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One of the most important steps in fighting any addiction is to admit there is a problem. 4 Years ago, our addiction was spending money and the consequence, DEBT, was quickly becoming a dark cloud over our lives. Fortunately, we were able to take steps to correct our mistakes before the debt completely consumed us.
I started reading as many financial books that I could find, and eventually stumbled across Dave Ramsey’s book The Total Money Makeover. Though I don’t agree 100% with Dave Ramsey’s financial concepts, his financial baby steps were instrumental in my families triumph in eliminating over $97,000 of consumer debt in just over two years.
Dave Ramsey gets a lot of attention for his baby steps to building wealth and his debt snowball technique, but one of the most effective strategies I learned from him is to get over the proverbial “Joneses” complex and start looking at the reality of “what is” and “what isn’t” a wise financial decision.
We began budgeting and set spending and savings goals and worked our way up our debt snowball and before we knew it the debt was gone! Along the way our perception of the “Joneses” shifted but we can’t help to reflect on how we used to think when we same something of materialistic value. What follows is a “Then” and “Now” perception of how my financial paradigm has changed regarding materialistic things that I used to be impressed by.
When Seeing an Expensive Vehicle
Then: Wow, that person must make a lot of money to be able to afford that car.
Now: I wonder what that sucker is paying per month to lease that thing?
When Seeing an Expensive Home
Then: Wow, that person must make a lot of money to be able to afford that home.
Now: I would be able to afford that home too if I had taken out a reverse amortizing adjustable rate mortgage.
When I See Someone Using a “Gold” Credit Card at the Checkout Counter
Then: Wow, that person has a gold credit card! They must make a lot of money, and how smart of them to earn frequent flier miles!
Now: I hope that they are paying the balance off every month and not using that card because they otherwise would have no money.
When I See People Buying $3000 Laptops (With 10 times more computing power than they will ever need).
Then: I wish I had a $3000 laptop! What a smart investment to buy a computer that will “grow” with you!
Now: I could wait 6 months and get that same computer for $1000. On the other hand, there is nothing that I will ever do on that computer that I can’t do on the cheapest $500 Gateway Laptop available in stores today.
{ 10 comments… read them below or add one }
Amazing what a change of point of view can do!! The sad truth is, the “now” quotes are used by too few but they are the way we should be looking at others – if at all.
Great Post!!
Tropper
http://www.dontdiepoor.com
I think you have a very negative point of view. Why do you assume that people cannot afford a new luxury car? Why do you assume people cannot afford a nicer home?
I am guessing you’d think that about my parents and in-laws who use CC, drive nicer cars and go on exotic vacations. But they both have no debt, a ton saved, and can afford pretty much everything.
I dislike Dave Ramsey intensely because of this mentality. Assuming that everyone you see is in debt. It really turns my stomach.
Good for you guys! I think people who pay cash for everything are very rare. I hope to be one of them someday! But that takes work, patience, and a plan. Dave Ramsey helps people see that.
@LivingAlmostLarge – I have to disagree with you. It might seem negative, but I don’t think it actually is. When you’re poor and don’t have money to afford these things… I think it’s fine to think like this. To assume that anyone who does have these things, can’t afford them. Because you’re in “working” mode, or “getting out of debt” mode, you need these ideas in your head to help you.
If you don’t think that way, and instead think that “Oh those people make way more money than I do, I’ll never be able to afford a new car…. I might as well just stay in debt… I have no chance.” you are far worse off.
I will split the difference between the OP and LivingAlmostLarge.
I do think that many people who engage in doing a Dave Ramsey type program take the negative view when they see someone in a new and expensive car or using a gold card at the check out.
There is so much I like about the Ramsey program that I use it in my life and facilitate the classes where I attend church. The first three baby steps are tactical steps to get out and stay out of debt. Steps 4-7 are a bit more strategic and likely need the oversight of experts in the field.
But one of the issues I have is that so many of the true followers develop a condescending attitude about the use of credit or the acquisition of stuff. They overlay their journey, their new values and their new paradigm onto everyone else. And if those other people aren’t doing life Dave Ramsey style, then there is an implied evil.
Each situation is different. Someone may well be able to afford the decked out Hummer as if it were pocket change. They may be very responsible with the use of credit cards and use them as a tool.
Others are pretenders using the Hummer as a facade and use credit in a way that is destructive.
When meeting someone, we just don’t know their specific circumstance and we shouldn’t infer what maybe they aren’t implying.
I’m not saying that the OP is one of them, but sadly there is a term that is growing in use. That term is “Dave Nazi”. Those who follow Dave’s plan and believe in it must really be careful that while as Dave says this is crusade against debt, they don’t come off as Dave Nazi’s and hurt what they are trying to encourage others to become.
Great list. I agree with it all except for the computer. Oh what I wouldn’t give for a sleek new computer and a 24″ widescreen monitor… Oh wait, I think I just fell in the trap again.
livingalmostlarge,
You are right that I shouldn’t assume people cannot afford a new luxury car.
Instead, I should hope that people who drive such cars are indeed comfortably able to pay for the expenses.
Excellent scenarios that really highlight the difference between spender and save mindsets.
Fabulous! A big part of getting out of debt and winning financially is changing your view of the world. I once had it bad for one of those BMW roadsters (still kinda do), but when you find out that 70 or 80% of BMWs are leased, it changes your view a bit. Go ahead, drive like a hot-shot in your leased BMW, I’ll take my paid-for pickup any day of the week.
Livingalmostlarge makes a good point that you cannot be too quick to pass blanket judgment, but I don’t think that is the point here or from Ramsey. The reference is to the perverbial ‘Jonses’ – you know, folks like you except with nicer stuff. Actually, when I see folks of my parents generation with a nice house/car/whathaveyou, I assume it’s paid-for, as those generations were not so credit-happy as my own.
Additionally, the current mortgage crisis – as well as the other credit-based bubbles bursting – pretty well supports this sentiment. It’s just like stereotypes – they exist because there is truth behind them. You just have to be careful in how you apply them.
Anony is also right in that Dave gets folks so fired up that they can become overzealous. You can use a credit card. You can play their game. Go for it. Have fun. But I’m not going to do it, and I’m not going to advocate that people do it.
BTW –
Congrats on paying off $97k in 2 years! That’s killin’ it!!