Where do I start?

OK. So maybe you read that last post and agree you’d like to get out of debt, but what now? Where do you start? How do you do it?

Well, I certainly will be talking about many of these things in future posts, but for those eager to jump ahead, I can share with you what we did. Dave Ramsey is a best-selling author and has a popular daily radio talk show. I started listening to him a few years ago as he was on when I was making my daily commute home for work. His most popular book probably is The Total Money Makeover. In it he details 7 “Baby Steps” for getting control of your finances. I remember checking his book out from the library and reading it gave me hope that I really could break out of the cycle of living pay check to pay check. In a nut shell the 7 Baby Steps are as follows:

  1. Save a starter emergency fund of $1,000.Life happens. Murphy shows up. Things break. We know that this is just a part of life. I know at least for me this usually meant just pulling out a credit card to handle the emergency. You have these grand plans of getting out of debt and then life kicks you in the teeth and you say what’s the use. Might as well just give up since I’ll never get ahead. Building this emergency fund helps you break that cycle of using debt to finance emergencies. Now $1,000 isn’t enough to cover any possible emergency that may arise but it will cover most of them.  Having this money set aside when the alternator goes out or the water heater breaks helps you break that cycle and stay encouraged on your journey.
  2. The Debt Snowball.In this step you take all your debts except for your mortgage and list them smallest to largest. You do your budget and then take every extra dollar you can squeeze out and throw it at the smallest one until it is paid off and then you move on to the next one. Take everything you were paying on the smallest one and throw it along with the minimum you were paying on the second smallest one and start working on paying it off. Continue that cycle until all of your debts save your mortgage are paid.
  3. Bump the emergency fund up to 3-6 months of expenses.Now that you are debt free except for your house, you need to build that emergency fund up to 3-6 months worth of expenses. With the recent unemployment issues some folks recommend even going beyond 6 months of expenses.

Steps  1 through 3 should be done in sequence. Once these are complete then you can move on to doing Steps 4 through 6 in parallel with each other.

4. Save 15% of your income towards retirement.

5. If you have children, setup and begin to fund college funds for them.

6. Take any extra that is left and work to aggressively pay off your mortgage.

7. Once steps 4 -6 are done, continue to save and build wealth and use that wealth to give and bless as many people as possible.

That’s the brief version of the plan. It’s not easy. Just remember you probably did not get into debt in a couple of weeks, you won’t get out of it in a couple of weeks either.  The more you are willing to sacrifice in the short-term the quicker you can get through these steps and gain control of your life.

I’ll definitely talk about these in much more detail in the future, but I wanted to at least throw out a brief outline of the plan. If you are interested in learning more Dave’s book is:


As I said this isn’t easy, but it works. My wife and I did it. We are working through steps 4-6 now. It requires discipline, commitment and sacrifice for a time, but if you do those things, I can tell you absolutely that it is worth every bit of sacrifice.

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