Crushing Debt: The Ramsey Method

Dave Ramsey is a very successful financial coach, author, teacher and radio host. He made money in real estate and went broke twice. Then he figured out what went wrong, learned from his mistakes, and set out to help others.

I have listened to Ramsey’s Financial Peace University lessons as well as his radio show regularly. He has made a tremendous difference in my life, helping me solve my personal financial issues.

Dave’s plan is quite simple. But like most choices in life, it takes willpower, commitment and what he calls gazelle intensity. (Think how fast a gazelle runs for its life when it’s being chased by a predator; people in debt should run like hell for their lives with the same intensity.

He preaches the need to get on a written budget, then only spend money that has been pre-allocated. I’m still working on this one!

To get out of debt, Ramsey teaches what he calls baby steps. I am implementing them and seeing a HUGE difference in my financial health.

1. Set up an emergency fund of $1,000. This is for dental visits, flat tires and all those things that WILL happen as part of life. You have to plan for them.

2. Pay off all debt using the debt snowball. To do this you start making minimum payments on all your debts except the smallest one. Then you attack that smallest debt by throwing every dollar you can at it, increasing your income through extra jobs and selling stuff. (You pay off all debts in this way, starting with the smallest, then going to the next one and the next one.) You DON’T start with the highest interest, rather the smallest balance. As Dave Ramsey says, this is an emotional issue; if money were about reason, you wouldn’t be in this mess to start with! Every time you pay off one debt, you have more money to pay off the next one. When you’re not paying on a debt, there is more money to throw at other things. Increasing income (what Ramsey calls “getting a bigger shovel,” is often necessary.

3. Increase your emergency fund by saving up 3 to 6 months of expenses.

4. Save for retirement. Do this by setting aside 15% of your household income into Roth IRA’s and pre-tax retirement accounts.

5. Save for the kid’s college. 

6. Pay off the house.

7. Build wealth and GIVE!

Ramsey encourages his tribe to live like no one else, so that later they can LIVE (and GIVE) like no one else!

Stay on the written budget. And oh yes, he recommends cutting up those credit cards and promising never to get in debt again.

For more information, visit http://www.daveramsey.com for inspiration, tools, resources and much more. Or read his top-selling book, The Total Money Makeover: A Proven Plan for Financial Fitness.

You can experience financial freedom. Remember, the various aspects of your life are interconnected. If you are in debt, spending too much and are otherwise financially unhealthy, you are sick in other areas too. Make today the day to change your financial reality and future.

If I can do it, you can do it!