Our Money Makeover

Recently, Rebecca and I read The Total Money Makeover by Dave Ramsey and it made us take stock of our family's financial situation. I graduated from BYU about 4 1/2 years ago and have been employed ever since, but we felt that monetarily speaking, we had nothing to show for it.

Neither of us are big spenders and we don't have a lot of debt aside from student loans, but our savings is pretty dismal. We were meticulous budgeters when we got married (since we both had nothing when we started) and basically maintained our thorough budgeting habits up till now. However, even with our larger income, we felt like we could never get ahead. We had only 2 financial rules that we lived by: one, pay a full tithe and two, don't accrue consumer debt. Good rules, but we had no real goals beyond them. Ramsey's book outlines sound, basic money goals that helped us see what we could have and how we could live, if we were willing to work for it.

Here are the steps we are following:

1) Set up a $1,000 emergency fund

2) Pay off all debts from smallest to biggest

3) Add to the emergency fund until we have enough to cover 6 months worth of expenses

4) Put 15% of our gross income into retirement savings/investment

5) Build the children's college savings

6) Pay off our home mortgage early

7) Build wealth and give

We were able to finish step one quickly by pooling together money from various savings accounts. For step 2, we want to pay off all our debts within the next few months. To do this we've had to cut up our credit cards and cut out of our budget most of our entertainment money, vacation savings, art classes, swimming lessons, amusement parks, etc. We've explained to the kids that we're still going to have fun, but that we'll have to be creative about it. Also, we apologize now to extended family that we won't be able to do much traveling beyond the trips we have planned this year. (You're always welcome to visit us though!)

We expect to maintain this spartan regime until we've established our full emergency fund (step 3). Steps 4 and 5 will still probably squeeze our income a bit, but we should be able to bring back some of the "fun" stuff (paid in full with cash of course). As for step 6, we don't even own a house yet, so the mortgage isn't an issue for now. To be honest, we're not sure it's even worth it to buy a house in our area (based on rent vs. mortgage payment ratios). Step 7 assumes every need is met and we can focus on building wealth for pleasure and to give it away charitably (beyond tithes and offerings).

That's our plan in a nutshell. We're very optimistic about it because we both have agreed to it and we've already made a lot of progress toward our goals in this first month. I'll try to provide periodic updates of our progress as we go along and if any of you reading this have done the Total Money Makeover, please let us know how yours went (and please share any helpful hints).