PocketCoinage

I just wanted to announce to the world that I am DEBT FREE! Debt free except the house, that is.  It’s such an awesome feeling to know that you do not owe another lender any money.  When I first started out on my own with finances, I just assumed that student loans and auto loans were just the normal thing to do and it’s true.  Debt is really just normal in America.  It’s very abnormal to be debt free.

My debt free fire really started with my auto loan.  I really disliked Chase Auto Finance.  They would apply my principle payment as monthly pre-payments!  A large tax return helped put Chase to bed 3 years before I was scheduled to pay it off.

Once the auto loan was paid off in early 2010, I rolled that payment into my student loan.  That brought it down from a 10 year payoff to roughly a 5 year payoff.  I thought to myself, 5 years to get rid of $16,000… There has to be a faster way to get rid of this.  That’s when I discovered Dave Ramsey in August of 2010 and really got fired up.  I listened to his radio show via podcast on my way to work.  I’ve also followed JD Roth from GetRichSlowly.org for about three years now and watched his progress of paying off debt and working towards his dream job.  If thousands of people can become debt free and pursue their dreams, I knew I could too.

At first, I wasn’t totally on board with Dave’s plan.  The thought of cutting up credit cards struck a little fear within me.  What if there was an emergency?  What if I needed to rent a car?  What if?  What if?…  That’s when it hit me: fear was paralyzing my decisions.  I had some money in my emergency fund, but I did not want to part with it “just in case”.

By October of 2010, I had one foot on the debt free boat.  I used $2000 from my “extra” mortgage payment to jump start my student loan payoff.  The “extra” mortgage payment is from being paid bi-weekly: 26 pay periods in 52 weeks equals one extra month’s salary.  This got me motivated like you would not believe.

By December of 2010, I cancelled three store credit cards and cut them up to display to my friends on Facebook.

Since December, I have not used any credit cards what-so-ever.  By March, I cancelled and shredded 2 out of my 3 credit cards.  I had this idea to keep one open “just in case” I run into any emergencies with my small emergency fund.  I am looking to cancel this credit card by the end of the summer.

Just this past month I made my final student loan payment to Sallie Mae of $4,283.46.  How did I achieve this?  I took $2000 from my vacation fund, $1200 from my tax return, and roughly another $1000 from scrimping and saving.  I paid off $16,000 in roughly one year from May 2010 to May 2011.  The outcome: DEBT FREE EXCEPT THE HOUSE! I still plan on going on vacation this summer, but I figured I would just work harder and save more to get there.

Right now I am on Baby Step 3 of Dave Ramsey’s Total Money Makeover.  Baby Step 3 is where you save for 3-6 months of expenses in an Emergency Fund.  If I keep up with my current plan, I should have 6 months of expenses saved in about a year.

I can sum up the feeling in two words: worth it.  The feeling is so amazing; it’s like a weight has been lifted off my shoulders.  If it feels like you’re not getting anywhere, I know the feeling.  Just keep pushing forward and you’ll succeed.

It all starts with a plan and a budget!  My plan was (and still is) to be debt free and the budget got me there.  Just think of it this way, how would you get to your vacation destination without an itinerary (plan) and a map (budget)?

Last Friday, I attended Dave Ramsey’s EntreLeadership One-Day Event Simulcast out in Collegeville, PA at the Valley Forge Baptist Temple.  EntreLeadership One-Day is an event where Dave teaches the techniques he uses to run his successful small business.  You learn everything from hiring and firing, to being an entrepreneurial  leader.  All the steps are there to help you change the way you run your small business.  Even thought I was watching remotely, he had us to interact with him using twitter and text messaging.

The simulcast was divided into five sections:

1. Entreleadership Defined
   
2. Dreams, Visions, and Goal Setting
3. Financial Peace for the Entreleader
4. Team Math — Adding and Subtracting
5. Making the Call

Entreleadership Defined
Dave had us define the character qualities of a leader and an entrepreneur.  We were able to come up with at least 10 words to describe each one.  We also discussed the basics of leadership and the types of leadership.

Dreams, Visions, and Goal Setting
Dreams, Visions, and Goal Setting discussed how dreams can turn into a reality when they become your vision.  Goals need to be set to reach your vision.  You can reach these goals by establishing priorities by dividing them into quadrants:

1. Urgent/Important
2. Urgent/Not Important
3. Not Urgent/Important
4. Not Urgent/Not Important

Dave also talked about the elements of a business plan.

Financial Peace for the Entreleader
Just like you need financial peace for your own home, a business also needs to be at peace with their finances.  Dave discussed budgeting a small business, busted some common myths about the use of debt, business lifestyle, saving, giving, and applying the financial peace principals within the business.

Team Math — Adding and Subtracting
I feel this is one of the best topics of the event.  Dave discussed working with your team members and how to bring the best people on board.  He uses a unique 12-step hiring process to make sure bad apples do not make it on his team!  He guides you on how to work with them when they fail, the steps to resolve failure, and if they are not the right fit; how to fire them.

Making the Call
An indecisive leader can paralyze any business.  There is one thing that causes indecision: fear.  Here he goes through the steps on how to make the decision and pull the trigger.

I really learned a lot from Dave’s EntreLeadership One-Day Event.  It also helped to reinforce many of the values I learned over the years to make sure that I am on the right track.  More than ever, I feel I can successfully start my own small business.

If you would like to attend one of Dave’s events, please check out his website at DaveRamsey.com.

Back in August, I stumbled upon Dave Ramsey’s material while researching personal finance articles.  I have heard about him before through J.D. Roth’s podcasts and blog on GetRichSlowly.org, but I never really looked into his material.  Let me tell you, I wish I looked into him sooner.

I started listening to his podcasts and I was hooked.  There were real people, with real debt problems, calling into his show to ask for his advice.  So I sat, listened, and learned.  I found out that I was on the right track with my Emergency Fund and paying off my debt.  However, I did not have the mindset to pay it off sooner.  I was on target to get my student loans of $17,000 paid off around 2015 and just accepted it.  Once I started listening to his show, I looked at that date and thought there has to be a better way!

Through his show, I found out that Dave has 7 Baby Steps to getting out of debt and building wealth:

1. Save $1000 for a starter Emergency Fund.
2. Use all available money above and beyond the $1000 Emergency Fund (minus retirement) to pay off debt; starting from the smallest balance and work your way up to the largest.  He calls it the Debt Snowball
3. Once you are debt free (except the house) start on your emergency fund of 3-6 months of expenses; not income.
4. Save 15% of income towards retirement.
5. Save for your children’s college.
6. Pay off your home mortgage.
7. Build wealth like crazy so you can live and give like no one else.

And that is the proven plan for financial fitness.  Doesn’t it seem simple?  That’s the beauty of it; It’s so simple and has common sense!  However, most people have trouble finding the right footing.  If you are committed and follow the plan exactly, you will become successful with money.  Which, oddly enough, makes you become successful in other areas of life (career, fitness, etc.).

You can start off with Baby Step 1 immediately, but there are a few things that will help you jump start your debt snowball:

• Live on less than you make
• Do a monthly written budget
• Cut back on lifestyle

I already live on less than I make, but I was pulled in so many different directions that I felt as if I could not get any traction.  I putting money into my Roth IRA, Emergency Fund, House Fund, and Vacation Fund.  Once I got myself on a written budget, I was able to see where all my money was going and gained a whole lot of control.  I found that I had about $1000 of free money to throw towards my student loan debt.

Through Dave’s advice, I was able to reduce my student loan target date from 2015 to 2011!  As of today, more than half of my loan is paid off and I have between 7 – 9 months left until it’s finished.  If I did not discovered Dave, I’m not sure that I would have been as intense in getting rid of my student loans.  To also keep me accountable, I post my student loan balance on the right side of my blog, the average monthly payment amount to reach my goal, and my target date.

You can find Dave’s one hour free podcast through iTunes and his book, The Total Money Makeover, on my list of recommended readings on the right.