Writing this post excites me. Ever since my grandpa (formally known as Opa) taught me the in’s and out’s of the stock market, I have always been very into finances and investment. Talking about budgets and saving invigorates me.
I dabbled in and out of the stock market for, lets say, seven years or so. My grandpa always taught me to invest in DOW stocks because they pay dividend. He said that he and Oma lived off their dividends every month… wouldn’t that be nice? Dividends are when you get paid 4x in the year, every quarter, based on what the stock offers (could be 2-8%, it varies). I took his advice and bought some stock of my own. He told me that investing in the stock market would get me the most for my money- since the bank only pays around 0.1% interest! WHAT?!! I did this for many years. Every year on January 1st, I revised my stock strategies- sold the ones that were not performing well and kept the ones that were. Luckily for me, I only have 2 specific companies where I lost money, the rest I gained. As I researched more about the stock market, I started to understand more how it works. My best stock to date was AAPL, or Apple as everyone knows it. At the time, I started with one share at $500. I later bought 2 more shares (at a higher price) but in the end made over $1,500 just on those three! I could go on and and on here, but I will stop because this is not the point of my post today. {Thinking of a doing a later post on my yearly stock strategies… let me know if there is interest!}
This past February when I met with my accountant, at the end of our appointment, he gave me a book. He said, “I teach financing at the local college and I give this book to all of my students. If you don’t read anything in it, just read the back section that I marked with a paperclip” I went home all excited because as I mentioned…I love this stuff! The book that he gave me is written by Dave Ramsey and is called “The Total Money Makeover”. It is a NY Times best seller.
At the back of the book, he marked a page (with a paperclip) called the “Debt Snowball Effect”. I had never really heard of this term before. What it says to do is to list every debt that you have, starting from the least amount to the highest by balance. (Ex: Medical bill $100/m, Sleepy’s mattress $200/m, Student loan $500/m). Luckily TJ and I do not have a lot of debt, but we do have student loans. I quickly wrote down our list.
When I was reading through the book there are ‘7 steps to financial success’ that Dave Ramsey talks about. Step 1, he talks about building an “emergency fund”. He says to save $500 and put that in an untouchable fund. Once you have this accomplished you can move onto step 2. Step 2 is paying off all of your debt. Most people will take YEARS to complete this step. This is where your list comes into play. He says to start at the top of your list. Take your smallest debt and pay it off. Once it is paid off, cross it off and move onto the next one. Once a debt is paid off, add the next minimum payment to your current amount. This becomes the new payment. So if you were paying $200 a month to your sleepys bill and you now completed that payment, take that $200 that you were paying and add it to the next bill on your list. So if your student loan is next to tackle, you would pay $300 a month, and so on and so forth until you have no more payments. The reason you pay the least amount FIRST, is so that you can start seeing things move faster and psychologically it motivates you to want to do more!
Right now, TJ and I are working on step 2 in the Total Money Makeover. We started our journey February 11, 2015. Our goal is by next August to be DEBT FREE! Working on this goal has required disciple and determination. We set aside a lot of money per month toward our student loans and that means less money for spending. We hope by doing this now, our life later will be so much easier. Once we are debt free we can truly focus on saving for a home and our family.
I didn’t go into all of the steps in Dave’s plan just yet, maybe at another time…but I hope this inspires you to write up your own list and start tackling your debt so that you can live a DEBT free life too!
“If you will live like no one else, later you can live like no one else.”
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