Home > Personal Finance > When Finance Is More Than Head Knowledge

Keep your calculators and spreadsheets away. If you think I have something brilliant to share this week, you might be disappointed. As you have known me by now, nothing that I will share with you will seem to be too brilliant until it would knock you off the chair you are sitting on. I'm always about keeping it simple. So, this post is not about interest rates and mortgage calculations.

I read this post, Where Dave Ramsey and I parted ways this morning and it got me really edgy. Good edgy I guess. If you follow my blogs at all, you know I dedicate a life to assist people get out of financial bondage. I believe you cannot truly became what you are called to be until you first release yourself from debt.

In the post above, this is where the author and I have a respectful disagreement:

• In his example of 2 debts ($2,000 HELOC loan at 6% and a $10,000 car loan at 5.5%), he suggests that it is a better idea to pay off the car loan first since the HELOC loan is tax-deductible. I respectfully disagree.
• He differs in Dave Ramsey's opinion on investing 15% in retirement across the board. He feels that the older you are, the more you should sock away for retirement.

So, here's my commentary based on what the author has to share:

Dave Ramsey teaches in Baby Step 2 to pay off the smallest debt first, not the highest interest. It's called the Debt Snowball. You pay off the smallest debt, get that out of the way, then transfer the "momentum" of the last debt paid off, to the next debt. Over time, you gain enough momentum to pay off ALL your debt.

In Step 4, Dave Ramsey teaches to invest 15% into retirement savings. He doesn't want everyone to have a paid-for house but nothing else to show for. Based on what I know about general America (this is not from studies or surveys), that most America don't save enough for retirement. Many people have to work in their "Retirement" age. My friend at my corporate job once told me that I would find his corpse on the desk one day. There is no retirement for him. My rebuttal for the author above is this: We don't necessarily need to play with any type of investment sophistication. After you have a paid-for house, you could invest everything in your retirement if you want to. I'm not worried about the future if I have problems TODAY.

If getting out of debt is about head knowledge, we probably will not be in the credit mess we are in. "Buying now even if I didn't have the money" mentality has not served anyone any good. It's just sad that too many people have believe that borrowing your way through life is the norm and it's acceptable. Again, if getting out of debt is about mathematical equations, how could anyone agree to pay 18% in credit card interest rates in the first place???

Forget FINANCIAL SOPHISTICATION. Instead, lean on discipline to see you through the finish line (out of debt)! It requires hard work and persistence. It requires saying alot of NO(s) before you can one day say Yes again. Did you hear me Loud and Clear?

One thing that people often fail to accept: Life always happens. You had great intentions to pay off your 0% balance transfer credit cards and to pay off the couch you bought at no zero interest for 3 years. You really believed the Realtor(R) and Loan Officer when they said you will have an increase in salary in the coming years, so it's okay that you sign an adjustable interest rate mortgage today because you will be making more. But as far as I know, everything has gone up in price except for salaries and wages over the years. The mortgage interest rates are also adjusting upwards coincidentally. I'm sharing this with no heart to push you down further than you already are. But life do happen and it always does. I have seen enough in life not to count on things that could/would happen. I make provisions on what I have TODAY.

Getting out of debt is about BEHAVIOR MODIFICATION. It's about changing the way you think and the way you live. Stop analyzing your way out of debt with financial calculators. So many parents tell me that they are away from their kiddos too many hours in the day. Hence, working an extra job is not feasible. My thoughts were, So you rather fumble through life in debt the rest of the way instead of tightening the ship, make very painful sacrifice for a year or two and never have to go through the pain of not seeing your children again? There are some potential jobs: delivering newspaper at early bird hours, or cleaning offices at midnight that you could possible do without taking time away from the children. Please don't tell me you need your precious 8-10 hours of sleep then. For single parents, I feel for you. But if you would make some short sacrifices in your life, you don't have to live like that forever. Get help from family and friends to watch the kiddos. If you believe that you are doing good for the kiddos, this sacrifice is only temporary.

Drop your child-like mentality and realize that pain doesn't have to be forever. But if you choose to meander your life away, you will always live a life full of mediocrity. I know you are better than that!

It's not about the interests, it's not about the tax deductions and it's certainly not about sophisticated finances. It's about going back to the basics. Living below your means. Sacrifice a little for a while so that you can have a full life ahead of you like it's intended to be. It's about changing the way you look at finances and it's about changing your lifestyle.

Some awesome Dave Ramsey quotes that I enjoy:

• Live like no one else, so later you can live like no one else.
• Act your WAGE!
• You may not be what you drive.
• I make myself RICH by making my wants few.

Related Articles:

• Unconventional Financial Advice for Newly Weds
• Stop Talking About Monthly Payments
• Even if you are on the Right Track
• Buying For All The Right And Wrong Reasons
• Can Dave Ramsey Principles Work for All America?