Thursday, March 6, 2008

Thoughts from The Total Money Makeover

I am about half way through The Total Money Makeover, and I am thoroughly enjoying this book. I wish, in many ways, I had read it last summer because I think that is when we had our crisis that is as close to rock bottom as I ever want to get again. Right after paying out most of the cash we had in any account to some loan or another, our air conditioner broke. In the dead of summer. In South Georgia. Something also triggered a migraine for the first time in years for my wife, and she needed to go to the doctor. One doctor's visit turned into two MRI's, a MRA, a balance test, and at least one other test whose name escapes me at the moment. She visited a neurologist and another specialist. The concerns ranged from her having an aneurysm to just a small loop of blood vessels in her brain, and it all turned out to be an inner ear imbalance. As the last doctor explained, they have to run all the other tests to rule out the inner ear, and then they can tell it is the inner ear. So, a new A/C unit, several thousand in unexpected doctor bills, and no cash. No expectation of cash any time soon, either. I was certainly worried. I didn't want the stress of that moment to trigger another migraine for Ellie, and I didn't want the lack of air conditioning to drive us nuts.

The first thing I did after all this sudden money crunch was to make sure I paid my tithing. I know a lot of people would consider it crazy to do such a thing in the midst of a money crisis, but I knew I needed the peace and all the blessings I could muster at a time like that. My mind was very much unburdened after I paid it, and I know I was blessed to come out of troubled times because of it, but I will leave my testimony of tithing at that for now.

Then, I did what this book would tell me not to do: I borrowed on my credit card. I had run through all the 0% balance transfer offers over time, and the one I had was for 1.99% for nine months. I borrowed enough to make sure I could pay them out of the funds, pay the bills we were suddenly hit with, and have a reserve in case something else came up. The exact amount is a little too embarassing to publish here, but I never plan to borrow short-term like that again. I actually never plan to truly borrow again, as The Total Money Makeover suggests. Dave Ramsey would describe last summer as the time "Murphy moved in" (Murphy from Murphy's Law that whatever can go wrong will go wrong).

This month, we will pay off all our debts other than our house, and we have no reason to expect to incur any new debts any time soon (read: never). I did not follow the plan Dave Ramsey would have suggested for my debt elimination, but I came close. I still paid into my retirement, paid of all my other credit cards as they came due (though I still used them), paid extra on my home loan each month, and then put any extra I could justify into the credit card debt. I certainly would've paid it faster if I had followed the Debt Snowball and put all the extra onto the debt, but I am thankful it never came to needing to. For anyone familiar with the Baby Steps, we are somewhere between steps three and four, but we're actually not far from moving towards six. We will have most of our necessary emergency fund built up by the end of the month, and I already invest 10% into my 401(k) each month, but we will plan to invest the remaining 5% into our Roth IRA later in the summer. The college accounts are already funded at this point, so we're planning to work on paying off our house as quickly as we can muster from now on. We've only owned our home four years, but we already own nearly half of the equity, and by year end we hope to have paid nearly half our original loan on it. Then we plan to refinance to a 15-year fixed rate loan on the remaining balance.

A couple of things will slow us down this year, but I consider them necessary to continuing our progress. We need to replace our stove to avoid a potentially dangerous situation, and our dishwasher will probably need to be replaced soon, too. We may also invest in a new closet design for our master bedroom because it would improve our ability to manage our space dramatically, which would in turn make it easier to be home more. Being home more comes with the territory of spending less, since we eat out less, go to movies less, and so forth. Our current plan is to spend the next several months really planning the closet and get it from Ikea. We've already paid for a trip to California in May for Todd's wedding, but most of the rest of our summer will be spent at home afterward.

I hope this post does not sound gloomy. I am really excited to become completely debt free. I feel less stress about money today than I have in ages, and I feel like I have a plan now to take control of my income, as Dave says to "Tell [my] money where to go instead of wondering where it went." I will probably write more about this book in the future since this blog is all about success and I think we will be successful. I haven't decided to make it a regular day of the week entry, but I might, just to keep myself on track and motivated. Here's hoping we're completely debt free in a couple of years.

-- Robert

P.S.: For anyone wondering, my wife was able to get her balance straight and has not had another full on migraine since. Her post on the balance issues is here.


le35 said...

If anyone wants to know about the balance problems, here: is that post. Also, I have had one migraine (remember Orlando?) However, I'm doing considerably better, and I'm excited about the new budget!

Robert said...

I thought the one in Orlando got stopped before it got really bad. Sorry.

michael said...

Well, I haven't commented on here yet, but I have been reading it semi-regularly. I think that getting out of debt is something that doesn't get the emphasis it deserves, but is very important. So, congratulations on moving closer to being debt-free.

Robert said...

Thanks for commenting, Michael. I completely agree that debt elimination needs more emphasis. The Total Money Makeover is very inspiring, very understandle, and very good at laying out a plan. As he repeatedly says, "It's simple, but it's not easy."