Dave Ramsey's 7 Baby Steps to Financial Peace

For the next seven weeks, I'm going to share with you a step from Dave Ramsey's "7 Baby Steps to Financial Peace Plan."

My dad has to be the biggest Dave Ramsey fan ever! He's always quoting something he heard on the Dave Ramsey show. But the guy has developed a great system that can work! Last January, I decided to take Dave Ramsey's advice (via my dad's preaching) and implement his 7 Baby Steps.

Step 1 - $1,000 to start an Emergency Fund

When I first started working after grad school, I decided to pay off my credit cards. I'd throw huge chunks of money at them, but I never seemed to make any real progress. Everytime I made a dent in the balance on my card, something would come up and I'd have to charge it, making my balance rise. It wasn't until I took Dave Ramsey's advice and saved $1000 BEFORE I started paying down my debt that I really saw progress. Now, whenever something comes up (like having an unexpected car repair), I don't have to charge it, I can pay CASH for it!

If I hadn't saved a $1000 emergency fund, I'd still be playing the pay-off and recharge game with my credit card. Now, each month I see the balances getting smaller and smaller! My momentum is building and I'm LOVING it!

Gotta love those 0% balance transfers

I've worked really hard this year to pay off my credit cards and I've made a lot of progress. Despite my progress, I still had three large balances on cards with ridiculously high interest rates. I tried calling the companies to ask for a lower rate but I was told they didn't have a lower rate to offer me. So, you know what I did? I double-timed my payments for one card and lowered the balance from over $1600 to just $200 in a little over a month. I'll pay off the remaining $200 by next week.

As for the other two cards, I took a risk and applied for an 0% interest balance transfer card. I was a little nervous about applying because I wasn't sure if I'd get approved or if would get a high enough line of credit. But things worked out for the best! Once I was approved, I called the companies again to see if they could work with me. My reasoning? I'd been with one company for over 5 years! Surely they could lower the interest rate to something reasonable. I told them about my 0% balance transfer offer (which has a very low APR after the promo period expires). No luck. After ending the call with bad credit card company, I immediately transferred the balance. So much for customer service.

The rest of my credit card debt will be paid off before the 0% interest rate expires. In the meantime, every cent of my payments each month go to lowering the balance. No more ridiculously high interest charges! I'm telling my money what to do!

January is a looong month.

As a state employee, I get paid once a month on the last work day of the month. It has its pros and cons. But in December, I've traditionally gotten my paycheck early (i.e. before Christmas). This makes for an easy month in December, but a very, very long January. Basically, I go for six weeks without a paycheck!

This year, the Legislature made some changes and state employees were no longer going to get an early paycheck in December. I guess there was a lot of outrage, because we just got a letter saying we're getting paid early. Boo!

I'm really going to have to budget well in December or those last few weeks of January are going to drag on and on and on (which means I might overspend or not meet my goals). I'm going to plan out my December and January expenses to make sure I don't wind up with $0.00 on January 15th.

January is an expensive month because I'm just wrapping up buying Christmas gifts and I have to turn right around and buy birthday presents for my mom, sister-in-law, niece, and nephew! Looks like I'll be putting in some extra time at the part-time job!

When the month is over, its over

I just finished reading an e-newsletter I receive. The gist of the newsletter was to remind us to let go of whatever tasks on our to-do lists that we didn't finish at the end of the day. I try to have the same mindset when it comes to meeting my monthly financial goals.

In January, when I vowed to get myself out of debt and into a better financial position, I didn't realize just getting started on this journey would be so HARD! I would set a financial goal for the month -- like limit my food bill to $XX -- but at the end of the month I was over budget, either because of poor planning or unexpected circumstances. It was so easy to get discouraged and fall back into my same spending habits, but each month, I reviewed my expenses, made adjustments, dusted my shoulders off, and tried again. I didn't beat myself up over how much I overspent, or how little I paid towards my debt. After a few months, somewhere around July/August, I started actually SEEING results. I was making PROGRESS!

Now, don't get it twisted, I STILL mess up and miss the mark. But, I am learning to congratulate myself on the progress that I make, and forgive myself for the setbacks I encounter. This saving/debt reduction habit is slowly but surely taking shape.

So, if you don't meet your financial goal for the day, week, month, or year, let it go! Don't give up, but don't beat yourself up about it either. When the month is over, it's over.

2008 & 2009 Goals

I'm jumping right in to this blogging! So, these are the remaining 2008 goals:

* Re-fund my emergency fund ($150 to get it back to $1,000)
* Pay off the rest of my credit card debt: $5,286

I'm on an end-of-the-month pay schedule at work. Yeah, living off one check a month can be tough. That's why I pay ALL of my bills as soon as the money hits the bank! Anyways, I have three more paychecks for 2008: October, November, and December. It's going to be tough, but I'll use all of my remaining money after tithing, paying my bills (rent, utilities, cell phone, student loans), and setting aside money for food and gas to get rid of that pesky consumer debt! Also, the extra cash I get from my part-time and blogging gig goes straight to the bank to pay on a card.

I've already thought about my goals for 2009, too!

* Fully fund an IRA
* Increase my emergency fund from $1,000 to $7,500.00 (approximately 6 months of living expenses)
* Pay off private student loan - Approximately $4,500
* Save for a new car - Approximately $6,500
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These goals are aggressive, but obtainable. I'll update them as I meet each one (or add to them).

My Journey Begins (sorta)

Okay. Here, I go. This blog is about my journey to become a Financially Independent Girl. It's not day 1 of my journey, but it's very close to the beginning (I'm a little shy of a year in). I'll share my goals, accomplishments, disappointments, life changes, and anything else that may impact my finances.

So, a little background: I'm two years (and a few months) out of grad school with a rack of student loans and approximately $5,000 in credit card debt. I have an emergency fund that was at $1,000, but as of last week, is now down to $850. I have three sources of income - my day job, a part-time, and a blogging gig about . . . finances (go figure). I have two goals for the rest of 2008 and several goals for 2009, which I'll tell you about in another post.

I've never really thought too much about handling my money and preparing for the future until my job ended last summer and I couldn't seem to find another position. I had to piece together funds from several sources and take jobs that I was overly qualified for until I found another full-time. After struggling for a few months and watching my credit card balances rise, I decided that I would never again be in that position. THAT was truly the beginning of my GirlFit journey.

A year into the journey, I've gone from zero savings to a $850 emergency fund that I've depleted, and re-funded, on three occasions this year to handle true emergencies (mainly pertaining to my 9 year old car). I've paid off two hospital bills from a surgery last year totaling approximately $600.00; I've paid off one credit card balance of $500, and whittled another balance down from $1800 to $400. Oh, and I didn't forget to LIVE! Yes, I shop (frugally of course), travel, and enjoy life - all on a budget!

This is it! I'm on my way to Financial Independence!

Dear Car, please don't die...

I drive a 1999 Oldsmobile Alero. She reached the 155,555 mile marker the other day. And I think she's getting ready to quit on me. This year, I've spent approximately $1000.00 on repairs already (new tires, window gadget thingy, etc.). I really, really, really want to keep her until I have at least a decent down payment on an upgraded ride. But it's not looking too good right now. She started to overheat tonight and my mechanic brother told me to, "get ready to put some money into her." Yikes!

Having to pay for significant repairs is going to throw off my goals for the year. Should I suck it up and chunk another $500-$1000 into my car or try to find a pre-owned cheap car?