Personal Finance 101 - Live Like No One Else

Personal Finance 101 - Live Like No One Else

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.

You have zero debtincluding 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

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

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

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.