I don’t know what you think about Dave Ramsey or if you’ve even heard of the guy, but I think he has some great practical advice on how to manage your money (to the Glory of God) and have financial peace in the midst of it. The biggest thing he advocates is the “Baby Steps”. If you don’t know what “Baby Steps” are see the list below. I would HIGHLY recommend following these steps!!!
Dave Ramsey advocates staying “gazelle intense” while tackling each step…especially Baby Step 2: Getting Out of Debt. What is “gazelle intense”, you ask? During the Financial Peace University class, he showed a movie clip of a gazelle outrunning a cheetah.
He likened “debt” to the cheetah, and he said that to stay out of debt you have to live “gazelle intense”. The cheetah is the fastest land animal, so “gazelle intensity” means to stay out of debt you have to run from it like a gazelle runs from a cheetah.
And, here is the reason for this blog post. While being “gazelle intense”, I’ve often wondered if I should stop putting money into extra savings, giving/tithe and investments to allow more cash to go into each Baby Step, and thus, finish with the Baby Steps quicker. I recently heard Dave Ramsey on his radio show and he talked about this subject…
He recommends that you continue tithing 10% to the church that you are currently attending while putting all para-church* donations on hold. Also, stop all additional savings and investments so you can use that money to attack the current Baby Step that you’re working on. He also said the Bible does not mention anything about “pausing” tithing. Neither does it say that we will go to Hell if we do not tithe. The tithe, which is a scriptural mandate, was not instituted for God’s benefit because He already has all the money He needs. He does not need our money.
So why does He ask us to give 10% to Him? Tithing was created for our benefit. It is to teach us how to keep God first in our lives and how to be unselfish people. Unselfish people make better husbands, wives, friends, relatives, employees, and employers. God is trying to teach us how to prosper over time. Many people have observed that after they stopped tithing, their finances seemed to get worse. In the Book of Malachi, God promises that if you do not rob Him of your tithing, He will rebuke your devourers and protect you.
If you cannot live off 90% of your income, then you cannot live off 100%. It does not require a miracle for you to get through the month. I think that if you sit down and look at your budget, you will see that you can make it while giving at least 10%. Read the Bible and take from it what you will, and if you tithe, do it out of love for God, not guilt. I do not beat people up for not tithing because Jesus certainly did not, but let me encourage you to keep tithing.
- No More Debt While not an official step, you need to swear off debt if you’re going to be able to succeed in this program. The most important part of getting and staying out of debt are having self control.Its a commitment you make to live debt free. Once you’re able to make this commitment you can move on to the next step.
- A $1000 Emergency Fund Why do we find ourselves in debt? Because we’ve needed money at different times and we didn’t have it. So what did we do? We went out and put it on a credit card or took out a loan. That’s why having an emergency fund is so important. Its going to protect you in those situations when the car breaks down, the water heater goes out, the kids get sick, and so on.
- Pay Off All Debt Using the Debt Snowball You need to create a budget and stick to it. Any extra money you have left over at the end of each month needs to be put towards your smallest debt. Once that debt get paid off you repeat the process with the next debt. Until all your non-mortgage debts are paid off and then you can take that Hawaiian vacation you’ve always dreamed of.
- Save 3 to 6 Months of EXPENSES Unless you live in Mozambique or somewhere like that, you probably realize that a $1000 emergency fund will not go very far. What if you get laid off or what if the roof needs to be repaired? There are many situations that will come up in your life were $1000 will not keep you afloat. Its during those times that you will be tempted to go back into debt. That’s why saving 3 to 6 months of your income is so important.
- Invest 15% of Household Income into a Retirement Fund 15% seems like a lot of money doesn’t it? But you have to remember that at this point you have paid off all of your non-mortgage debts and you already have 3 to 6 months income saved in the bank. So, in other words, you’re living large at this point. Now’s the time to really start concentrating on your future. Ramsey recommends investing 15% or more in Roth IRA’s and pre-tax retirement.
- College Fund for Children My parents did not pay for my college tuition, because like most parents they couldn’t afford to. I took out student loans from the government which I’m still paying for today. My parents were nice enough to support me financially in other ways, like paying for my food and rent. Thank you mom and dad. But whether or not you pay for your children to go to college is really up to you. If you do plan on doing this the time to start saving is after you’ve accomplished all of the above steps. Don’t sacrifice your retirement to pay for college.
- Pay Off That Mortgage Early A mortgage payment for most people cost 35-40% of their monthly income. Can you imagine the freedom it would give you to pay that off early? Imagine the flexibility you would have in your life. Has your wife always wanted to stay home with the kids, now she can. Have you ever wanted to trade in your job that you hate for the opportunity to follow your dreams, but you were scared because it didn’t pay as well? Guess what? Now you can.
- Build Wealth and Give It Away Now that you have all those debts paid off, you have the kids college paid for, you have your retirement funded, now you can start to build some serious wealth. Take some of your money and start investing it. It can be in real estate, in mutual funds, in index funds, whatever you prefer.Dave Ramsey advocates tithing 10% throughout all the baby steps and I agree with him on this. Personally I want to give back some of what God’s blessed me with, so He can bless others. Now whether you feel that way or not is totally up to you. But I believe we can all agree, that if we’re able to help those less fortunate than us, we should.