financial freedom // the baby steps

financialfreedombanner-01 Just over a year ago, Matt and I graduated from the Dave Ramsey Financial Peace University. We took the course through our church, and it was an absolute game-changer for us. We were newly married (only a few months out from our wedding day), living on a VERY small income, and super overwhelmed by thinking about how we could live the life we wanted, without having six-figure incomes. How could we travel, and buy a house, and fix up a house, and have kids, and pay for their college, and have adventures? When do we start saving for retirement, how do we factor in insurance? It can be super overwhelming. Dave Ramsey truly revolutionized our thoughts on money, answered all those questions, improved our spending habits, and our communication skills as we worked toward total unity when it came to our finances.

We definitely aren't perfect when it comes to money (who is?) and we've made a LOT of poor choices and mistakes even after taking the course and learning how to properly manage our money. The truth is, we fall short of our goals--a lot. We blow the budget time and time again, sometimes by $5 and sometimes by $100 (and sometimes more.) But Dave Ramsey's FPU gave us the tools to succeed with our money and life that life we've always imagined--regardless of the fact that we will never be making hundreds of thousands of dollars as a household.

It's really been on my heart to start sharing about our journey with money publicly, because I think there's a lot of pressure for us, young twenty-something "professionals" especially, to keep up this certain image and lifestyle. I know that I was personally SO burnt out by trying to act like we had more than we did, like we could do more than we could. The feeling of trying to act rich, feeling pressured to buy with credit and afford shopping trips and nice cars and being mad when we couldn't do those things--it was exhausting. Thankfully, we've found a better way, and I want you to know that YOU can, too. You can have a beautiful, full life filled with adventure and rich experiences and NOT make a super high income. So I want to candidly share--with actual numbers and as much detail as Matt and I decide is wise to put on the internet--to show you what is possible. I am not an expert. This is not endorsed by Dave Ramsey in any way. I took one class and have failed a lot. I'm not going to pretend to know much of anything, but I want to share where we've been and what works for us and how we're working towards true financial freedom. I am passionate about living a simple but FULL life, and that it's possible no matter your circumstances. Are you in? I hope you'll follow along and that this series helps you in some way! Selfishly, I'm hoping that sharing about our progress helps keep me accountable and motivated because even though I've read the Bible verses and believe that I need to be a good steward with my money, I still want the brand-new car and the Anthropologie shopping trips. I like things. I like pretty things and I like to surround myself with things that inspire me. I want my home to be in a magazine. That's the truth. I am a spender, and it's a constant battle to curb that tendency (and the pride!) and stick to our budget, but that's a conversation for another day :)

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I'm not going to tell you everything we covered in the FPU class, because I want you to take one for yourself! It will be the best $100 you EVER spend, and a lot of churches offer scholarships if you can't afford the class materials. You can find a list of all the locations that offer FPU right here.

But, I will share this, because it's readily available to the public on Dave Ramsey's website. The basis for our journey with financial freedom is the 7 Baby Steps. We started at Baby Step #1, and are working all the way up to Baby Step #7. The key is to work through them one at a time. You get super-focused on the step you're on, and once it's complete, you move to the next one. Here they are:

  1. Save $1,000 as an emergency fund | The idea is to get this as quickly as possible. Cut out all non-essential spending, have a garage sale, whatever you can do to get a thousand bucks in the bank as quickly as possible. We were able to get this together pretty quickly, so we crossed this step off. (Although, we just paid for a very expensive plumbing repair at our new house that drained our e-fund all the way down to $0--so actually, I suppose we have to do this over again--but it's in our budget to refund it back to $1,000 in February and start building on it in March.)
  2. Pay off all debt using the debt snowball | We started our marriage with roughly $16,000 of student loan debt. I realize that is a MUCH lower number than many people have, and Matt and I were both extremely blessed by having the majority of our school paid for by our parents. That student loan debt was from one semester I spent studying abroad. I am so glad I did the study abroad program...but living on a student loan messed me up a lot in terms of how I thought of money, and I never want to live on borrowed money again (like I did in England for three months on that loan!) We were able to pay this off last September, so we are now "debt-free" except for our mortgage. We have no credit card debt, no car payments, and we never want to have them again. When we buy a new car later this year, we will be paying cash.
  3. Build up your 3-6 month emergency fund | This is the step that Matt and I are currently on. For us, 6 months of expenses is a little less than $10,000. That means that if neither one of us made ANY money for six whole months, we could pay ALL our bills (including our mortgage, gas, food, dog food, utilities, etc.) In general, Dave suggests 3 months to start out if you don't have kids or any dependents, and definitely 6 months if you have dependents. We don't have kids yet, but 6 months feels more comfortable to us than 3. Eventually, we'd like to build that up even more, but our goal for 2015 is to bank $10,000 for emergencies. This is different than saving for Christmas, or vacation. Those savings are in addition to the e-fund savings. Christmas is not an emergency (although I reaaaaaally wanted to dip into our e-fund for Christmas this past year--but thankfully my husband is the voice of reason and reminded me that that was not in line with our goals. I love him.)
  4. Save for retirement | Matt has a small Roth IRA that was started for him a long time ago, and will be able to have a retirement account with his new job he just started. We're looking at starting to save for retirement in 2016, assuming our e-fund is fully funded. Sometimes I stress that we should be doing #3 and #4 at the same time--but Dave Ramsey has had huge success with his system, so we've decided to just follow his wisdom and not start retirement saving until our emergency fund is fully funded.
  5. College funding for children | Once we have kids, we'll start a college savings for them. Since my college was paid for by my parents (and Matt's too) it's really important to us that we give the same gift to our kids. People have such different philosophies on this--and everyone does what they feel is right for them and their kids. But having practically no student loan debt when we started our life together was HUGE. It was one of the reasons we felt like we could get married so young and begin our life together--we weren't drowning in debt and feeling that pressure. I would love to continue that legacy for our kids.
  6. Pay off your home early | Dave suggests a 15-year fixed-rate mortgage. We did a 30-year fixed-rate mortgage instead...which maybe wasn't the smartest, but we did it knowing that we would pay it off early. We are hoping to pay it off in at least 15 years, if not much less.
  7. Build wealth and give | This is the fun part--where you get to give SUPER generously. I can't wait to leave $100 tips at restaurants for unsuspecting servers and things like that. There are so many Bible verses about how we are supposed to use our money and so much of it comes back to giving. When you believe that the money doesn't belong to you, but belongs to God, it changes your whole perspective. We remind ourselves of that often so that we loosen our grip on our dollars and use it in ways that can glorify God.

So, there you go! We are walking through those steps with tons of other people across the country and globe and it is truly transforming every aspect of our life. From my capsule wardrobe, to my thoughts on crafting an intentional home, to thinking up creative, meaningful and cheap date nights, our walk towards Financial Freedom has been hard and trying but also a huge gift. I'm super pumped for 2015 and building up that 6-month emergency fund and the peace that will come with having that money tucked safely away, so when the plumbing breaks or the washer goes out or the car needs a major repair--it's not a hand-wringing oh-my-gosh-what-are-we-going-to-do situation.

What about you? Are there any Dave Ramsey-ers out there? Having a community when it comes to things like this is SO helpful I've found. Another helpful thing we've done is paint a chalkboard wall in our kitchen and draw out this chart for our emergency fund savings. It is SO motivating to see it each and everyday. It's at zero right now, because we just drained our emergency fund for that plumbing repair (womp wompppp) BUT we'll be putting $1,000 back into it in February, and saving $400-$700 per month after that. Any bonuses, tax refunds, Christmas and birthday money and things like that will all go straight to the e-fund until it's fully funded. I'm so excited to fill up the chart...and throw a big party when we get to the end :)

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Next week, I'll be talking about our budget and sharing actual numbers, and how our household runs from month to month. Can't wait!

xoxo,

Val