Tuesday, October 18, 2011

Introducing...."Money Monday" - Part Two


Okay...so my posts about Financial Peace University have been a bit more vague (about the actual principles) and more topical and applicable to me. I figure if I am going to give this weekly blog series a go...'Money Monday,' then I need to bring you up to speed a little.

So, by now, hopefully you know that Financial Peace University was created by Dave Ramsey, a well-known  author, public speaking and radio talk show personality. If you don't know him, don't worry about it. I didn't really either -- until our finances were so out of control, I went looking for answers. The FPU is compromised of a 13-week class that helps you "dump debt and build wealth" by his subscribed-to methodology. The class revolves around a video about that weeks' topic by Ramsey and then small group discussion time afterwards.

Something that is a bit hard to swallow at first is the cost. Most classes are about $100 -- which seems outrageous when 1.) you are poor and in debt, 2.) you are trying to change that and feel a little taken advantage of.

However, the materials you will receive, online resource center, access to the videos, the group support and feedback, facility usage, etc. makes it pretty much a bargain. Plus, it's my personal opinion that you value more what you have to pay for. You will be less likely to skip the class because you "don't feel up to going" when you have $100 invested, than if you got the class for free.

So, if you are considering doing a class in the near future, or if you live in the Fresno area and want to register in a class starting in January at my church, then start saving that $100. (Check in from time to time to see when the class gets officially scheduled.)

Also, I should say that you are welcome to attend a class one time for free to see if it's something you are interested in doing. The preview that is online on the website is also a good place to start (the first link I gave in this post).

So, now that I've shared that, let's get into the weeks that we've already completed:

Week 1: Super Saving - The Seven Baby Steps
  • Step 1: $1,000 in an Emergency fun (only $500 if income is less than $20K per year)
  • Step 2: Pay off all debt except the house utilizing the "debt snowball"
  • Step 3: Three to six months expenses in savings
  • Step 4: Invest 15% of household income into Roth IRA and pre-tax retirement plans
  • Step 5: College Funding
  • Step 6: Pay off your home early
  • Step 7: Build wealth and give
Ramsey has created a plan where you can logically get from being debt-laden to having money to spare and give. But, he advocates following that plan...to get to step 3, you need to first to step 1 and 2 and so on...

As I've mentioned in previous posts, we're still on Baby Step #1, but almost there!



Week 2:  Relating with Money: Nerds and Free Spirits Unite!

This one was especially fun because he talked about how we relate to money and especially in a marriage relationship where there is usually a "free spirit" and a "nerd" when it comes to money. This is where the "money tension" comes into play and all the money fights. He talks about the importance of both parties committing to creating a budget and following it.

For us, I would say I'm more of the "nerd" when it comes to our finances. I see the total picture as the "money person" in our marriage. Rylie tends to be more of the "if I spend it, it will be there," but I think that's more of a result of him not sitting down and doing the majority of the reconciling and budgeting. He is also concerned about our financial picture and future too, but he doesn't lay awake at night thinking about how he can make a spreadsheet on Excel to plan our way to a specific goal.

He also talked about how this can impact your children and how you can start to teach them about money and how to avoid debt. All of his children were able to save up money for their own cars (which they matched) by following the principles.


Week 3: Cash Flow Planning: The Nuts and Bolts of Budgeting

This week, Ramsey talked about money being "active." And because of that, you must do a "cash flow" plan every month to make sure each and every penny is allocated. Without allocating each cent, we get these ambiguous categories or "slush funds" that end up melting away. Only when you have each and every penny assigned to a specific category will you have full financial control over your money, and not the other way around.  He gives you the worksheets and tools to sit down and hash this out. He warns that this is usually the one that creates the most tension for couples since you really have to sit down and see the reality of the full financial picture you've drawn, and have a meeting of the minds for a solution.

Although this was a tough one -- to see exactly how deep into debt we are -- it was also very freeing to look that monster full in the face AND create that game plan. There is no more guessing now. We know what we have to do to get out of debt and be where we want to be.

I've mentioned in another post, how much we are enjoying an online envelope system called Inzolo. The nice thing about Inzolo is that because it's online and comprehensive, we were pretty much able to use it to do our cash flow planning. Plus, the extra benefit is that we can then USE it for the month....AND it's dynamic, so we can make all the changes we need to as the month progresses.

We're still in the "free trial" phase, but so far we really like it.


Week 4:  Dumping Debt: Breaking the Chains of Debt

This was the longest video to date, the hardest to hear, but the most entertaining and hopeful. He debunks a lot of the myths we have about credit cards, loans and debt. He points out that our great-grandparents thought debt was a sin. Our grandparents thought it was unwise. Our parents took on a bit to help them "get ahead." We are debt-crazy and think we cannot live life without it.

I really enjoyed this one. It made me want to pump my fist at every myth he popped (and he would literally pop a balloon on stage every time) and say, "yeah!" It really gets your blood boiling when you realize how much you have bought into the marketing of credit card companies and what a crazy notion we've bought into.

I love that he gave us practical steps to get out of debt:
  • 1. Quit borrowing more money!
  • 2. You must save money.
  • 3: Prayer really works.
  • 4. Sell something.
  • 5. Take a part-time job or overtime (temporarily).
His thought is that if we are willing to buckle down and work hard and sacrifice for a short amount of time, we can then live the remainder of our lives in financial freedom.

And the end of this lesson brought us to Baby Step #2...

Pay off all debt using the "debt snowball," which is paying the minimum payments on all your debts except for the smallest one. That one you attack and work hard to eradicate. Then you attack the next one. Every time you pay a debt off, you add its old minimum payment to the next debt payment and so on, and so forth.

This is where we are almost at, and I'm excited. I can't wait to see this debt start to get hammered down. But, this one is tough too. One thing we've done right is saving for the kids' education and a little bit of retirement. Ramsey says, however, that during this time period, you stop all of that and focus all your energy and resources on to paying off that debt. And then, when it's gone, you put that money back to saving and even more of it!

Although the idea of stopping that hurts a bit, I understand it. However, the one that hits a bit harder is thinking through other areas of our budget where we could eek out more money. One glaring place is our son's preschool tuition. I won't go into all the nitty gritty, but the bottom line is that it's costing us $200+ a month for him to go two days a week for preschool and enrichment. He was supposed to be getting free preschool at our local school. But the state raised the income guidelines and we no longer qualify. So, now he's going (and enjoys it), but we could really use that money.

My husband thinks we should pull him out and work with him at home. I'm....not so sure. I'll admit my feeling of lacking in the "home school department." Frankly, it scares the heck out of me. Even setting aside some time to go through a workbook is frightening. However, I also feel guilty about taking him out of a setting (educational too) he enjoys because of our poor money choices.

However, that's "my issue," and I know I need to work through it...and especially pray about what God would want us to do. But, you can see that being committed and working hard to get out of debt is full of tough decisions. How badly do you want it? What are you willing to do, sell, rethink in order for it to happen?

That's where we are now...October 2011. We're on the journey. We're making tough decisions. But, we're getting somewhere!

See you next Monday! I'll tell you how the "dumping debt" week has gone and give you a preview of week 5..."Credit Sharks in Suits."

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

Related Posts About Our Financial Peace Journey (in order):
http://www.mosaicmomma.net/2011/10/financial-peace.html
http://www.mosaicmomma.net/2011/10/my-god-wink.html
http://www.mosaicmomma.net/2011/10/peace-like-river.html
http://www.mosaicmomma.net/2011/10/introducingmoney-monday.html


For more info on Financial Peace, visit:
http://www.daveramsey.com/fpu/preview/

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

0 comments: