What I found exciting in Dave Ramsey’s book, The Legacy Journey, was a provocative financial vision beyond the now. It all starts with the foundational framework Dave lays out in Financial Peace University. But that is the “ab crunch” part of this (definitely not my favorite). I needed something big to pull me through the foundation building. The “pull” for me was the hope I got through the vision exercise for the time after all of the Baby Steps have been taken!
Baby Steps
(from Dave Ramsey’s Financial Peace University)
- Place $1000 in an Beginner Emergency Fund
- Pay off all debt except your home mortgage using the Debt Snowball
- Put three to six months of living expenses into savings as an Emergency Fund
- Invest 15% of the household income in pre-tax retirement plans
- Start college funding for the kids
- Pay your home off early
- Build wealth and give
Why I Struggle
I don’t like being called a baby! And yet, I look at the Baby Steps above and think… this is going to take me a lifetime. I hate budgeting. Its hard and I don’t want to do it. This is going to take FOR-EVER. My income is up and down and unpredictable. I am never going to get to the fun part!!! But here is the core problem: Everything starts with the small stuff. “Whoever can be trusted with very little can also be trusted with much.” Luke 16:10 NIV
Manager – Not the Owner
I believe this subtile shift will unlock part of the hope for me. For some reason, I can get more engaged by doing this for God and managing God’s money than I can for building wealth for myself. I know that logically I cannot manage my money so well that it will guarantee me security or happiness. So, my tendency is to give up and just survive.
I do want to get the pressure off and get out of debt though. The irony is that the disciplines that will allow someone to climb out of debt are the same disciplines that will allow someone to manage wealth and be able to give generously. You don’t graduate to some place of freedom from Biblical principles. God’s ways are best – and they are necessary. As Dave Ramsey says “You never outgrow the need to do a monthly budget”. If your job was Money Manager, you would make decisions based on a budget and your performance would be evaluated on how close to stuck to the budget. Well, we are managing someone else’s money!
Dave Ramsey’s statement in the book really hits home: “We all have equal value before the Lord and are equal as humans, but we do not all bring the same level of economic service to the marketplace.” Everyone has the same opportunity to manage their money by Biblical principals. We just don’t all do it. And, there really is no good excuse for it. Ugh!
Jesus taught on this in Luke 16 and also in Luke 19:11-27. Here is a great commentary on Luke 16.
Contentment and Ratios are the Key
“Content people don’t always have the best of everything, but they always make the best of everything.” Like happiness, contentment is an attitude rather than a accomplishment. One of the keys to generating contentment early is to be on a path that can last. People can be content if they believe in the plan or the path. Taking out debt is a path to freedom because Debt can unravel dreams faster than anything. Debt numbers, though, are specific dollar amounts. Once, you escape the debt numbers, you start working with excesses and growing with those takes ratios. Ratios keep you in balance. Dave Ramsey calls these excess amounts “Overflow”. The other thing that comes into play for Christians is Tithing.
Here are some ratios for consideration that split up the Overflow Total:
- Tithe for Overflow Ratio: 10%
- Taxes for Overflow Ratio: 40%
- Extra Giving for Overflow Ratio: 10%
- Investing for Overflow Ratio: 35%
- Extra Lifestyle for Overflow Ratio: 5%
A Real Estate Agent Example
One planning suggestion we are taught as team builders at Keller Williams Realty is to take a fixed salary as the Lead Agent of $100,000/year. Once that is fixed, the Lead Agent’s lifestyle should be based on that. The rest? Should be managed by business principles and ratios. In this example, lets assume that the team generated excess income to the lead agent (as the team owner) of $100,000. Just add 3 zero’s to the percentages above to divide up the overflow. The problem most real estate agents have is when they see an excess $1, they see $1 and they spend it all. Using ratios will help agents like me make a much needed mental conversion when it comes to any excess income. Overflow dollars can have rules thanks to these ratios. Those rules help things from getting out of balance. Emergency Reserves get built. Taxes get paid. Investments get saved for. Giving increases. There are some lifestyle bonuses along the way. THAT sounds like the legacy I want to leave!