ishmael]

ollie:



I am not familiar with Dave Ramsey, but you have given some very good advice here; which you say comes from him. The snowball payment plan should be taught in all our schools. Perhaps all of this should be. The public schools do not really prepare us for the reality of real life. They "teach us to think" as my teachers always told us. Hmmmmmm!

LOL... maybe they aren't doing too good a job when we can't manage to think about where our money is going...? :rofl: