Past finances

Past finances

finance / Dave Ramsey

During my mid to late teens, I read books about the stock market and retirement. I knew back then that putting money into retirement was extremely beneficial and would easily make me a millionaire.

My first real job was in the Air Force, where I immediately went into debt by purchasing some encyclopedias. Also I did not follow the instructions I previously learned about investing in my retirement.

Upon leaving the Air Force I was mad with myself for not investing in my retirement, so I opened a Roth IRA with my bank. I wasn’t making too much money, so only planned for about $50 per month. That plan didn’t last long and I went to putting money in every so often. I did manage to get the balance to about $2000.

A very dire emergency came up where I needed $5000. That meant selling my Roth IRA for much less than I put into it. Also meant borrowing money from my Mother. I had a small “emergency” fund that I wanted to get to $1000. Even after 10 years, I was never able to get that account to $1000. I spent WAY TOO MUCH money and would use the couple hundred dollars in my emergency fund to pay off credit cards.

I opened a 529 college fund for my daughter. Based on the amount of bills and debt, I calculated that I could only put in enough money to get the account to $10,000 by the time she would need it. I was not pleased with those results.

Shortly after opening the 529, I bought a 1 year old used vehicle and the payments prevented me from putting money into the 529. Now I’m really not pleased with my finance numbers.

I’ve searched Google for finance advise before. Usually the results are about how to increase your credit score, which I’ve been trying to do. However, that’s not why I was searching this time. Instead of Google, I tried finding podcasts. Out of the results, I found two I would try listening to. I do not remember the name of one of podcasts, but the other podcast was Dave Ramsey.

I really liked Dave Ramsey’s ideas as they fell in line with my ideas I’ve been trying to do for the past 10 years. He calls them baby steps and they’re as follows:

  1. Save $1000 for starter emergency fund.
  2. Pay off all debt, except mortgage, smallest to largest. NO, do NOT pay off based on interest rate.
  3. Save 3-6 months of expenses for a full emergency fund.
  4. 15% of income goes towards retirement.
  5. Save for college.
  6. Pay off mortgage.
  7. Profit!!! (Officially called build wealth and give generously).

Steps 1-3 also require stopping any money into retirement. I’m already so far behind with the retirement plan I learned a long time ago that I did not want to stop all retirement deposits, but I stopped my 401k anyways. Step 1 I agree with and I’ve been trying to do for 10 years. Step 2 is interesting, as why would he say ignore the interest rate? It’s basically emotional and behavioral reasons. After understanding those reasons I now agree with him. By doing step 3, there is no reason for any credit card, ever. I will be able to make more money from interest than any credit card points offer and I won’t have to spend money to make that extra money. I can’t wait to get to step 4, as I could only do about 10% before. I will love sending 15% towards retirement. Once I reach step 5, I’m pretty sure I’ll be able to save a lot more than $10,000 for my daughter. Now I’m starting to be pleased about my future finance numbers.

I started Dave Ramsey’s plan in August 2016 and completed step 1 in just a month. Already a significant improvement over my original plan of saving $1000 which I never completed after 10 years. The key to this new-found success is having a realistic budget and sticking to it. Only buying the items the I absolutely need. I’m predicting that step 2 will take me a bit over 2 years to complete. I plan to get my daughter for a month or two during the summer, so I’ll be budgeting to travel half way across the US.

Debt at start of plan:

Creditor Amount
Judgement: Asset Acceptance $1764
Collection: MCM $3034
Collection: EOS CCA $643
Collection: Car repo $5376
Student loan: sub $7912
Student loan: unsub $9722
Credit card 1 $18
Credit card 2 $7504
Car loan $21719
TOTAL $57692
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