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.
Had a minor setback today; my back went out, so I’ll be in re-coup mode for the next few days...which means two less earning days this month, but I’ll survive it; I got cash for Christmas. :)
Bright side? I’m not going anywhere or spending any money, other than the reimbursable expense for my Chiropractor. My medical slush fund kicked in for the year January 1, 2010, so it was good timing as far as these things go. ;)
I hope you start feeling better very quickly. I know how dabilitating a back injury can be.
Working on the Mortgage and we will be debt free.
But I need a new roof and its gonna cost quite a bit. always something ain’t it?
Lord, please help Delores and Steven Guthrie to get out of Debt because Debt is like Sin. Debt enslaves and strangles just like Sin does. May Delores and Steven Guthrie look to the Lord Jesus Christ and if it be your will, to be FREE!
Thanks, CSM. Just woke up from a nap, time for ice! Just wish it were in an Old Fashioned instead of on my back, LOL!
Husband bought me a TENS Unit. I’m hoping I won’t need it too often. Surgery is in my future; I have a bad vertebrae in my lower back. Blech!
ping
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