This week I am going to be focusing on step two of Dave Ramsey’s Total Money Makeover.? As you may recall, step two is dumping debt.? In order to dump debt, there are six basic keys that must be done with gazelle intensity (we will talk about gazelle intensity tomorrow, read Proverbs 6:1-5 to prepare for it).
1. Quit borrowing money!
2. Save money!
3. Pray about it!
4. Sell something (enough that your kids think they may be sold)!
5. Work overtime or get a second job (just until you are done with step 2)!
6. Utilize a debt snowball!
While I won’t be dedicating a post to each one of these topics individually, certain ones I will.? I am going to talk specifically about the first key today, and how hard it can be.
Imagine lying on the ground after having been shot in the leg. As the blood rushes from your body, what is the first thought that comes to your mind? Is it pricking your arm in order to get enough blood to replace the blood you are losing? Then when your arm runs dry, if you happen to still be conscious, do you then move to your abdomen to try to get more blood to replace all the blood you have lost? Of course not, you simply stop the bleeding!? No one would think of doing anything different, yet when it comes to debt, this is exactly what we do.
When the debt was about to swallow up my business, and it was taking the life out of me, the only solution I could think of was to borrow some more money. The exact thing that was killing me was what I wanted more of. Worse than a drug, I was addicted.? I have about another $1500 available on Discover, another $2200 on my Target Visa, $1200 on my Sears Mastercard, $800 on my Capital One, and American Express might authorize close to $4000.? This was my exact thought pattern. I wanted to give myself a blood transfusion to solve my problem. Thankfully the SBA took a second lien on my house, because if they wouldn’t have, that would have certainly put me over $600,000 easy with a home equity loan.
In January, Amy and the kids shredded (with a shredder that may soon find itself for sale on ebay) the credit cards in Springfield. I was in Columbia, South Carolina and admittedly, not absolutely ready to get rid of those credit cards yet. We had an emergency fund now, but still, what if? The fact of the matter is that I needed to stop bleeding. I could no longer try to give myself the blood transfusion. The bleeding must stop!
Wow, that is so true. What a great analogy. We keep using and using our credit cards “just until we can get back on our feet”. When in reality we are just making that goal more far away. I think by the time your journey out of debt is over, you are going to have to become a motivational speaker.
Comment by Debbie — March 20, 2006 @ 9:45 am
I don’t know about being a motivational speaker, although I love teaching. I am wanting to start facilitating a Financial Peace University course, but I want to wait until we are under $400,000, which actually should be by June if everything goes well. I do appreciate your comment.
Comment by Joel — March 20, 2006 @ 12:23 pm
I think stop the bleeding is the most important step one can take. It took me a while but a few surprise Mastercard bills (charges that took a while to come though) put our account over the limit and a few lettes from the bank convinced me it was finally time to ditch the credit cards. I have swiched 100% over to cash, it’s an awsome feeling when at the end of the week you have cash left over at the end of the week. Makes all that frugality worthwhile.
My wife still has a coporate Amex for traveling but it is used only for business and NEVER for personal.
Comment by Rob in Madrid — December 24, 2007 @ 8:07 pm