DebtFREE-Revolution

For those of y’all curious about how the Dave Ramsey debt snowball can really work in real life to eliminate debts!  OK, folks, gather ’round and I’ll map out the plan for killing that stupid truck note on hubby’s 2005 Chevy Colorado (bought new, of course…).  Since this is supposed to be a surprise for hubby, and I know he’s reading this blog when he can…honey, just skip this post

The rest of y’all, check this out because I played with numbers this afternoon (math nerd that I am).  Yes, these are real numbers, from the budget of a real person who ain’t rich (yet!).  The only reason I haven’t slammed the truck note already is I am waiting  on my financial aid to be applied to my tuition bill before I shell out the money to the college LOL

I have been sandbagging money since about April in preparation for this tuition bill, and currently have $2500 in savings and a $2100 bill for the fall semester.  Score $400 or more so far :)   Now, between $1600 for my GI Bill money coming in, my $1500 allotment, and my VA Disability payment of about $600 I can easily clear my monthly expenses of $1950…which leaves me with about $1700 to put the smackdown on that truck note from that angle.  We’re up to a cool $2100 right there, plus hubby is slapping a $700 payment on it this month instead of the required $488.  That baby is going DOWN!  Quick fast and in a HURRY!

Now some of y’all just starting out or thinking of starting the Dave Ramsey plan are probably scratching your heads wondering just how I have come up with that much extra for the month.  It’s that debt snowball in action.  Back in January I paid off my car which freed up $236 a month.  In February I paid off the line-of-credit at my credit union, which freed up another $100 per month (running total $336 so far…).  Later in February, I used my tax return to pay off the Chase Master Card, freeing up another $50 a month ($386).  Then I set my sights on American Express, finally killing it completely on the 1st of June, freeing up yet another $100 per month ($486).  And last month I dealt the death blow to that pesky AAFES Star Card, which frees another $150 per month for our budget ($636!).  Add that to the $600ish I had above monthly expenses that I “found” when I started budgeting…and we are up to $1200 per month above expenses that can go towards killing off the target (and LAST) debt: the truck note.

Once you get “traction” and are no longer spinning your wheels on minimum payments, that snowball really starts rolling and you can see results.  Man, I really do wish I had learned this in high school!

I get asked how much money I make delivering pizzas on the weekends as a part-time job all the time.  The gang in the MyTotalMoneyMakeover chat room are always curious, and the question pops up on the forums from time to time also.  I’ve also seen that question show up in the search queries here on the site…so let me take a few paragraphs on this.

First let me preface by saying I started delivering pizzas at the end of April, and have been doing over the slow season of summer.  Another caveat is that your results will depend on which company you work for, and where your delivery area is.  I deliver for Domino’s, and our delivery area is HUGE and covers everything from Section 8 housing to $300K houses in gated subdivisions.

Now, all that being said…I worked Friday night, Saturday night, and last night delivering pizzas this past weekend.  Domino’s currently pays $1.25 per delivery as gas/mileage offset, which is dependant on current gas prices (which is why I recommend having a car that gets at least 25 mpg).  Tips tend to be better at the beginning of the month, since between the local college and the army post we have a  lot of people in this town drawing government checks in some form or another.  This weekend was a bit off, being the end of the month.  Now, between tips and mileage/gas offset I brought home $40 per night, which does not include my hourly wage (at minimum wage of $5.85 an hour).

My all-time best night was last month on a Friday night, when I took home $85 in tips and mileage…and that was in the middle of summer :)  Talking to the other drivers at the store, I have heard stories of nights where they earned over $100 in tips and mileage!  Usually, the weather does play a part in how much a driver can earn.  Rain or snow tends to increase both tips and volume of orders.

Right now, business is slow because of the heat, the clear skies, and of course the whole back-to-school idea; but right now is also the perfect time to get that pizza delivery job!  Drivers who have never worked a summer in pizza are quitting right and left, several at my store are on vacation, and our manager is looking for midweek help for when those of us in college start school next month.  Earnings aren’t stellar right now, but it is an excellent time to get a foot in the door and learn the delivery area while the pace is slower.

I just came home from my lab partner’s house where we were studying for tomorrow morning’s test.  The study session was cut short when his daughter fell off the swingset and broke her arm.  He’ll be sitting in the Emergency Room for several hours probably, and the mother had to leave work to meet them there.

This is the same lab partner who has urged me to take on student loans to pay for college, even though right now I don’t need to do that.  His lackadaisical attitude towards debt makes me really wonder how they intend to pay for this emergency room trip.  Do they have an emergency fund to cover this level of life’s emergencies?  Or are getting hit with Murphy’s Law just because they don’t have an emergency fund?

As I mentioned before, Murphy’s Law clearly states, “Anything that can go wrong, will.”  There also seems to be an i nverse correlation between “Murphy visits” and how much of an emergency fund you have socked away and saved up.  Simply put, the bigger your emergency fund, the less Murphy visits you.  If you don’t have an emergency fund, or don’t have much in your emergency fund, Murphy seems to love to come around and mess with you on a regular basis.

Now, this is a lot of speculation on my part…It really wasn’t my business to ask him how he planned to pay for the ER visit.  Also, I was busy keeping the dad calm, calming the hurt baby, and finding a towel and wooden spoon to rig up a make-shift splint for the car ride to the hospital and the thought just didn’t occur to me until after I got home.  But this is a harsh reminder to everyone: what would YOU do if you went out to your backyard to find your daughter’s forearm bent backwards?  Or if someone ran the red light in front of you at 10 mph over the speed limit?  Or a storm brought a huge tree limb down on the house?  Do YOU have an emergency fund to take care of a significant Murphy visit?  If the answer is “No” then I think you should start budgeting for that “rainy day,” because even a desert gets a good rainstorm from time to time!

As some of y’all know, I am in college working (slowly) towards a PharmD degree to eventually become a pharmcist like my mother.  What some of y’all may not know is so far I have no student loans!  None, nada, zip, zilch…no student loan!  This is a small point of pride for me that I have successfully completed two and a half years (since January of 2005) without having to borrow money to pay my tuition.

What’s even more amazing to me as I look back is that I have done this while carrying a mortgage, a car payment (finally paid off in January 2007), and until this summer, no real job.  It wasn’t easy, and there were many times I was all stressed out the week before a semester started trying to pay the previous semester’s bill so I could register for classes before the first day of class.  But I bit the bullet and scraped up the money somehow each time…because I had a student loan long ago when I first went to college right after high school.  I dropped out of college back then in 1992 because I couldn’t come up with my portion of the tuition.  It took me until 1999 or 2000 to pay that tiny little student loan off also!  A big part of that whole fiasco was poor money management and even worse planning.

To be honest, I still wasn’t making the grade in money management this time around either.  Then after Christmas I discovered Dave Ramsey and his Total Money Makeover plan.  I finally learned how to budget my money as my 34th birthday approached.  I learned how to save up cash to have on hand when the tuition bill is due.  I paid off my spring 2007 tuition before spring break…then paid off my summer class tuition before the first day of class (by two weeks even).  This is a major achievement for me!

Now that I’ve had a chance to do my bragging…I am staring down the barrel of graduate pharmacy school tuition, and it’s ugly.  It’s $27,100 per year ugly, as the two pharm schools within commuting distance are both private universities.  Naturally, the advice I am getting is to take out student loans for this, since once I graduate and get a job as a pharmacist I will make enough to pay them back effortlessly.  But I don’t want to take on student loans!  I’ve been working hard for the past six months to eradicate and eliminate my debts…not go get new debt!  So I have been spending time searching for scholarships and grants online, but they all seem to be written for second year pharm school students and higher.  I am determined to get my degree, just as I am determined to get out of debt for good.  So what happens when the two seem to be diametrically opposed?

A lot of people like to knock the Dave Ramsey plan, saying Dave Ramsey is bad at math with his debt snowball, which teaches to pay off the smallest debt balance first regardless of interest rates.  Dave Ramsey’s favorite response to this criticism is, “Honey, if we were concerned about the math we wouldn’t have credit cards to begin with!”  And he is right.

Let’s take a look at the whole credit card racket.  According to creditcards.com here are the average interest rates charged (as of today, 24 July 2007):

• Low Interest 11.41%
• Balance Transfer  11.41%
• For Bad Credit  12.81%
• Cash Back 13.13%
• Reward 13.66%
• Business 13.95%
• Instant Approval 14.18%
• Airline 15.08%
• Student 17.88%

Hmmm…am I the only one who notices the credit card industry’s current primary target -college students- is also the one they earn the most interest off of?  Or that all these “brownie point” type of cards also have higher interest rates?  Remember these are all just averages…which means while there are better interest rates there are also much worse!  So let’s work off the average of these averages, which is 13.73% (Technically, it is 13.723333….. but since credit card companies will always round up partial pennies I will also)

Current standard savings accounts are paying very little right now…I think my credit union is at 1% this month.  Mutual fund money market accounts are doing a little better at about 5%.  This is what you can earn for your money.  Many people who see nothing wrong with getting and using a credit card also have money in savings.  Let’s think about this little trivia for just a second…people have money earning them from 1-5% interest then turn around and pay 13.73% interest!  That’s an 8-12.73% LOSS on their money, not including inflation.

And inflation comes into play when you consider how many consumers carry a balance on those credit cards, and for how long.  The minimum payment for a credit card is 2% of the balance or $20 (sometimes as low as $10), whichever is less.  That means it can literally take YEARS to pay off a credit card balance of only $2000 (that we USED to have with American Express!).  When we were carrying a balance on AmEx very close to $2000, the minimum payment they required was $35 and the finance charge each month was over $20…meaning less than half of that mimimum payment was actually going to the balance.  For each step forward, we took half a step back.  For a year of payments, we would only make a $180 dent into that principle balance.  Wow, is that really worth it?  Do I really want to owe my soul to a credit card company for that long?  Is there anything that I actually NEED that is worth paying 13.73% interest on in my life?

Those of y’all who have credit cards: I challenge you to actually read your next statement.  Compare the mimum payment to the monthly finance charge…then flip it over and search the terms and conditions for something about “universal default” and late fees, and over the limit fees, and penalty interest rates, just to see how much you have to really pay for that little flat rectangle of plastic.  Just how much..per month, per year…are you REALLY paying?

This is the second part of Dave Ramsey’s interview with the legendary Zig Ziglar (part one is here) from Thursday afternoon in Nashville.  After the basic background questions and answers, Dave Ramsey got into some interesting questions…and Zig took off and stressed some points that are important to him.

Zig took great pains to stress he does NOT consider himself a “self-made man.”  He emphasized how people skills and relationships were key to his climb to the top, while insisting his wife Jean Ziglar is the most amazing person he has ever met.  After over 50 years of marriage, any spouse who can say that with as much sincerity as Zig did has a truly wonderful marriage!

Zig also credits his faith with his success, declaring that when he became a Christian at age 45, all of a sudden “the phone just rings now.”    He has not needed to solicit a speaking engagement since then, and often must turn down speaking requests simply due to time constraints.  He and Dave both agreed that while they received advice to not mix faith and their businesses, they both felt they should and both credit that for their successes.

Around this point, Zig Ziglar’s microphone died, and when Dave Ramsey told him the mic was dead, Zig joked he has had “more dead Mikes than an Irish undertaker.”  Dave cracked up laughing, as did the front half of the audience who could hear it.

Once the microphone issue was resolved, and we finally were able to control our chuckling, Zig launched a new topic: the idea of keeping a “Wall of Gratitude” instead of a wall of achievements, and taking time to acknowledge “precious moments” with loved ones.  Zig states he does not have a bunch of brag items on his wall; instead he had pictures of people we’ve never heard of that influenced and impacted his life in a positive way to remind him that he really isn’t a “self-made man,” but that he owes these people thanks every single day for helping him grow into the person he is now.  “WOW!” is all I can say on that idea.

Then Zig finished off with another subject he feels passionate about: the difference between education and learning.  He stated (and I wrote this down, it was so good!) “Only a LIFE-LONG student will ever be ready for the future, so never stop learning!”  Like Dave, he urges people to read at least one nonfiction book a month.  In fact he says in his briefcase at any given time you will always find three things: a copy of the Bible, the book he is currently reading, and a notebook so he can write down things that he wants to remember from either book.  He also says people should bring notebooks into seminars to write things down for later. 

At this point, Dave Ramsey recounted a Live Event he did in Dallas, Texas, with the legendary Zig Ziglar sitting in the 3rd row with his notebook open and writing.  “How intimidating is that?” Dave asked…as I sat in the 3rd row scribbling furiously since both men were talking pretty quickly!

Zig finished up the interview with something that sounded VERY familiar to me: “You have to BE in order to DO so you can HAVE.”  What’s so familiar about that?  It’s on the cover of the Army publication FM 10-100 on Leadership!  Zig tied this philosophy in with a strong sense of integrity in everything you do.

The interview flew by so fast, with so much great information and insight in it…I have to wonder if it will be offered on DVD individually.  As we were heading out, we received a booklet called “Zig Ziglar’s Little Book of Big Quotes” and it is just the perfect size to fit in the pocket of my purse as a little token with some very interesting memories!

OK, before I end up being the target of a cyber-riot in the MyTMMO chat room…here’s the post on Zig Ziglar’s visit on Thursday afternoon.  First of all, this was a “bonus” lesson for the new Financial Peace @ Work program Dave Ramsey is starting.  It looks at how debt affects both employers and employees in the business environment, and what both can do to improve the situation.  This is something that is very much needed!  I see the effects even at the minimum wage level in my pizza delivery job.

OK, to start the afternoon off…traffic was a total mess all around Nashville because President Bush decided to visit, which meant the highways were shut down for the motorcade and backed up.  So…yes we got off to a late start…again!  Then we finally got over half the audience in, and Dave Ramsey kicked off his Financial Peace @ Work lesson which lasted about 45 minutes and was Dave being Dave on stage and teaching.  This new lesson is intended to be used as an introduction to the course for those businesses who are going to be using the Financial Peace University course as an HR benefit…what a great benefit!

Edited to add:  Here’s a clip of another presentation Dave Ramsey has done that is very similar to what he taped at this session: