Personal finance 101 – live like no one else

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by Tsh

Tsh is the founder of this blog and is currently traveling around the world with her husband and 3 kids. Her latest book is Notes From a Blue Bike, and believes a passport is one of the world's greatest textbooks.

This is the eighth and last part in my series on Dave Ramsey’s Baby Steps, a proven personal financial plan. My goal is to explain a really solid money management plan in plain ol’ English, for intelligent yet financially “average” home managers.

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Photo by Ivan Makarov

Missed other parts of my series?

  1. Dave Ramsey’s Financial Plan
  2. The $1k Baby Emergency Fund
  3. The Debt Snowball
  4. The Fully-Funded Emergency Fund
  5. Investing for Retirement
  6. Saving for Your Kids’ Education
  7. Pay Off Your Home Mortgage

You have zero debt, including no mortgage. Congratulations, you are among 2% of all Americans.

You also have a fully-funded Emergency Fund. You are saving 15% for retirement, and your kids’ education is financially set. What are your next financial moves?

You have some fun. You invest for the future. And you give like crazy.

Seem like a far-fetched, impossible dream? Yeah, me too, in some ways. But this is the seventh and last step in Dave Ramsey‘s Total Money Makeover plan, and before I learned about his process, I all but brushed off this sort of financial well-being as impossible for us. Not anymore. We now financially behave as though this sort of future is not only ideal, but it is entirely possible for us. We’re excited.

1. Have Fun

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Photo by Michael Slezak

It is not a sin to be wealthy and to have fun with money, but it is financially irresponsible to spend money you don’t have, or to spend money that should be going towards necessities. But when you’re financially fit with absolutely zero debt and plenty in the bank, Dave Ramsey says it really is okay to do some crazy money stuff.

In his book, Dave tells a story about a caller on his radio show who asked him if it was okay to buy a $20,000 brand-new Harley Davidson motorcycle. He was getting ready to lay into this listener’s financial immaturity, until he asked the guy what his household income was the previous year. “$650,000″ was the caller’s answer. “How much do you have in investments?” Dave then asked. “About $20 million dollars.” Dave’s advice? “Buy the Harley, dude!”

I can’t say I daydream about owning a Harley, but a small-yet-functional home designed personally by us on a cool spot of land? Yes, please.

2. Keep Investing

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Photo by sharaff

Dave recommends continual investing, even when you’re financially free. And instead of getting in to complicated stuff for no real reason, he advocates staying in simple mutual funds and debt-free real estate. And since any purchased real estate has to be done with 100% cash on his plan, that means you can have some fun with your investments. Who wouldn’t enjoy a paid-for lake house?

I don’t have the financial smarts to really understand it, but Dave also describes something called the “Pinnacle Point” – where your money works harder than you do. Basically, your money is so well-invested and you’re doing so well that your investments earn you more money than your job. This means – get this – that you work because you want to, because it’s something you truly love.

3. Give Like Crazy

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Photo by Maximiliano Gutierrez Contreras

After meeting thousands of millionaires, Dave says the healthiest ones have one thing in common – they give like it’s going out of style. I don’t have the room here to tell all his stories from his book, but I tell you, I would love to one day give $10,000 cash to a total stranger who needed it. Too cool.

One essential point to Baby Step 7 – you have to do all three of these things. They aren’t mutually exclusive. In order to give like crazy, you need to keep investing so that you have money to give (as Margaret Thatcher once said, “No one would have remembered the good Samaritan if he hadn’t had money”). You need to give so that your life is not All About You. And yes, you need to have some fun, otherwise you forget that life can be a true joy, and that God truly has blessed you with financial freedom.

Baby Step 7 is what keeps me on this track of living like no one else, so that later we can live like no one else.

Dave Ramsey can be a bit controversial – after all, not many financial gurus advocate being 100% totally debt-free – no credit cards, no mortgage payment, nothing. But he swears the grass in your backyard feels differently when you completely own it. I bet so.

Thanks for holding on with me as I explored each of his Baby Steps. It took awhile, but I actually learned a bit more as I did my research. If you haven’t yet, please read his book and listen to his show, either on a local radio station or via the internet. You won’t be disappointed.

Other books by Dave Ramsey:

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Comments

  1. Thanks for sharing. I enjoyed reading your summaries of Ramsey’s principles. And, while I can agree with most of them (including eliminating nearly all debt), I would say that not all real estate investments need to be made with 100% cash. That lake house you’ve always wanted? Certainly you should pay for it in full up front. However, when it comes to rental property investments, it’s smarter to get a mortgage: Make a down payment that’s large enough so that the rental income is enough to cover the mortgage payment, taxes, insurance, and other operating expenses. Then, even though technically you’re in debt, your tenants are buying your investment for you. In such a way, you get a free property (well, significantly reduced, at least) and you leave more of your cash on head free for even more investments.

  2. @Michael – Good points. But what about when your real estate isn’t being rented? Then you’re having to pay the mortgage yourself. It happens a lot more than people initially think it will.

  3. Thank you so much for this series. My husband and I went through FPU many years ago and it saved us in so many ways. We’re still creeping through the baby steps and from time to time we need to pick up one of the books and reread it just to stay motivated.

    As of this past Friday, we are 100% debt free! Do you know how many years I’ve waited to say that?! Wow! It feels great!

    Again, thank you for your series of posts. This one is by far my favorite because it gets me excited about what I have to look forward to one day!

  4. This is a great summary of Dave’s principals. We went through FPU last year and it has really changed the way we think about and spend money. For the first time in our married life, we aren’t accruing any debt! Now, we just have to pay off all that stupid tax. :)

    Every time I hear Dave’s principals, I’m reminded to stay on track. Thanks!

    Tiffanys last blog post..Running on Faith (Eric Clapton)

  5. This is the best post yet of this series. I love the rewards for all the focus & discipline.

    Rachel@SmallNotebooks last blog post..Handmade Gifts: Baby Edition

  6. I’ve been a Ramsey fan for years. With rising costs of it seems EVERYTHING, I’ve been giving myself a “refresher course”. As a previous commenter put it, I need to “stay on track”. Just today I picked up at the library some of his stuff: Priceless, More Than Enough, Financial Peace on DVD, and one of his children’s books. My children are really liking his story, too :)

    Kats last blog post..Contentment Revisited

  7. @bee – Congrats! I left a comment at your blog. :)

    @Tiffany – We’re going through FPU online right now, and I love it! Glad you loved it, too.

    @Rachel – Thanks, Rachel. I agree, this last step makes it all worth it.

    @Kat – Sounds like you’ve got great summer reading ahead of you! Let me know what you think of them. I’d love to read more of his stuff.

  8. We are on board with the Total Money Makeover. It changed our lives. I am working on a post about our journey through this plan.

    Your blog is awesome. I’ll be back!

    Sporty Mamas last blog post..I Had to Let My Anger Where Off

  9. Loved your series! I went through FPU last year but did not put it into practice. I’m now getting set to initiate it this month. I was a fool not to do it last year when taking the course.

    celticbuffys last blog post..

  10. Just found your website, and I just discovered Dave Ramsey earlier this year. The Total Money Makeover has challenged my paradigm! I even started a new blog to help hold us accountable to our debt-free endeavor. One day I hope to be “credit-free” as well!

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