Becoming Debt-Free: The One Thing You MUST Do First!

(Originally published October 6, 2013)


I feel compelled to share things that have transformed my life. This one comes from Dave Ramsey. He’s a man who learned the hard way (as did I) that he knew nothing about money. He declared bankruptcy in his early twenties and was determined from that point forward to learn about how money works and to begin making different choices.

The crazy thing about his brilliance is that it was once common sense (before we were all brainwashed about the magic of credit and the importance of having a great credit score). If I told my grandmother that this man named Dave has changed the lives of millions of people by teaching what he teaches, and if I then told her blow-by-blow what he teaches, she would probably laugh hysterically.

What Dave Ramsey teaches is not rocket science! It’s fiscal responsibility packaged into 7 Baby Steps that are simple to understand and not always easy to implement. I’ve read TONS of books about money and Dave’s was the first to TELL ME WHAT TO DO.

Dave’s Baby Step #1: Put $1,000 in a beginner emergency fund ($500 if your income is under $20K per year).

I can’t begin to tell you how this seemingly simple and obvious tip changed my financial life forever! I had been trying to claw my way out of debt for years and to no avail. I would live simply and throw as much as I could at my credit card balances. I was using the debt snowball tactic (part of Dave’s Baby Step #2) but because I was missing this SAVINGS piece, I failed and failed and failed and failed at paying down my debt.

Without this savings in place, here’s what happens:

Throw money at debt. Throw money at debt. Jeez I’m broke, but I’m paying down my debt! Throw money at debt. Need car repair. Damn. I don’t have any money because I’ve thrown it all at my debt. Have to put car repair on my credit card. Damn, that just undid a lot of progress. Okay, back at it. Throw money at debt. Throw money at debt. This sucks. I have no money ever. Throw money at debt. Water heater needs to be replaced. Damn it. Put it on the credit card.

And around and around and around this cycle goes: two steps forward, one step back, three steps forward, four steps back. It’s exhausting and frustrating and will-breaking!

Enter this magical $1000 emergency fund. In order to build it up, you might need to stop paying extra to debt for a while. So be it. Cut back on everything you can, pay only minimum on all your debts, and build your emergency fund as fast as you can. Sell stuff. Take on extra jobs. Do what you must to gather 1000 dollar bills into an account. It will change your life!

Now, with this savings in place, go attack your debt. Now if something breaks and needs to be fixed, you’ve got it covered without going further into debt. It’s what Dave calls “Murphy-proofing” your life. He talks about how Murphy goes from door to door, looking for a place to wreak havoc. What happens when he comes to your door and realizes you have savings? He moves on to the next house.

(Important note: If you do dip into this savings account to take care of an emergency, halt the massive debt payments until you’ve refilled this account, then proceed once again to attack the debt.)

I’ve had my $1000 in place for just over a year now and I haven’t had need of it. It’s mind-boggling how important this seemingly simple thing is. It shifts everything! It backs you a hundred feet away from the cliff and holds your hand and says, “You’re safe. Everything is okay. You can do this.” It puts something in your mental “plus” column and shifts your perspective from one of “I have no money ever” to “I HAVE money.”

And if anyone tries to convince you it’s stupid to have this money hanging out earning no interest while your debt is being charged incredibly high interest…thank them for caring and run as fast as you can to a Financial Peace University class. They are offered at churches all around the country or you can do it home-study style. It’s an affordable class that will change your life (if you follow the plan). I promise.


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