I consider us conservative spenders in our family. It's easy for us to have buyers' remorse, so when we make big purchases, we make sure we 1)really need it, 2)really love it and will keep it for a long time, and 3)can pay for it.
Money is a taboo subject to talk about. In fact, it has been shown that parents are more comfortable talking with their children about sex than about money. I thank my parents for their frugality during my upbringing. I remember, as a girl, we were doing a little shopping and I really wanted this pair of new shoes. Mom said, "We don't have money for that right now." And I said, "That's OK. Just write a check!" I've learned lessons the easy way (listening to valuable advice) and the hard way (selling my plasma in college because I was broke and too proud to ask for help). "It is human nature to want it and want it now; it is also a sign of immaturity. Being willing to delay pleasure for a greater result is a sign of maturity."
This book is targeted toward high-debt, desperate, on-the-brink-of-bankruptcy consumers, but it's a useful reminder for anyone trying to improve and add padding to their nest. Briefly, there are 6 baby steps to achieve financial fitness, IN ORDER:
- Save $1,000 cash as a starter emergency fund. Ramsey: "It is going to rain. You need a rainy-day fund. You need an umbrella...life happens, so be ready. This is not a surprise. You need an emergency fund, an old-fashioned Grandma's rainy-day fund...Now, obviously, $1,000 isn't going to catch all [the] big things, but it will catch the little ones until the emergency fund is fully funded."
- Start the debt snowball. Make a list of all your debt, starting with the smallest. Once you pay off the first one, even if it's a $59 phone bill, add that payment plus any extra to the next debt until it is paid off. You will feel empowered and the snowball will grow and grow until you are debt free.
- Finish the emergency fund. Add to the original $1,000 to cover 3-6 months of expenses should anything unfortunate happen that cuts off your monthly income.
- Invest 15 percent of your income in retirement. We've taken this advice, and although we have less expendable for "fun things," I know we'll be glad when it comes time to retire. Ramsey's motto is on the bottom of each page of the book: "If you will live like no one else, later you can live like no one else."
- Save for college. Ramsey gives numerous options for saving for this inevitible expense in most families. There is a reason to do this after saving for retirement. A trusted financial advisor once told me that your kids will forgive you (eventually) if they have to pay for some of their college, but they won't be very happy about bailing you, their parents, out when you're old and out of money. Blunt, but I see the point. Just like on an airplane, put your oxygen on yourself before you help your children with theirs.
- Pay off your home mortgage. This seems far away for many of us homeowners, but if you do all of the other baby steps first, you should have the means to chop your years of commitment to your house payment in half and save nearly $100,000 in interest just by paying a couple hundred more dollars a month.
So, there you have it. We are by no means rich, except in blessings. :-) We are "living like no one else" because we pass up purchases that would probably make us more popular by the world's standards. But I have faith that because of our sacrifices, we will be blessed with the things we need and occasionally the things we want.
Here's to prosperity and a fiscally healthy and happy life to you! Oh, and I'd love to know some of your strategies for fiscal fitness!