Posted on 01/03/2010 7:56:09 AM PST by Diana in Wisconsin
In order to continue their quest for financial freedom — a resolution they originally set for themselves in 2007 —Douglass residents Delores and Steven Guthrie will attempt "to live like no one else" in 2010.
The concept, which the couple discovered through a step-by-step money management program they took part in at a local church, encourages individuals to become accountable for their finances and how they choose to spend their money, something local and national finance experts agree is the key to getting out of debt in the new year.
Guthrie says she and her husband began to take Financial Peace University, a video-based class series by national radio personality and finance author Dave Ramsey at Calvary Baptist Church in 2007, and in the process, they learned not be overwhelmed by their looming debt — which at that time was $420,000 — and simply work with the money they had. Guthrie says much of the bulk of their debt came from their trucking business in the form of property and equipment.
"We sometimes have a boring life, but we know it's for an ultimate goal: when we're debt free," she says. "... Honestly, Financial Peace University just really taught us not to be too overwhelmed, but just pay what we have and work with what we have,"
Guthrie says one of the most important aspects she has found in doing that is to spend money on paper first.
"Every time we get paid, say for example we get a $1,000, we take that $1,000 and write it on a piece of paper and we literally spend our money on paper first," she explains. "It takes time and it's not always fun, but by spending that money on paper first, you realize where your money is going."
The couple has also increased their cash flow, by not always going out when the opportunity arises and prioritizing where their money is needed most.
"It's not always easy. There have been times when all of our friends are out having fun and we're just sitting at home. But we've decided 'let's just sit at home' for now, because one day, because of it, we'll be able to do certain things and live like no one else. We live like no else now, so later, we can really live like no one else."
In the three years, since they became accountable for where and how their money was spent, the Guthries have reduced their debt by $317,000.
"There are so many people who have struggled this (past) year financially, but you really can overcome it if you live like no one else," Guthrie says.
Shannon Smith, a certified financial planner and registered principal with Smith and Partners Financial Services, a firm associated with Raymond James Investments, says the first step in eliminating debt is to reduce expenses.
"The reality is that a vast majority of people spend money on things they don't need. A good example is spending $5 on a latte," he says.
Smith says a reduction in spending, even by a small amount like $10 a day — assuming a person's income remains the same — can add up to a large sum of money that can be used to pay off debt, he says. "There's a way to do it, but the reality is that most people don't want to do it; they don't want to lower their lifestyle."
Smith suggests paying off debt with the smallest balance first and then utilize the former balance payment and put it toward paying a larger sum on the bigger debt balances.
For instance, if someone has three credit cards with balances of $1,000, $3,000 and $10,000, respectively, and they pay $100 every month on each balance, when the lowest balance is paid off, they can take their former payment to that card and apply it to the larger balance, along with the $100 payment they were already paying, plus any savings they were cutting from their expenses. For instance, cutting $10 out of daily spending would come to a savings of $300 per month.
"If people can find a way to cut their expenses and then take that savings and start paying off debt, in addition to what they're already paying on debt, that's how you get out of debt. There's no magic formula," he says. "The formula to getting out of debt is simple, but it's just not easy for people to execute. It just takes discipline."
Smith says another option for individuals who have good credit and some form of equity in an asset like a home is to take debt with a higher interest rate and consolidate and refinance it.
He says if someone has three credit cards at 20, 15 and 12 percent and they also have equity in a house, they may be able to refinance their home and pay off all their consumer debt (the credit cards in this case), while also locking in a lower interest rate on their house for a longer period of time. Home mortgage interest is usually at least partially tax deductible for most families, assuming they itemize deductions, he says.
"The key is that you don't go out and run those credit cards back up again because you're just going to put yourself in a bigger hole, and unfortunately, I've seen a lot of people do that." Smith says.
Dave Ramsey Ping! Let’s live like no one else in 2010 so we can live like no one else all the sooner, shall we? :)
Keep dreamin’, LOL!
However - take some time and look over your finances and see what you can do to keep YOUR money out of the hands of Government.
I say, ‘Starve the Beast’! :)
Dave Ramsey is saving the financial lives of many people across this country. My family is only carrying a home mortgage debt and we hope to pay that off soon. When interest rates begin to spike up, those carrying all of that credit card debt are going to get hammered.
Us, too. I have a little bit to go on a cc, but then it’s just our (very manageable) mortgage on our farm. Of course, the car and truck will die soon thereafter; Murphy’s Law, but we’ll be able to buy two used vehicles with cash if all goes well.
I’ll be 50 this year, and hope to be out of the work force at 55. Of course, I’ll still ‘work’ but for myself and no one else. Husband is already self-employed and loving it.
It’s looking good, despite the economic times we are in. :)
TOO LATE!! For me at least. When dim-0s won the congress in ‘06, I sold out and paid off everything, cause I figured the bottom was gonna fall out.
I love Dave Ramsey. I watch him on Fox Business when I can.
Good luck! http://www.usdebtclock.org/
“The future ain’t what it used to be” Yogi Berra
No shiite Sherlock.
Institutionalizing your debt only works if you NEVER rack up a credit card balance again. I've seen so many people "pay off their credit cards" by taking equity out of their homes then start using the cards and making the "minimum payment" (AKA maximum profit for the card company) the very next month.
BTW, why would someone need more than one credit card?
Debt free! Even the house and cars.
I owe nothin to nobody........(and I'm rat holeing canned goods and ammo)
2010 is not going to be pretty, IMHO.
A most excellent strategy. :)
Good for you! I’m bringing up the rear, LOL!
I would say people should strive to have 9 mos to a year in cash on hand. Cookie cutter conventional wisdom was 3 mos to 6 mos before the SHTF. I remember some lively threads were it was suggested people didn’t need cash savings. Just tap your home equity or raid your 401K..
They pointed out part of the basics of Dave Ramsey’s plan, and then quoted someone else saying to refi unsecured debt with your home.
Dave doesn’t advise that. CON-solidation is a trap for 90% of borrowers - and Dave points that out.
Personal finances are personal. It’s not shaving a few interest points that makes the difference. It’s getting on a written budget and taking control of your money that does.
LOL! This morning I’m ‘splurging’ on Dunkin Donuts-brand coffee from the grocery store, made here at home.
One thing I will NOT give up is my flavored coffee creamer, though. That’s one thing I’m willing to spend $150.00 on each year...
Wait a minute! I spend $150.00 a year just for coffee creamer?!?!? I’m working on it! I’m working on it, LOL!
(I’ll work to wean myself off of it in 2010.)
Was the business prospering and using the equipment to make money sufficient to pay for the equipment, repairs and any salaries? In that case the debt wasn't bad and should be considered differently than money spent on a big screen TV or a swimming pool.
Well, looky here! I found a solution to my problem in about 2 minutes. I love the WWW! :)
http://www.associatedcontent.com/article/435431/make_your_own_flavored_liquid_coffee.html?cat=22
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