DebtFREE-Revolution

Hubby brought home a copy of the Army Times Friday night, to show me one story in it: the story of how an E-7 and his wife have eliminated $95,000 worth of debt.  Although the story doesn’t mention it until the middle, I knew after the first three paragraphs these folks had found Dave Ramsey (emphases mine):

On March 10, 2007, Sgt. 1st Class Reno Peterson and his wife, Lisa, made a rash decision. They decided to live on their income, within their means, and stop buying on credit.

They faced up to their $145,000 debt — including $40,000 in credit card debt, $25,000 in vehicle loans, $9,000 in student loan debt, a loan for a swimming pool, a loan against Reno’s Thrift Savings Plan and other debts.

Now, the Petersons, who live in the San Antonio area, are on track to wealth. In one year, they have paid off $95,000 in debt — including $15,000 of the credit card debt, the vehicle loans, the TSP loan and the student loan. They also sold a rental house and paid off the mortgage on that property, applying the $23,000 profit to their debts.

Let’s face it, only us folks who follow Dave Ramsey get *that* crazy and weird and accomplish that much that fast!  It’s true: Of all the personal finance “gurus” only Dave Ramsey says to get your happy hide out of debt as quickly as humanly possible.

In the military, debt is more than just personal finance.  It is a readiness issue!  In fact, a military person can actually be discharged for being too far in debt with no way to repay given their salary, as I wrote back in a September guest post for CashMoneyLife.  Debt can be a doubly-serious thing when you combine it with military service since it impacts your career as well as your home life.

Dave Ramsey’s company offers a military version of Financial Peace University, with discounts to military units who wish to run the class for their units.  Hubby has passed a little of the information to his commander, since his company recently found out (through the “blotter report” of all things) that their soldiers are having money problems and money fights.

Hubby has also asked to borrow a couple of my old FPU videos to take in and show to his squadmates over lunch.  He hears his buddies grump and gripe about the same problems we had before he went to Korea, and remembers the stress and strain of those money problems.  This is the same husband of mine who still calls Dave Ramsey a cult leader!  I find it amusing my semi-reluctant spouse has become such a proponent of the Dave Ramsey plan at work.

As for what can be accomplished when both spouses are totally into the Dave Ramsey plan: I think the story in the Army Times illustrates that beautifully.  Debt reduction success stories are all-around motivating and inspiring!

I started thinking last night about how big of a deal getting out of debt except for my mortgage truly is.  And the question came to me: WHY?  This was considered the “normal” way of living not too long ago.  Now I am considered “weird” in an America that has credit cards and car loans and every other kind of loan imaginable (and many I simply can’t imagine!).

Back in my grandparents’ day, it was considered an embarassment if you couldn’t pay for your things outright.  Yes, people went into mortgage debt, but they paid for their cars in full usually.  If you didn’t have the money, you either got things from family or went without … and my dad tells stories of going without when times were hard because Grandpa was too proud to go on public assistance for food even.  Mom grew up on a farm, so they were never lacking for food, but she tells of going shoeless over the summers when she was a kid.

So just what changed American life so much in the past 50 years?

Was it television?  I’ve heard some folks say this is “the most marketed-to culture in the history of the world.”  (Another Dave Ramsey quote for those keeping track.)  But advertising isn’t a new phenomenom.  Abraham Lincoln advertised when he started practicing law.  If it is advertising and marketing, how has it changed significantly in past 50 years to make such a difference?  Just when did all the credit card and loan commercials first appear?  Because I can vaguely remember the commercials for when Bank Americard changed its name to Visa … yes I must be old!  LOL  I can remember the advertising blitz when Sears came out with Discover card.

I may have grow up watching way too much TV, but I hardly ever watch televison anymore.  In fact the only time I do is in between delivery runs at work since the pizza shop has two TVs on for dine-in customers.  I do listen to radio quite a bit, and debt is marketed on that medium as well … even during commercial breaks during Dave Ramsey’s radio show!

Of course, there is the interesting little fact that the very first ever credit card started up 52 years ago: Diners’ Club in 1956.  Debt is a product, and always has been to some extent.  But now it seems different.  Now debt is marketed as the solution to anything and everything.  It seems every single commercial break during prime time has at least one credit card commercial. 

But the question still lingers: how could attitudes change so quickly for my parents’ generation, the Baby Boomers?  How could we go from a “save up and pay cash” mentality to a “charge everything and be in debt up to your eyeballs” culture?  And even more importantly: is Dave Ramsey’s popularity (and others like him) an indictaion that the pendulum is beginning to swing the opposite direction?

I honestly don’t know the “why” or “how” of this.  I just know that becoming consumer debt free has made me a statistical anomaly now.  I am enjoying being such an anomaly as I drink my coffee on the first morning in many years that I wake up debt free but the house.  But the question still lingers in the back of my tiny, caffiene-fueled brain: Just how did this seismic shift in attitude happen?

It’s now OFFICIAL!!!  I talked to one of hubby’s credit union’s customer service representatives who officially closed out the truck note!!  We have officially finished Baby Step Two, which is paying off all debt except the mortgage!!!!

I’m bouncing around, all happy and excited.  LOL  Just got off the phone with hubby, who said he is excited and happy also.  He also is looking forward to making up a new budget without big honking debt payments in it!

Here are the quick stats:

• Just shy of fourteen months.  Started on 29th of December, 2006.  Finished TODAY the 26th of February, 2008.
• Three “Murphy visits” totalling $1140 in January 2007, $538 in May 2007, and $509 in December 2007.
• Approximately $25,500 in non-mortgage debt paid off (not including amounts paid prior to starting the program … don’t wanna think about all the years of debt payments!)
• Two tax refunds and one part-time pizza delivery job applied in addition to regular income.

Whoa!  Wow!  Did we really do that?  LOL  It’s amazing what you can accomplish when you get mad enough and determined enough.  Y’all will just have to imagine the amount of hope, excitement, and relief in my voice for this one:

WE’RE DEBT FREE!!!!!!

Next goal: the big honkin’ CASH emergency fund (Baby Step Three).

OK, prepare for at least a week of celebrating and looking back since it’s pretty sure hubby’s credit union will process the LAST truck payment we will ever have tomorrow.  I thought I’d start off by revisiting the crucial key to my whole get-out-of-debt journey: THE BUDGET!

Yes, that nasty ugly “B” word is what it took for me to get our money under control.  That bad word that evokes unpleasant images of bread and water and privation is what made it possible for us to send huge honkin’ debt repayments each and every month.  Our budget was our lethal weapon against our debt!

Until I made up the first realistic budget on December 29th, 2006 I didn’t think we made enough money to cover our expenses.  It was a huge eye-opening experience to look down at the numbers in the budget and realize we made about $600 more in a month than what was supposed to be going out.  We made enough money to last to the end of the month, but we weren’t tracking our spending and usually ended up with about five days at the end of each month where we “had no money.”

That was a major wake-up call.  I had been asleep at the wheel for the first fifteen years of my adult financial life.  Dave Ramsey often says the first budget you make won’t work.  The second budget you make might work a little, but it usually takes until the third month of budgeting for things to start going smoothly.  I didn’t feel like I had that luxury, so I FORCED the very first budget to work.

I will have to give my teenage son credit where credit is due: he lived under my Draconian budget for the first three months in relatively good humor.  Yes, my first three budgets were actually the nightmares the dreaded “B” word tends to conjure up.  I was feeling very insecure, especially when the heat broke and cost more than my emergency fund had to repair in the first month.  Hubby was in Korea at the time, and missed out on the experience of my super-tight budgeting.

After the first three months on a budget, I had killed off the small debts and began to relax a little.  I started to budget in a few little fun things again as I found I had about $350 more per month to work with after killing the small balance stuff.  I had also discovered the thrill and satisfaction of killing off debts … and was hooked for the long-haul needed to knock out the big balance debts.

And there are the two things that have sustained me over the past fourteen months: the determination to get it done and the tool I needed to accomplish it!  The determination was vital as we have worked since the beginning of August on our last debt: the truck note.  Eight months actually feels like forever when you are watching a $17,000+ debt go down to zero.  The budget was the big hammer I used to knock that debt out for good.

So, how can you use a budget to get out of debt yourself?  Especially when the first one isn’t “supposed to” work?  I think the trick is making your budget as realistic as possible the first time.  Go through your account ledger and see where you spend money.  Go back at least three months to find spending patterns, and also to remind y ourself about quarterly bills.  Wrack your brain for every possible bill you can think of that might come due in that month.  Write it all down.  If you have more month than money - it is time to prioritize.  It will also be the time you take on a part-time job … but that is another post.

The biggest beef I have with some “financial experts” is the idea that you can get out of debt without a working budget.  I can’t see how that can be true.  Hubby just quipped, “No budget, no success,” after asking me what I am writing today.  I whole-heartedly agree with his assessment.  Determination will keep you going during the long haul to get out of debt, and budgeting will give you the blueprint you need to actually do it!

Your budget doesn’t need to be fancy (mine still isn’t), it just needs to be realistic and workable.  If you don’t have a budget right now, grab a pencil and paper, and have at it!  If you’re a nerd, you just might come to enjoy the budgeting process and the feeling of control it gives you over your money.  I speak from experience on that last point.

Well yesterday I was talking about Crown Financial since my mom has indicated a strong interest in that.  Last night Randall from Credit Withdrawal asked if I would be interested in listening to some audio files from John Cummata (not linking, sorry folks…) to review, who says about the same thing as Dave Ramsey and Crown.  I was definitely curious, since the person who owns the non-hyphenated version of my domain (not linking, although I’d love to buy it) has a John Cummata website up.

I have to say, after listening to one set of audio files …. Dave Ramsey is more interesting and entertaining!  John Cummata basically has the same advice, and the same examples, but is much more low-key.  Dave Ramsey critics charge that Dave is abrasive and arrogant at times as well as accusations he “butchers” the English language with Southernisms (which I have no problem understanding since I also live in Tennessee) but he is also humorous, entertaining, and catches and holds your attention.  John Cummata is calm … after twelve audio files I still haven’t heard him get excited or raise his voice.

Also, while browsing on Google about John Cummata, and visiting his website I was hit with THREE pop-ups after I closed the page, with the first being a chat box with a “virtual assistant” who didn’t really answer any of my questions about whether or not the Cummata program had anything for someone who is already out of consumer debt.  As a regular web surfer, I find pop-ups beyond annoying.  As a webmaster in a former life, I know they also tend to work.  But three is a little excessive…

I also have to say I am not really liking his presentation style.  To me, John Cummata comes across like a slick used car salesman who just won’t take “No” for an answer.  I also can’t find his radio program online (maybe I just didn’t browse back far enough on the Google results page).  And to be honest I am still torqued about those pop-ups … and the “virtual assistant” who sounded more like a chatbot than a real person.

I guess my advice on John Cummata would be: get it for less on eBay!  Stay off his site unless you have a stronger pop-up blocker than I have (and I thought mine was pretty good!) or unless you enjoy toying with virtual assistants in a chat box.  If you can find it at the library for free, or borrow it from a friend, then go ahead and listen.  The message itself isn’t bad if you are still in debt.  The sales technique leaves quite a bit to be desired.

 I’ll stick with Dave Ramsey for free on my radio when the signal is clear or listen online when the Nashville station is staticky.  Yes, I have paid for Dave Ramsey’s books …. after I read them for free from the library!  In fact I am working on the idea of giving one or two of them away here on the blog.

Oh, back to Crown who also has a radio show with co-founder Howard Dayton, available on their website for free.  Their books are surprisingly inexpensive, but then again Crown is a declared 503(c) non-profit so I guess it shouldn’t be a surprise.  The more I see of Cummata this morning, the happier I am my mom is latching onto Crown.  In my not-so-humble opinion, Crown is definitely the best alternative for a Christian person ( which Mom is) who just isn’t inspired by Dave Ramsey.

It’s HERE!!!!  Our tax refund (return) finally hit hubby’s checking account this afternoon, and before supper I had the honor of transferring it over to the truck note!  This brings our balance down to $751.02 … with my $750 payment en route and expected to process either Saturday morning or Monday morning!  Then we will transfer the last little bit of interest over and be DEBT FREE but the house, baby!!!!

I’ll make the official announcement as soon as it happens of course!  Well … maybe a few hours after it happens. LOL  It took me over four hours to settle down enough to put my thoughts together for this post!  Hubby is amused and a little puzzled at just how excited I truly am about this.  It may take him until next month to really catch on, when he doesn’t have to make the truck note payment like he has for two and a half years.

Now the “big decision” is: how do we want to celebrate this milestone??  Even though hubby doesn’t feel like it’s “that” big of a deal, it is HUGE for me.  I’ve been working towards and planning and dreaming and scheming about this for fourteen months now, so we gotta do something. 

 DEBT FREE BUT THE MORTGAGE!!  It’s only a matter of days, then all that will be left is the credit union crying and us CELEBRATING!  Yes, I am still “way too happy” about it still!

OK, I’ve had coffee and had a conversation with my mother about money and finances.  Nothing like controversy in between the first and second cups of coffee! 

I’ve mentioned in passing here that my mom is definitely not a Dave Ramsey follower, although I have tried to pique her interest by telling her I went to church during the tapings of the new Financial Peace University videos.  I’ve given her the URL to this blog several times, but so far have seen no indication she reads it.  My son took copies of the old FPU audio files up to Indiana for his dad and my mom to hopefully listen to.  So far, no indication of that either.

I’ve remarked that I don’t think Mom will ever truly give up her credit cards.  She’s gone into debt to fund her international adoptions, and over the summer told me she intends to cash out some of her retirement for living money while the new kid(s) transition to life in America.  (No comment on THAT subject….)

Well, this morning Mom was talking about Crown Financial Ministry and how she is considering being a counselor for them.  This is the same woman who blew the budget I helped her construct that same evening over this past summer.  Yes, she made a budget in the morning before I left to return to Tennessee, and that night when I let her know I made it home safely, she confessed to blowing it in less than twelve hours.  At the time I simply figured my mom hadn’t hit the “I’ve had it” point that tends to inspire people to take control of their finances.

So, with Mom’s rather surprising announcement this morning, I decided to find out what Crown teaches about debt and whether or not they will inspire Mom to shed hers.  I’m seeing a lot of similarity between Crown and the Dave Ramsey “baby steps” with the main differences being the intensity used to get out of debt and the attitude towards credit cards.  I’m not sure how recent this is, but here is Crown’s Ten Things to Find Financial Freedom.  My biggest disagreement with this article is in point #8:

Remember that the problem is not credit cards but the misuse of credit cards.

But, their big thing is getting on a budget and paying off debt and saving up money, all things I wholeheartedly endorse.  I’ve even said before that it doesn’t matter whether or not a person uses the Dave Ramsey plan to get out of debt or some other program/system, as long as the result is the same.  If Crown Financial Ministry is what it takes to get my mom’s finances back in the black and helps her to begin prospering, then I will be a fan (although not a subscriber LOL) of that program.

Oh, speaking of Dave Ramsey’s “baby steps,” next week the M-Network will do a multi-blog project on the Dave Ramsey 7 Baby Steps, and I have been invited to participate since I was part of it and also the biggest (?) Dave Ramsey fan of the network.  Look for it to start on Monday!  I’ll be covering “Baby Step ZERO” which actually does exist on Tuesday.

There’s quite a bit of chatter in the PF blogosphere about P2P lending, so I thought I’d pull out my soapbox and give y’all my uninformed opinions on the whole subject.  I’ll do my usual disclaimer here: I am not a financial expert, do not aspire to a high level of sophistication when it comes to personal finance, and am very biased against debt.

First up, what P2P lending is.  Silicon Valley Blogger wrote a good informative introductory piece about P2P last month, and even submitted it to the Carnival of Debt Reduction.  I feel bad about not being able to include it since my narrow and strict view of the phrase “Debt Reduction” didn’t let me see a connection.  The short and shallow version: P2P stands for “person to person” or “peer to peer” and it is simply direct loans between individuals.

Opinion time now!  I don’t think P2P lending is a good idea at all, not only for philosophical reasons but also for practical reasons.  I’ll break down the practical reasons first, before I get the “fire in the belly” anti-debt philosophical reasons going.  LOL

Practically speaking, I don’t see why P2P lending is even necessary.  Why would you rather borrow or lend money to a total stranger?  These are borrowers who can’t seem to get loans anywhere else, and in today’s American “Debt Marketing Blitz” I have trouble with that. 

Each and every one of these borrowers have friends, family, and the majority have a local bank or credit union.  Has anyone stopped to ask why they can’t get a loan from those sources?  If thier friends and family - who know them personally - don’t feel comfortable lending them money, that says something.  If their local bank or credit union, who has firsthand knowledge of their money habits and a business interest (pun intended) to lend them money won’t make a loan, that is telling.  With the Fed’s  interest rate dropping like a dense lead ball lately, the “better interest rate” argument isn’t holding up as well as it used to.  I understand that bad things happen to good people, but my gut feeling is the majority of these borrowers on these P2P sites probably shouldn’t be borrowing money.  Recent headlines indicate that the major P2P sites have needed to hire collection agencies, which reinforces my opinion.

Finally, the borrowers on the P2P lending sites don’t seem to want to get out of debt.  I say this because the simple practical truth is “You can’t borrow your way out of debt.”  Yes, that is a Dave Ramsey quote, for those who are keeping track.  It’s why debt consolidation seldom works … you are trading many small debts for one large (and usually longer) debt.  The only way to get out of debt is to pay it off completely.

Now I’ll pull the soapbox out to center stage for why I don’t think this is a good idea on principle.  There’s the general problem I have with encouraging people to go into debt.  Anyone who has read this blog for even a week knows I actively try to inspire people to get OUT of debt!  I’ve stepped back, examined the debt system in place here in America, and decided it is too close to indentured servitude or the old sharecropping system or the mining town store business model.

Shakespeare said it best, “Neither a borrower nor a lender be.” (Hamlet, spoken by Polonious to his son Laertes, if anyone is curious.)  The more Biblically-inclined folks will quote the book of Proverbs, which states, “The rich rule over the poor, and the borrower is slave to the lender.” (Proverbs 22:7) 

So on the philosophical level, the lenders on the P2P lending sites are looking for borrowers to become their wage slaves, much the same way I had my son working as a wage slave the other week when he wanted to borrow against his chore money.  While I might be inclined to do that as a life lesson for my child, I am not comfortable at all with the concept of doing that to total strangers!  So, y’all will never see me on those P2P lending sites as a lender.

An old Army drinking buddy of mine used to wear a T-shirt to the bars that said: “Lead me not into temptation - I can find it just fine myself!”  That pretty much sums up the whole P2P lending situation for me.  Those borrowers who crave to be debt slaves will find someone who is willing to “own” debt slaves (or indentured servants if you’re not comfortable with the word “slave”).  There will always be someone who is willing to “sell their soul” for things, just as there are always people willing to write that contract. 

Not me.  I am no longer willing to go back into the chains of debt myself.  I am not going to encourage anyone else to go into those chains of debt.  And I would not be able to sleep at night if I were the ones slapping those chains of debt onto another person as a lender, since I have worn them myself for too long.  So, I do not endorse or even like these new P2P lending sites.