New Year, New Financial Plan
By: Kim Kerr, Family Services Manager
Here at Habitat, our families and I, are beginning the year focusing on getting our finances in great order.We are using a program from Dave Ramsey called Financial Peace University.The program is designed to help us live our lives Debt Free.What a great feeling that would be.Have no debt, have savings in case an emergency comes up, and even have money saved for retirement.
The program is divided into 9 lessons.Here at Habitat we will focus on 7 of the 9 lessons.The first step is to save an emergency fund of $1,000.00.Dave tells us right away, this is baby step #1 along with a budget.This is the beginning of becoming debt free.Most people do not have enough cash for a $400.00 emergency.Our budget will account for every penny that comes into the household.They told us that it will take practice and to be sure to give it three months for the budget to become a rhythm.I can’t wait to get started!
The next step in the program is to pay off debt.Dave says start by paying off your smallest balance first and paying the minimum on all of the other cards.Once the smallest balance is paid off, move onto the next paying the minimum plus the amount you were paying on the other card. He calls this paying off debt using the snowball effect. Then…. Cut up all of the credit cards and don’t use them. We turned this into a “Plasectomy” party, by cutting up credit cards in our class.
The third step is to save a true emergency fund. Now it is time to save 3 – 6 months of expenses in a fully funded emergency fund. If it gets spent, you have to rebuild it. This step is all about using cash instead of credit cards. Now you are in saving mode.
Now look at us go. We have no credit card debt, three to six months of savings in an emergency fund, still staying on our budget, and paying cash for things instead of using credit cards. Ok, so it is baby steps. I didn’t get this done in the time that it took to write this, but I will continue to work on it. Now I’m ready to save for my future so that I can plan to travel and enjoy retirement. The next step is to save 15% of my income for the future. The younger you start, the more benefit your money will give you.
Once we are ready for our future, we are ready to prepare our children for a good life as well. That means saving for the education of our children. This can be a group effort. Children should look for grants, scholarships, and work studies. We need to encourage them to find an affordable school. Encourage your children to help by getting a job. Student debt is a huge problem in our country. Wouldn’t it be nice to help our children prepare for college so that they are able to graduate, if they desire to attend college, without debt.
The next step is to pay the house off early. Just one extra payment a year can make a huge difference. This step may take time, but it will be the last debt to pay off before you are truly debt free. Of course, even after the mortgage is paid, as Rochelle has told our families at a ceremonial mortgage burning, “you still have to pay your taxes and insurance”.
The final step is my absolute favorite. Once you have worked so hard to become debt free, you are free to give to others. This will be the greatest part of dealing with money. I am anxious to begin this journey with our families during January and February. What a great way to begin a new year with a plan to make a change that can allow me to live Debt Free!!