In the second part of this series on our financial journey, I want to share how a man named Dave Ramsey entered our radar and changed our perspective on financial matters. If you read my post on Saturday, you know how when we first got married, we sat down, merged our finances and prayerfully set out to maintain a monthly budget and track all of our spending for a space of three months. Now we need to fast-forward to March of 2009.
In March of 2009 Ciaran and I were still budgeting with YNAB and having a minimum of one financial meeting a month (at the end of each month/the first day of the next month) to reflect on our past budget, how it worked and what we needed to do differently for the upcoming month. We would take our earnings and spend every dollar on paper before the month began, until our balance said $0. We would discuss any foreseeable bigger than normal spending coming up and plan for that, to a degree. I continued to read on YNAB's website and go through the instructional manuals there hoping to glean any information that would help us know how to better manage the money God was entrusting to us.
Now enter Dave Ramsey. It was either on YNAB's website or on the radio or on the TV, but somehow I heard the name Dave Ramsey. Then I went to my local library one day after teaching and started to peruse the finance section and explore what books were out there to give us guidance. I saw Dave Ramsey's The Total Money Makeover and grabbed that book immediately. I went home and read it in one sitting. I knew I needed to get Ciaran to read this and get his opinion on what he thought of what was espoused in those pages. We were heading back to visit family in our hometowns that weekend so I picked up the audiobook at our library the next day after school and Ciaran and I listened to the book on CD in the 5 hours we spent in the car that weekend. We had to keep pausing the CD to discuss it so when we got home we finished the audio book and went to his website and after a couple days of prayer and further discussion we decided to try this "Total Money Makeover."
The first step was to drain our savings down to what Ramsey calls a $1,000 Baby Emergency Fund (this can be altered if you have a very small income or a larger income), but our combined salaries put us in the middle so we went with the $1,000. We had a little bit of leftover wedding money that hadn't been used when we set up our apartment, so we drained the savings down to that $1,000 and applied the rest directly to what was left of my medical debt which was our lowest balance on all of our debt. The awesome part was that it wiped out what was left of the medical debt and we experienced our first victory in Ramsey's Babystep 2 which is called "The Debt Snowball."
Next, since we weren't really sure the current balances on all of the rest of our debts, we had to spend some time calling a bunch of phone numbers and checking online accounts. Once we knew the rest of our remaining debts and their balances, we listed them from smallest balance to highest balance. The funny part at this stage was when we sat down to share each of the balances, we realized that each of the three remaining debts stood just above $11,000 each. So more research ensued as we discovered that if each of the balances are around the same, you can then begin to pay off the one with the highest interest rate first. Ciaran's car won. So we wrote down the minimum payments for my car and my student loan and then every spare penny we had above those two minimums we started sending to Ciaran's car. Month by month, it was so exciting to watch the numbers fall downward on that balance. "Frank," as we lovingly refer to Ciaran's car, was slowly coming closer and closer to becoming fully ours.
Months and months went by as we pinched pennies and worked so hard to pay off Ciaran's car. Then in December, just before we left to go visit family for Christmas break, we watched the balance on Ciaran's car go to $0. We were ecstatic!!! DR's plan was working!!!
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