Friday, September 10, 2010

GOOD Post #1

Welcome to GOOD Post #1? What is GOOD? I'm glad you asked. GOOD is my acronym for Getting Out Of Debt. Recently, a good friend told be about Dave Ramsey's Total Money Makeover.
z ramsey tmmo_book_2010
I read this book, and it has changed the way I look at money...more specifically the lack of it. My previous retirement plan was to die young. That's right. Live for today and hope tomorrow never comes. Or at least hope that I won't have all that many tomorrows to worry about. There seems to be a little problem with the execution of my plan, though. (No pun intended.) I haven't died yet, and I no longer consider myself "young." Barring any unforeseen circumstances, it looks like I will be on the earth for a little while yet. ::sigh::

OK then, time to take the proverbial bull by the horns. I'm sure there are lots of ways to do it, (robbing banks? prostitution?) but I decided to do it legally, the Dave Ramsey way. Below, I've broken down his Baby Steps into an uber-simplified version. If you want to know more, ask me. No, wait... I'm hardly an expert. I'm following his plan with the blind faith of a sheep following a shepherd. Baaaaa. If you have any questions, buy his book, or get a copy from your local library. In a nutshell, here is Dave's Plan.

Baby Step 1: Save a thousand dollars. This is your Baby Emergency Fund. It is there so that while I am busy getting rid of debt, I won't go further into debt if WHEN something goes wrong.

Baby Step 2: Pay off your debts (except mortgage), putting every spare penny that you can on the smallest debt, while paying minimums on the rest of them to keep them current. When the smallest debt is paid off, you can pat yourself on the back for being so hardworking and clever, and then move on to the next smallest debt, adding what you were paying on the first debt to whatever spare cash you have to pay off debt #2 until that is paid off. Then, congratulate yourself for being so hardworking and clever again, and move on until all debts are paid off. This stage is called the “debt snowball”.

Baby Step 3: Increase the Baby Emergency Fund until it’s a full fledged emergency fund of three to six months of living expenses. Wow. Seems like a lot, but I'm determined to do it when I get my debts paid off.

Baby Step 4: Start putting fifteen percent of your income into retirement savings. This is on the assumption that my initial plan of dying young is not going to come to fruition.

Baby Step 5: Save for kids’ college. WHEW! This is just reason #2,498,589 why I never had kids. No college savings. Although if I did have kids, they would be in college right now and I would be totally screwed. Or rather THEY would be totally screwed. Hey, I paid for my own education, so any mythical, imaginary kids of mine can do the same thing!

Baby Step 6: Pay off the mortgage. Mortgage? You have to have a house to have a mortgage, right? So I guess I can check this one off... In place of steps 5 and 6, I don't see why I can't substitute my own:

Baby Step 5&6: Save for my dream house. Do you think this one will still be up for sale?

Yeah, I don't think so either...

Baby Step 7:
Continue to grow wealth. Give some away, have fun with some. Live like no one else. If I live that long.

So there it is. I've been on this GOOD journey for not quite a month now, and it came to me last weekend that I needed a visual representation of my debt. I channeled the inner School Teacher in me, and I made a paper chain.
Nice, huh? All those years of college getting my degree in Elementary Education didn't go to waste after all!

Each link in the chain represents $100 of debt.
Holy cow. That's a lot of links. That's a lot of money!
How did this happen?

After finishing the chain I wanted to cry.

And then throw up.

And then go to bed and never get back up.

And then pray for a Comet to come and smash into the earth to put me out of my misery.

After I indulged myself by acting like a child for a good 10 minutes, I decided it's time to put on my big girl panties (so to speak) and deal with it.

I'm determined to do this thing.

I will be debt free.


So anyway, from time to time I will be blogging about my journey out of hell , umm, debt. The silver lining to this black cloud of debt is that if I never make another yarn purchase, I have enough sock yarn...

DSCF4122 last me a good long time!


Kristyn said...

Good for you facing your debt. It can be very scary but will be so worth it in the end.

Sue said...

Even though dogs can seem expensive, consider how much less they cost then children. No college, no day care, no new shoes and school clothes, etc, etc, etc.

Good luck with your plan. We're rooting for you.

Channon said...

Good for you! We need to work on our plan too. Gretchen wants to know if you've done estate planning for your fur-kids, just in case... She's my worrier, you know! ;)

Anonymous said...

I heard a story on NPR today about a study that some folks in Canada did about money and happiness. Basically they concluded that it is the little joys in life that make us happy. Let's hear it for stash!

Donna Lee said...

It sounds like a good plan. Thinking about money always gives me the heebie jeebies. I'm not sure why.

Tsuki said...

Woo! Good for you!

The only point I'd worry about is pt2 where you say pay of the smallest debt first. I don't know if you have different interest rates in the US like we do here, but Money Saving Expert Martin Lewis (google him!) says that you should pay of the debt with the highest interest rate first - so if I owe:
£1000 on a 0% card
£1500 on a 5% card
I'd pay of the 1500 first because it will cost me more to keep servicing that loan than the 1000 on the lower rate. (Mortgage is also excluded)

Best of luck though, having a plan is great!