March 26, 2013 by Will Ray
Last night was one of the most powerful lessons in FPU: Dumping Debt. It’s probably the lesson for which Dave Ramsey is best known. While he does have a (great) comprehensive plan for your money, most people know Dave as the “no debt” guy.
Last night was a HUGE lesson, in duration and amount of information shared. It’s a gargantuan task that Dave has in this lesson, because he has to systematically dismantle all the things that our culture believes about debt. Beliefs like:
I’ll always have a car payment.
Student loans are the only way to get through college.
I’m beating the credit card companies at their game because I get airline miles.
You need to build up and maintain your credit score to live a full life.
We sometimes don’t realize it, but our culture at large deeply holds these beliefs. And we’re told these things over, and over, and over as we grow up and become adults, until it becomes an accepted norm that yes, we will always have a car payment and student loans, and always be in pursuit of that 850 credit score that’s always just out of reach.
The power in this lesson is it’s motivation towards getting you to live differently. Broke and in debt is normal in our culture – this is a challenge to be weird.
A few final thoughts on this lesson and getting out of debt:
– Get Gazelle Intense – Dave shares an incredibly powerful illustration, a video of a young gazelle getting away from a cheetah. It illustrates the intensity with which we need to work to get out of debt, taken from Proverbs 6:1-5. Baby Step 2, paying off all your debt but the house, isn’t a 10-year proposition, or even a 5-year proposition for most people. This is an intense, all out, 110% sprint to break the chains of debt and get after it. Most people should be able to complete Baby Step 2 in two to four years.
– Get Creative – There’s more than one way to skin a cheetah. 🙂 Sell some stuff. Start a side business. Find a way to make some extra money doing what you enjoy doing. Sell your old or broken gold jewelry, ladies. Clean out and sell stuff at a consignment store, or in a yard sale. Anything like this you can do will help boost your momentum toward becoming debt free.
– Use the Debt Snowball System – We can argue about paying off the lowest balance or the highest interest rate first, or we can actually bust it and get out of debt. Truth be told, interest rates don’t get us into debt or financial issues, our choices do. If we based our behavior on interest rates, we wouldn’t do half the stuff we’ve done.
The Debt Snowball is listing your debts smallest to largest and paying them off in that order, adding the payments together to build up momentum. If you’re on Baby Step 2, do this, and track your payments and debts well! Without tracking them well, when you pay off a debt, that old payment will disappear and you won’t know where it went! It will end up frittered away on random life stuff. Make sure you immediately add the payments from old debts to the new debts, or you’ll lose the power of the Debt Snowball.
This is some pretty powerful stuff, if you’ll actually implement it. It works every time it’s tried, if you stick with it. I look forward to hearing some awesome stories!
Question: What are you most excited to do when you get out of debt? If you’re out of debt, what do you love being able to do?