Debt-free living seems like a pipe dream to many Americans who, according to Dave Ramsey, have been sold a bill of goods in the form of debt as a tool, when in fact being debt-free is the way to gain control of one’s money and live in financial freedom. Most people who are up to their eyeballs in debt can agree with this in theory, but may have difficulty applying it to their situation in practical terms. If the goal is to get out of debt as Ramsey and his daughter Rachel Cruze, along with every other speaker, writer and financial coach with Ramsey’s Lampo Group repeatedly recommend, then how does one go about making that happen? Ramsey knows about climbing out of debt as he has done so twice before he wised up and became the financial counselor to millions, as he is known today. Therefore, he has practical advice about specific steps to take and habits to break to help people short circuit the vicious cycle of debt and learn to control money instead of letting it control them.
Motivation, motivation, motivation-It is all about how much a person really wants to get out of debt. Not how much they wish, dream and hope for it, but now much they truly desire it and will make the hard choices and sacrifices to gain control and live free from money myths that keep them bound to their debt. In Ramsey’s Financial Peace University video course and his books, he tells people straight up that the tools and strategies he teaches will not fix the problem if there is not a shift in accustomed ways of thinking. Becoming debt-free is 100 percent about behavior change which starts with changing thought patterns and hating debt more than wanting to indulge one’s desires for toys, luxuries and comfort items. It starts when a person stops making excuses, gets “gazelle intense” in escaping the cheetah of debt and does whatever it takes to make the debt go away and stay away.
People should give the credit cards a “plastectomy,” as Ramsey calls it. No one can get out of debt as long as they are making debt a way of life. Debt is the enemy. People who play with it or try to manipulate or outsmart the system end up getting burned eventually. Ramsey is adamant about getting rid of them and deciding to live within the means at one’s disposal, not the means of one’s dreams. Credit cards are a debt-free dream killer.
Start tracking expenses and make a budget-then live on it, no cheating. Not exciting in the beginning, perhaps, but the appeal grows on a person when suddenly they know where their money is going and realize that maybe for the first time, they are in control and telling their money where to go. The debt-free journey suddenly feels more possible. The first time they want a little splurge on something fun and look at the budget and find out they do not need credit and they do not need to cheat. They actually have the money right there because they have been disciplined in their budgeting and savings plan. They are hooked.
Pay cash for almost everything-feel the pain of handing over the actual green stuff. Ramsey says the more people feel the money they spend, the less they spend. Use an envelope system to portion out how much to spend on each category each month and when the envelope is empty, stop spending. When a person does not spend more than he or she has, debt-free will eventually become a reality.
“If you want to be rich, do rich people stuff,” Ramsey tells his students,That means not listening to the advice of broke friends who do not understand the debt-free concept and call anyone on that path crazy for the sacrifices they are willing to make to get to the goal. Crazy is OK, Ramsey says, it just means a person is on the right track to eliminating financial worries and having the same friends who still have mortgages, credit cards, student loans, car loans and more, call for advice when they get to the bottom of their barrel.
Earn more money-Get creative about a second job to bring in extra money to put toward the debt. It does not have to be a forever, career type job. Think like a teenager and deliver pizzas, mow lawns, babysit or clean houses, but stay away from pyramid schemes and get-rich-quick gimmicks. Give music lessons, tutor students, make crafts or jewelry and sell them online. Hold a garage sale and sell all the unnecessary, unused or underused items cluttering up the home.
Eliminate payments that are beyond one’s means-Ramsey is a big proponent of selling the car with the big car payment and paying cash for the cheapest used car to be found that will carry a person from point A to point B while getting out of debt. Likewise, downsizing the house with an oversized payment, even renting for a short time while becoming debt free and saving up to pay cash for a house. Put investments on pause. Eliminate expensive hobbies, habits (yes that means the designer coffee and super-size takeout meals, too) and memberships and even minor recurring expenses such as Netflix and cable, until debt-free is no longer a dream but a reality.
Seek out free entertainment-Get books and movies from the library instead of the bookstore and Redbox. The library may have passes to museums and other cultural destinations that patrons can sign up to check out for a day. Look for community announcements of free public events for families. Take a hike. Have a picnic. Hold a backyard campout. Being on a debt-free journey does not have to mean no fun ever. Families just have to get creative about fun without money. It is possible.
Look for any and all ways to save-Look for big bargains on good quality items and hold tight to the right to say “no” and walk away if the deal is not good enough. Avoid buying fever. Learn to coupon. Eat in, not out. Buy generic medication and get water from a tap, not a bottle. Make a menu and a shopping list before grocery shopping and stick to it. Never shop hungry or on impulse. Use the “no” with kids and mean it. However, avoid the overhyped infomercial deals, on or offline. It will not be what it is cracked up to be.
Start now, no excuses-Build a $1,000 starter emergency fund and start paying off the debts, smallest to largest, using the debt snowball method. The rapid wins with paying down a couple of debts quickly, fuels motivation and momentum to stick with it. Ramsey, Cruze and millions of people who have become debt-free this way have found that it really works and the early successes build a positive mindset of success that sparks perseverance in a process that has life-changing power when undergirded by maturity and self-discipline.
Ramsey and Cruze both have many more suggestions for becoming debt-free on their respective websites. Still, the underlying bedrock of success in the quest to ditch debt is honesty with oneself that the current way is not working and readiness to commit to radical changes, no matter what it takes to gain control of one’s money and live free from money worries. When a person has truly had enough and is willing to apply the principles of financial freedom, even when they are painful and uncomfortable or challenge preconceived notions about how money works, their hidden traits of debt-free people can start to shine through. They develop financial wisdom, stop using debt as a tool and know how to set goals and follow through with a plan to achieve them. They are responsible, mature and practice patience and walk away power, avoiding impulsive purchases and waiting until they can actually afford to pay cash for the items. They shun materialism. They are willing to sacrifice wants temporarily and delay instant gratification for a greater goal later on. They are settled and confident in their decision to pursue financial peace and do not care what other people think of their drastic lifestyle changes. In the end, success on a debt-free journey is a matter of passion about getting out of debt to the point that a person is willing to start taking purposeful action to eliminate the financial baggage. Then they keep doing it repeatedly until all balances read “paid in full” and they are in full control of what to do with their income, marking the birthday of their debt-free financial freedom.
by Tamara Christine Van Hooser
Dave Ramsey: Leap Out of Debt
Dave Ramsey: Americans Waste Money
Dave Ramsey: Americans Waste More Money
Dave Ramsey: Waste Money on Kids
Dave Ramsey: Debt-Free People
Rachel Cruze: How Do I Start Getting Out of Debt?
Rachel Cruze: Three Ways to Pay Off Student Loans
Financial Peace University, in-person attendance
Lead and top image courtesy of TaxRebate.org.uk – Flickr License
Inside image courtesy of the writer