7 Steps to Get Out of Debt

Mom, I need new shoes for wrestling.  The motor just went in the car.  The dog has a mass on his shoulder.  Hours are getting cut at work.  Surgery for your wrist is scheduled and you will be out of work for 6 weeks. Time to crawl in a hole right?dave-ramsey-quote-e1412126359691

Statements like this can be instantly depressing if you don’t have a rainy day fund.   I don’t and believe me those statements scared the hell out of me and depressed me for weeks.  Now, I am taking the steps, through Dave Ramsey, to get control back with my money and tell IT where it needs to go instead of dreading looking in the mailbox.

I will be doing a series showing my journey from being thousands upon thousands of dollars into debt to finally living debt free.  I am going to take control of my money one step at a time.  Is it going to be easy?   NO.  Is it going to be worth it?  YES!

Dave says that there are 7 baby steps to take.  These steps, I will admit, scare me.  They don’t look easy at all but again will it be worth it?

First things first.  I have to create that dreaded budget.  I just downloaded Every Dollar.  This budget/manage money tracker app that I downloaded to my iphone. Dave recommends it and I figure if it is good enough for him it is good enough for me. 🙂

every-dollar
Every Dollar Budgeting Tool

 

Today is the first day of my taking control of my money.  Today I plan out my budget for the month.  Today I am setting my financial goals and sticking with them.

Dave’s 7 Baby Steps:

1 – Save $1000 to create an emergency fund

I know I know.  If you are like me I took a look at this and said what the hell Dave!  If I am living paycheck to paycheck why wouldn’t I want to try to pay off bills so that I am not being hounded by collectors.  Wouldn’t I want to pay off bills instead of just letting money sit in a bank?  But he assures me that it is important to have that rainy day fund for those unexpected emergencies.

2 – Pay OFF ALL Debt but the House

List ALL of your debts but the house in order from smallest to largest.  The smallest one should be your number one priority.

3 – 3 to 6 Months of Expenses in Savings

This step is all about building a full emergency fund. It’s time to kick debt to the curb.  Sit down and calculate what you would need to live on for 3 to 6 months and start saving to protect you from some of lives bigger surprises.

4 – Invest 15% Of Your Household Income Into Retirementborrow

With no payments put 15% toward your retirement.  The money you were using to pay off your debt can now be used to build your future.  There are plenty of options out there so pick what is right for you.

5 – College Funding for Children

College tuition and housing is so expensive.  Don’t let it creep up on you.  Start a savings now.  There are two smart ways to save.  A 529 college savings fund or an education savings account.

6 – Pay Off Home Early

Imagine your life with no mortgage. This is your last debt keeping you from being completely debt free!  Apply all of the extra money to paying off your home.  You will save thousands in interest fees.

7 – Build Wealth and Give

This is the LAST step!  Give yourself a pat on the back!  Build your wealth, give generously and set your future generations up with an inheritance.  People with no debt  can live and do anything they want.  🙂

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The Dreaded B Word…Budget!

Since my surgery on December 20th, I have been stressed about money. Ugh. That dreaded B word keeps popping into my head. BUDGET!
It’s hard to budget when you have zero money come in, I mean who wants to even think about it right? But it is something that needs to be donewoman-opening-empty-pink-wallet_web, at least for me.
Did you know that 78% of Americans live paycheck to paycheck? Ever since I can remember that is how I have lived, for the most part.
I really would like to get to a point in my life where I can have more than 200.00 in my savings.
I want to get to that point that if I want to go visit my daughter in Kansas I can.
I want to get to that point where I don’t have to completely stress when I am out of work because of an illness or surgery.
Wouldn’t it be nice to know that the bills are coming but there is money to cover it?
Hmmm…
But how? I am going to start doing the baby steps that Dave Ramsey talks about. It’s time to take control of my money.
Budget before the month begins.

I need to start with my income.  This is the total take home pay (after taxes) for me and my husband.  This is images-1both of our full time jobs, including any extra money that I make from being a Beachbody coach.  (If you have social security, disability or any freelance jobs make sure to include that as well.)

Next it is time to list all of our expenses. I need to make sure to include all of my regular monthly bills…mortagage, electricity, phone, gas, Beachbody coaching fees, food etc.  Don’t forget the irregular bills too.  For me this would include Beachbody on Demand, insurances, etc.   Anything that is due for the next month.

AFTER everything that I need to pay for is accounted for then I get to consider if there will be any money left over for the fun stuff like going out to eat or to the movies.images

 Being on a budget doesn’t mean you can’t have fun, it just means you need to check your priorities and other goals first!
Budget to Zero

Now it is time to subtract my expenses from my income.  My income minus my expenses should equal zero, this is called a zero based budget.  I am telling my money where it should go, I get to be in charge. 🙂 By giving every dollar a name, you’re ensuring that every dollar is accounted for and working hard.

 

Track EVERY transaction

Now that a basic budget has been created for the month, it’s time to make sure I stick to it.  As I go about my daily errands I am going to make sure to track EVERY transaction, even if it is for a stick of gum.  NO matter how tiny it is, I am going to write it down.  I have a little pocket notebook that I am going to use just for this purpose.

The whole idea behind this is that if I have to take the time to track the transaction it is going to make me stop and think about what I am spending my money on.  Is it part of my budget?  Is it really something that I need to buy at this point?

Piggybank and calculator

Remember that no two months are the same, so no two budgets will be the same either.  It’s definitely ok to look back at last month’s budget but make sure to make adjustments for any new expenses or even a lack of income for the month.

This is your budget.  Make sure to plan your budget early, zero it out and track your spending.

Check back for my next post about the Baby Steps.  A budget without a plan or a map won’t help you accomplish your money goals or help you get out of debt. That is where the Baby Steps are going to help.

Sending strength, hope and love.

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