Tuesday, September 22, 2009

Total Money Makeover

Anyone read this book? It's by Dave Ramsey. And...it's amazing.

Mr. Lukie nor I were raised in families where we were taught how to handle money. Money was more of a "taboo" subject and was not discussed. I didn't receive an allowance (I had to work around the house--more than just my daily chores, in order to get things I wanted). I started babysitting at 13 and continued doing so through high school. I got a "real" job when I was 15 and received an actual paycheck, but had no guidance on what to DO with that money. Sure, I had a checking account, but I just used my money to go out to eat with friends and go shopping. I never saved any of my money. I was never taught to.

Now, I'm not BLAMING my parents for not teaching me, but how else does one expect a 15-year old to react to receiving a bi-weekly paycheck, who has never been talked to about money?

I never had credit card debt until the real estate market took a nose dive. At that time, I had a lot of money in my savings account. I bought what I wanted, when I wanted. I picked up the tab at the bar for a group of 10 friends. I bought designer...and designer only!...jeans, shoes, purses, etc. I went shopping at least once a week and spent no less than $300 each shopping trip on clothes, accessories, shoes.

Then. Commission checks stopped coming in. Savings was dwindling as I transferred funds to my checking account to cover bills. Oh, who am I kidding? To cover the bills *I* created for myself, by trying to maintain this "standard of living" I had placed upon myself for the previous 2 years.

Then. I broke off my engagement. I moved out. And I let him keep E V E R Y T H I N G. It just wasn't worth it, at that time, to argue over who got the armoire, who got the dresser, who got the bed, etc. I just wanted out. And he wanted to argue...in order to keep in contact with me. So. I had to basically furnish an apartment from scratch--plates, bowls, cups, baking stuff, cooking stuff, utensils--the list goes on and on.

Then. A few months went by & I realized that I had little to no money in my savings account. I was receiving a measly $500 per week (pre-tax) and wasn't making enough to cover my basic needs. Grocery trips were being put on the credit card...I had to eat! Gas fill-ups were being put on the credit card...I had to drive! Rent was due so a cash advance was taken out a time or two on the credit card...I had to live!

Eventually, I curbed my spending. I stopped going out. I only bought the necessities from the grocery store. I tried to ride my bike more places. I bought off-brand food and soap. I completely stopped living the life I once knew.

To date, I haven't used a credit card in over one year. I am married, so having a dual-income household helps things significantly. But I'm tired of being in debt. I'm tired of being a slave to the credit companies. I'm tired of it limiting me to buying a house right now. I'm tired of seeing the balances go down a measly few hundred dollars each month on those credit cards. I'm tired of being tired of it all!

Mr. Lukie and I both brought debt to this marriage. And neither of us believe in filing Bankruptcy to make it all go away. We got ourselves into this mess and we're going to get ourselves out of it. In the grand scheme of things, our debt is really not THAT bad, compared to my knowledge of most people's idea of "debt." Mr. Lukie's best friend told him about this book and suggested he read it. Mr. Lukie loved it, and suggested I read it.

I'm halfway done with it and it has truly transformed me, my thoughts on debt and my thoughts on paying it off. I've never had a 'plan' to paying off debt before. Because I've never known how. And there are SO many ideas and SO many opinions on HOW to go about doing so.

"Pay off the debt with the highest interest rate first!"

"Don't worry about your student loans! That is 'good' debt!"

"EVERYONE has a car payment! It's part of life, just deal with it!"

"It's dumb to pay off your mortgage...just do a 30-year and re-fi as needed!"

"Don't worry about furnishing your new home, just take out a Home Equity Line of Credit and use THAT to furnish it!"

What am I to believe? What am I to do? How do I go about paying off debt, saving towards an 'emergency fund' AND save for retirement all at the same time on a measly salary?

I know I sound like an infomercial right now, but this book has truly changed mine and Mr. Lukie's outlook on our debt. We HAVE a plan now. It's quite aggressive, and involves sticking to a very strict budget. It may also involve us moving into a 1-bedroom apartment (with 2 large dogs...yes, I know...we sound crazy, we're aware of that) in order to contribute an additional $500-$800 towards debt per month. It may involve us finding someone to take over the lease on my beautiful, luxury sports car and driving an older Honda Civic that we can pay $3000 cash for, and use the current $400 per-month car payment toward debt. I know, we still sound crazy.

Call us crazy. Think we're weirdos. The book says that more likely than not, our friends & our families are going to ridicule us. They're going to make fun of us for the changes we're making in order to pay off our debt as soon as possible. But that they're doing so because our lifestyle changes make them uncomfortable. It forces them to take a look at their finances, and it's easier to have the "ignorance is bliss" attitude when it comes to debt. Especially in an economy like ours is, now.

But mark my words. In 18 months, we will have 90%, if not ALL of our debt (credit cards, student loans, and HELOC) paid off, in full.

And the biggest lesson we're learning from this? HOW to manage our money. HOW to save our money. How to never, ever have to use credit again. I've never been so excited about paying bills in my life!


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  2. Ugh, I totally had a pit in the bottom of my stomach reading this. I can completely relate to most of what you mentioned. Thank you for posting this.

    I also grew up in a household where a healthy relationship with money was not established and I got very out of control with my spending. I too, am in debt and have been weighing my options-- selling my car, etc.

    I consulted a loan officer last year and was given a booklet on how to clean up debt and credit score. Like you mentioned it is frustrating and overwhelming receiving mixed advice & opinions on where to start/how to go about it.
    While it may be painful learning the hard way, I am grateful that I made the mistake young and am learning early on how critical debt/credit responsibility is.

    I don't think your plan is crazy or ridiculous at all. I think it's quite respectable of you both to do what it takes to tackle this head-on.

    Good luck to you guys!

  3. Good luck to you! If you want another great book to read, it's called "The Automatic Millionaire".

    I read that when I first decided I wanted to shop for a house and realized I had crap for a down payment, and too much debt. I honestly think they should have "Real Life 101" in college to teach kids how to manage money, write checks, learn about credit cards.

    Once I put into place some of the simple plans in the book I read, I paid off my credit card debt, made my savings "automatic" and within 10 months, I was debt free and had a start to my house down payment.

    Good luck to you guys - I'm sure you can do it!

  4. I'm proud of you for the steps you are taking. The reason why so many people are in the trouble they are in is because they are still trying to maintain a standard of living that doesn't coincide with their income. Like the mortgage crisis, I'm sorry, I know how much I make, and I don't care if someone told me I could buy a $200,000 house, I know I can't afford it!

    This is coming from someone who got into CC debt years ago and took the "easy" way out, re-built her credit, had no CC debt when she bought her house and then a year later found herself owing $14,000. Yes, a lot of it was house stuff (I had to buy every appliance, and that stuff ain't cheap), but a lot of it I could have done without. I have cut that in half and cannot wait until it's completely gone so instead of paying like $800/month on debt, I can pay it right to myself into my savings.

    You are on the right track, and I commend you for taking steps for a healthy financial future!

    PS-Check out Suze Orman, she comes off as a bitch on her show, but some people need it! I never miss it now, she has some great advice.

  5. I have read this book, and I like a lot of Dave Ramsey's ideas! I actually did a lot of them, like snowballing debt payments, (I mostly had medical bill debt) and starting an emergency savings account. I lived pretty frugally for a few years, (and still do, but I am buying a house now) but it was SO worth it. My husband and I paid off all of our debt in 2007, and now our only debt is our mortgage. It has made SUCH a difference to not have those nasty bills coming in the mail each month. I feel so much more free, and so much more prepared now! It sounds like you and Luke are really committed to this, and I definitely think you guys can do it!!! Good luck!!! :)

  6. LOL, I ramdomly realized after I posted that I called Matt "Luke" in my last comment... I am so used to seeing you guys referred to as Mr. and Mrs. Lukie that I guess it threw me off! lol! Sorry!!! ;)

  7. Awesome! I am a HUGE Dave Ramsey fan. Keep at it!


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