A few weeks ago, I wrote an introductory post about the Financial Peace University class we'd been involved with since January and what we had learned. Our last class is next Saturday and I have to say, it's a little bittersweet. As things begin to wrap up, however, I wanted to share how we've been applying the advice of our personal finance guru, Dave Ramsey.
1. Discipline is hard
This is the first lesson we've learned. Dave says that personal finance is 20% head knowledge and 80% behavior and boy, is he right! Owning up to your splurging and unnecessary spending is no walk in the park. But Hubby and I have committed ourselves to getting out of debt and we work every day to get one step closer to that reality.
We've gotten much better at passing up the opportunity to order a pizza when we have cupboards full of food that need eaten, and have been saving up money for the trips we have planned for the spring and summer, so that we aren't taking a hit in the "gas" category of our budget when the time comes.
2. Emergency Fund
Dave's very first Baby Step is to put aside $1,000 for an emergency fund. We're not there yet, but expect to be in one or two more paychecks. This will ensure that if something unexpected happens, we won't be completely screwed.
3. Our Debt Snowball
So although it's a little embarrassing sharing the extent of our debt, I wanted to give an honest of portrayal of our current situation and how we're tackling it. I know there's a lot of people in the Blogger world who are in a similarly tight financial place, so I hope we can serve as inspiration!
Using Dave Ramsey's FPU software, I plugged in all of our current debts (most of which are student loans). These are outstanding debts, but this does not include regular bills, gas, rent, etc.
This shows all of our debts, ordered least to greatest, along with the minimum payments for each. The trick of the debt snowball is not to pay off debts with the highest interest rate, but to focus on tackling the smaller debts first and then applying that minimum payment toward the next largest debt...creating a snowball!
This graph illustrates what our debts will look like as they're paid off and gives us a time frame of when we can expect to be debt-free.
Lastly, this cute little illustration shows when we can expect to pay off specific debts using the Debt Snowball method and the exact month and day we'll be debt free!!!
These figures are based on the calculations if we were to use the Debt Snowball method, and don't include any extra money. So, as our incomes increase we'll be able to apply any extra funds toward our debt and hopefully pay it off even sooner!
4. Tax Refund
As I previously mentioned, unfortunately about half of our tax refund went toward car repairs, but I'm just thankful we had the money! The remaining funds went toward paying off our smallest debt in full- my Mom's credit card! We used this to pay off the remaining balance of our honeymoon, and I'm so glad it's one less thing to worry about!
5. Planning for our Future
Because of Dave's lesson on Real Estate & Mortgages, we came away with a much more realistic idea of when we can start growing our family and buying a house. Dave suggests the following before investing in a home:
1. Have zero debt,
2. Have 3-6 months worth of expenses saved,
3. Have enough money saved for a 20% down payment.
our my baby fever is running rampant and we'd love to have four walls to call our own, we've accepted that we have about 10 more years before we can expect to buy a house. It's a little discouraging, but it's also really helpful to have a timeline in place for our future. No babies for us any time soon!
I hope this was helpful to anyone in similar financial standing. If you're interested in getting a better grasp on your personal finances, I would highly, highly recommend Dave's class.
Go HERE to find a class near you!
All images courtesy of DaveRamsey.com