A couple of months ago, I cancelled my Audible subscription to save money. I had six credits, so I downloaded a bunch of random audiobooks to use up my credits. On the drive to work this morning, I finished the fiction audible that I had been listening to. On my drive home today, I began listening to a Dave Ramsey Total Money Makeover book.
There are elements that I disagree with, but for the most part he makes some incredibly good points. On the overall point, I love his analogy between financial fitness and physical fitness. We all know what we need to do to be physically fit; it is a matter of making the personal commitment to do these things. Financial fitness is the same.
A major element of Dave Ramsey’s principles is to avoid “well dressed poverty” otherwise known as “keeping up with the Jones”. The worst thing that we can do with our money is things we do to impress others. This is so true. I am without a doubt guilty of this. Why else would I live in a 4,700 square foot house with just myself and two children? I could afford the house, but nothing about it made me happy, yet I stayed there because the house was impressive.
Selling that house was like being paroled from prison of what other people think. Now, I live in a home with a fifteen year mortgage that requires less than eight percent of my monthly income to pay. That leaves more than ninety-two percent of my income to do other things with. Another way of looking at it, the mortgage payment, interest, insurance, property taxes, and extra payments to pay the house off five years early costs less in total than my property taxes did in my last house.
I sleep like a baby at night.
Another benefit of this new lifestyle is how some of my choices have altered how some people treat me, while others treat me exactly as they did before, and some have fallen in love with my new house, and they are open about their affection for it. My new house has a warmth and soul to it that my old house did not. The good souls of the world pick up on this.
There are some people that are obsessed with knowing where I live now. They ask me, and I divert the conversation, and they ask again and again. They clearly have an anxious need to judge where I am living. They hope to learn of a fall from grace. In truth, I am living my best life here in my humble little home.
My good friends treat me exactly as they always did. Some have helped me put special touches on my new house, which makes me happy. Others have asked to use my property to plan special events, like backyard barbecues, small dinner parties, and even a homecoming proposal. This makes me happy.
In short, Dave Ramsey’s principle of not spending money for the sake of appearances, or “keeping up with the Jones” is really good advice. I am passing this money management principle along with a number of other Dave Ramsey principles on to my boys.
Looking at Ramsey’s initial steps to financial freedom, I was actually already on Step 6 and well into step 7, having completed the first five steps of the plan when I lived in my old house, but I was spending a chunk of my income on a house for the wrong reasons. In my new house, I am further along on Steps 6 and 7, and I am so much happier.
- Baby Step 1: Save $1,000 in an emergency fund
- Baby Step 2: Pay off all debt (except your mortgage) using the debt snowball method
- Baby Step 3: Save 3-6 months of expenses in an emergency fund
- Baby Step 4: Invest 15% of your household income for retirement
- Baby Step 5: Save for your children’s college fund
- Baby Step 6: Pay off your home early
- Baby Step 7: Build wealth and give
I absolutely believe in Ramsey’s plan to get out of debt. I share his disdain for debt. I did step 2 of paying off my debt with the snowball method after my divorce, and I paid off everything but my mortgage within a few years.
I do believe; however, that we all need to strike a balance. We all need a budget that gives us a little freedom to do special things with our money each month without feeling guilty about it. Going back to his physical fitness analogy, the strictest of diets will lead to the fastest weight loss, but I don’t want to live that way.
I have more to share on my perspectives of Dave Ramsey’s plan, but I it is time for bed, more on this in future posts.