For the first time in my life I finally have control of my money.
Total debt paid off to date: $43,941.11
I have a plan and I am sticking to it– I have an emergency fund. I’m on a budget. I am beating debt for the first time ever.
How I am doing it
Once I realized I had a debt problem, I began doing research on how I could get a handle on my situation. Dave Ramsey and his book The Total Money Makeover was a major resource in giving me the direction I needed to become debt-free.
I also am following the counsel from the LDS Church and it’s leaders and as it is written in the scriptures. Information on the LDS Church and it’s teachings on personal finance can be found at the Provident Living website.
Where am I today?
I am currently on baby step 2:
Baby Step 2: Debt Snowball ($50,318.97)
Baby Step 3: Fully Funded Emergency Fund (3-6 Months)
Desire To Change
I was tired of feeling stressed out by money. And mostly tired of working hard and never having money to enjoy. I like doing things and going places; I couldn’t do these things and enjoy them in my current situation. I was a slave to my debts.
The Bible clearly describes the relationship between the borrower and the lender:
Proverbs 22:7: …the borrower is servant to the lender.
President N. Eldon Tanner (late General Authority of LDS Church) echoed Proverbs 22:7 stating,
Those who structure their standard of living to allow a little surplus, control their circumstances. Those who spend a little more than they earn are controlled by their circumstances. They are in bondage. -President N. Eldon Tanner (“Constancy Amid Change”)
I found this to be very true in my own life. For years I had been in bondage to my creditors. Every single dollar I had made was being sent back to the banks in the form of a payment. I had ZERO dollars in savings, yet I had made hundreds of thousands of dollars in my young 10 year working career. I was a servant to my lenders. I had grown sick and tired of living this way and I had a strong desire to get out of this mess. I wanted to enjoy my money. I wanted to build a savings, be able to buy a house, and be able to travel the world with my wife. There were so many things I wanted to do with my money. But my debt was standing in the way of my dreams.
Dave Ramsey often talks about the place people must get to before they are willing to make changes in their lives. He regularly quotes Les Brown, a popular motivational speaker and author:
People change their lives when they say, “I’ve had it!”
I had definitely had it. I was ready to change.
My Story: How I found a solution to my growing debt problems
I finally reached a point where I was no longer able to pay all of my bills. There just wasn’t enough money. I began to seek out solutions to my debt problem. I wanted to know THE BEST way for me to gain control of my money.
Credit Union Manager: I sat down with the manager at my local credit union to discuss my financial situation. He shared with me the options that were available, namely debt consolidation. He told me I could get a consolidation loan using the equity in my car by refinancing my car loan (I owed $4000 and it was worth $6000), which would give me back $2000 to help pay down my loans. Borrow more money in order to get out of debt? That didn’t seem like a very good plan.
Credit Card Companies: I contacted my credit card companies and asked them what types of programs were available to help me pay down my credit cards. They asked for some information regarding my financial situation and referred me to the hardship department. The hardship department referred me to Money Management International (MMI), they wanted to put me on a Debt Management Program (DMP).
MMI told me I qualified for their program and that with a DMP I could be free of credit card debt in a nearly 4 years (so far this program sounded much better that the others). MMI would require me to make ONE monthly payment to them along with a small fee (total payment of about $322). They told me that I would no longer have to deal with each creditor individually, but simply make the monthly payment to MMI and they would work things out with my creditors. Being out of credit card debt in 3 years and only having to make ONE monthly payment of $322 sounded awesome and was very intriguing. At that point I was already paying nearly $300 per month and I was no where near being debt free in 3 years. But something felt funny. I didn’t want to get into a bad deal. I didn’t sign up for the program immediately. Instead I decided to do some research.
A Debt Management Program is just that, the company will manage your debt for you by taking your monthly payments and negotiating settlement deals with your creditors. This is how they are able to help you pay off your debt in what seems like a really small amount of time (in my case 4 years). All this for a small fee. On the surface it doesn’t sound too bad. But in researching these programs, I discovered that they didn’t always follow through with their promise to work out a deal with your creditors and often times their clients find themselves having paid thousands of dollars to the DMP only to have one of their creditors file a law suit. Essentially, they are poor managers of YOUR money.
A Debt-Free Plan That Makes Sense
I had just moved to the Midwest for school. Having to move, change jobs, and take out more school loans, only added weight to the already overwhelming debt situation.
I found a job for a small, local delivery company. We delivered everything from small packages, to food and catering orders, to Gifts of Life (yep, kidneys, pancreas’, etc). My job required me to do a lot of driving. That is when I came across a radio program called the Dave Ramsey Show. Dave Ramsey is a financial counselor and best selling author of a book called The Total Money Makeover and hosts a nationally syndicated radio program where he discusses how to become debt-free and counsels people on how to deal with their own personal financial situations.
After a few days of listening to Dave Ramsey, something he said really struck me strongly. Something that none of the other people I had consulted had told me. Dave said to STOP BORROWING MONEY. Ding! It was very clear. It was simple, sound advice. The concept of NEVER borrowing money again pierced me deeply at the core of my soul. It was nearly a spiritual awakening. A reminder of something I had already known. I’d already had the desire to get out of debt and now I had the answer. I committed myself to living debt-free. That day was Jan 7, 2010– the last day I used a credit card.
Dave always says “you can’t get out of a hole by digging out the bottom.” Ramsey calls his plan the Total Money Makeover. He advises people to cut up their cards, stop borrowing money, get on a written budget, and intensely focus on paying off your debts using a method called the debt snowball. He lays out his plan in 7 steps he calls the baby steps (Dave Ramsey’s Baby Steps). He teaches people personal accountability with their personal finance, he teaches, “personal finance is 80% behavior and only 20% head knowledge.”
If you want to be in a different place, you must believe and do things differently. The change will be painful, but the result will be worth it. — Dave Ramsey, Total Money Makeover
Finally, a plan that made sense. A plan that felt right. A plan that I COULD do. A common sense plan. A roll-up-your-sleeves and work hard plan. I was ready to become debt-free.
Nobody else with whom I consulted about my debt and how to pay it off told me to cut up my credit cards and to stop borrowing money. Nobody ever told me my debt was a symptom of my behaviors. They didn’t counsel me to get on a disciplined budget and manage my life.
They told me debt was normal. They advised me to borrow money to pay down the debt (see credit union manager). They advised me to allow them to manage MY money for me. Those things DO NOT work.
My behavior was the problem and my behaviors will be the solution.
Turns out Dave’s financial advice, much of which comes from The Bible, is very similar to the financial counsel given by the LDS Church. The things I probably should have already known, having been a member of the Church my entire life.