Seven Steps to Financial Peace
After weight loss strategies, debt-free living must be one of the most talked about, search-engined topics around. Evidence: a recent Google search returned “about” 9,720,000 results in .12 seconds. Some catchy titles popped up, but the third-ranked program was the Dave Ramsey homepage, www.DaveRamsey.com.
Living like no one else—being weird—is at the core of Dave Ramsey’s Financial Peace University (FPU) program. The dynamic radio talk show host, best-selling author and charismatic speaker has helped millions of American families get out of debt. The average family eliminates $5,300 of debt and saves $2,700 in the first 91 days of the program. Excepting the home mortgage, most families are debt-free in 18-24 months.
The secret? It’s a seven-step, self-help program—WAIT! Don’t stop reading! The steps are sound financial principles that Ramsey himself follows (see sidebar). The program puts people in charge of their money using a flexible monthly budget.
Normal is broke. Be weird.
“Oh, yeah, you’re that Dave Ramsey family…” That’s the reputation
Mike and Michelle Sumler built by repeatedly turning down credit card offers at a children’s clothing store. The Sumlers retired between $26,000 and $28,000 of debt in 14 months. After hearing Ramsey’s radio program, the couple enrolled in a Financial Peace University seminar at their Belton church in 2007. The Sumlers paid off student loans, then tackled furniture and unexpected real estate taxes. Today, they are on Baby Step 4, retirement saving. Ramsey’s Financial Peace Jr., taught their children how to earn money and prioritize spending, saving and giving.
The Envelopes, Please?
The Sumlers attribute much of their success to using FPUs monthly cash flow plan, which Michelle found “doable” compared to other budgeting approaches. To stay on track, they use a modified FPU budget form and its envelope system to keep track of monthly expenses. Debit cards pay for monthly expenses (groceries, gas, etc.); the receipts go in their respective envelopes, and the expenses are deducted from the monthly total. When they reach their monthly allotment, they stop spending.
How Simple the Difficult Things Can Be
Rebecca and Ryan Mills of east Kansas City, MO, took a slightly different path to financial freedom. They utilized the internet, radio show and Ramsey’s best-seller, Total Money Makeover. After reading that book, Ryan says, “A light bulb came on,” and he was sold on the program. The couple retired $35,000 of debt in just over one year. Ryan explains their success: “You both need to be on the same page, share responsibilities and communicate regularly about finances.”
The Mills snowballed their debt (see Baby Step 2) by paying off some lingering wedding expenses and credit cards. Next were the car payments and a second property. “Once we accomplished this,” Ryan recalls, “we had the momentum going. Paying off the first two debts gave us more money to put toward the next two.” Unlike other financial advisors, Ramsey tells participants to pay off the lowest debts first. Early success creates the snowball effect that keeps people motivated.
Momentum and motivation are key. Both families treated themselves to vacations during their debt reduction process. The Sumlers went to Disney, the Mills to Jamaica. The major difference: neither incurred any debt. This is how you “live like no one else.” Be weird. Live
debt-free.
Kathy Stump lives in Parkville, MO, where she and her husband are raising two financially-savvy children on a budget.