Better Than I Deserve...

For a long time, I have been searching for someone or something to help me with financial matters. This is a topic which people generally do not come in and start telling others to do. Finances are personal. But, what are the standards to live by? What are the rules? How does one save money? How does one buy things without going into debt?

I grew up doing all the standard dumb things. My first two cars barely cost me anything, but then when I bought my Toyota Tercel, I paid 18.75% interest. No air conditioning. No radio. I knew nothing. I basically ended up paying double what the car was worth in car payments. Then, when I bought my truck, I did a 6 year loan. I bought my tv, sofa, camera all on credit. I sensed that I was doing something wrong, but I had no real direction. By the time I bought my condo, I had a truck payment, school loans and credit cards.

I knew I wanted to pay off my debt and I knew that I wanted to save money, but all I could do was incur debt and then pay it off. I think that is how most of America works. There seems to be no other solution than to just slap all that money down on a credit card and then spend the next few years enjoying what you have while paying a huge price for it.

This all changed when I came across the teachings of Dave Ramsey. I know some people have read his book, The Total Money Makeover, but the book does not teach people like his radio show does. He talks to people about how much they make, how much debt they have, and what their spending habits are. He actually has 7 Baby Steps for people to follow to feel financially secure. And, most of the calls he takes revolve around those baby steps.

Who is Dave Ramsey? Why should I trust some guy on the radio? He is a Christian, which sort of threw me off at first. I suppose I wondered if he cared about people or converts. But listening to his show changed all that. His story started off with him flipping houses and he was a millionaire, but then some deals went bad and he went bankrupt. After going through that hellish experience, he came across a business idea of being able to help people avoid what he went through and eliminate debt from their lives.

Dave is really conservative when it comes to money. He says to have a written budget before each month starts. Give every dollar a name. It works. It is not hard to realize that one's money gets spent so quickly. Then, the sacrifice steps in. Things we wanted to buy had to wait.

I could go on for hours on how great his program is. I would recommend listening to his show. He has the archives from two weeks back on his website.

But back to my initial statement. I was searching for someone to help me out with this financial stuff. We had a guy come over once who told us to roll our debt over to a 401k loan. Not knowing any better, I signed on. This was a bad idea. If I had lost my job, that money would have become due all at once. Very risky.

The show teaches people to minimize risk. What if I lose my job tomorrow? Do I have anything in place to allow me to look for a new job for a couple months? Why is debt a bad idea? Why get a fixed rate loan on a house? Why avoid debt at all costs?

Dave talks a lot about Murphy's Law. And it is so true. Life is all about the unexpected. And, we live in such a Must Have Now society. So, people buy all these things anticipating that everything will be fine in the future, but it won't. We need to have safeguards in place.

The policy on credit cards is to never use them. A lot of people say that they need to build up a great credit score, but Dave's argument is that one does not need a great credit score if one does not take out any loans. The only exception would be a home loan, and for this he says that one can go to a lender who does manual underwriting, which is what they did in the olden days.

Many would say that no credit card use is too extreme, but the argument here is more about behaviour. The statistic goes that people spend 12% more using credit cards than they do with cash. It does not take a stat to know that this is true. Are some people able to handle this anyway? Sure. But, there are certainly way too many people out there who are in over their heads when it comes to credit card debt. And it comes back to behaviour. If people were disciplined with a written budget, they would be okay. People want to have fun, go out to eat, go on vacation, buy brand new cars, buy large homes. We are not patient.

Dave offers a standard from which to work from. I believe he is right most of the time. He speaks to me in a language I can understand. It is conservative, but that is okay, because it works. And, I am no financial expert. I could not tell people where to invest or how best to use their money. I just know that risky behaviour with money often requires quite a bit of work to overcome. I don't want to do that. I want my family to feel secure.