August 2008: Saving During Tough Times
This month’s e-Wealth coach is Dave Ramsey, a personal money management expert, popular national radio personality and best-selling author of The Total Money Makeover. Ramsey is also the creator of Financial Peace University (FPU), a 13-week program that helps people dump their debt, get control of their money, and learn new behaviors around money that are founded on commitment and accountability.
Dear Saver,
Getting freaked out about these “tough economic times”? All over the news, the talking heads keep blabbing about how it’s time to panic! Well I’m sorry, I’m not with Chicken Little, and we’re not handing out helmets. The sky is not falling.
I’ve been doing financial coaching for 20 years, and working with all those families has taught me that money management just comes down to making choices. Let’s put things in perspective. You may be scared to death because the cost of gasoline is up around $4 a gallon. Well, take a look at the bigger picture. Lattes sell for $55 a gallon, but I don’t see the line at Starbucks getting any shorter. Why? It’s because people are making choices about what’s important to them. I have to laugh at the thought of people sitting in an expensive coffee shop complaining about gas prices. Good grief! Go find a coffee pot at home and start sending your latte money to the gas pump!
Even if you don’t have a latte problem, you should take a look at how much you’re spending on other things, like movies, shopping or going out to eat. No matter what’s going on in the world, and no matter what you hear on the evening news, there are always some things you absolutely have to do if you want to get ahead.
·Make a plan and stick to it. You will not get ahead by accident. You’ve got to do a written budget every month, spending every dollar on paper, on purpose, before the month begins. You can make a basic budget in about 60 seconds right now with the online Quickie Budget.
Once you have a basic budget in place, you have to adjust it to what’s going on in the economy. Yes, gas prices are high, but carpooling with just one other person will cut your cost in half. Time for lunch? Reach for a brown bag. I bring my lunch from home and eat with my team every day. There’s no need to drop ten bucks on lunch five days a week!
· Get out of debt and stay out. You’ll never have any savings if all the money comes in and all the money goes out, and only the names are changed to protect the innocent! Don’t believe the lie that you have to depend on a piece of plastic to get through life! Check out the Debt Snowball to find out how to knock out your debts one by one.
And please, please don’t buy into the title pawn garbage. Military personnel are the most aggressively targeted group for payday loans, which simply infuriates me. One in five active duty personnel are payday borrowers, paying $80 million a year in fees. That’s crazy, it’s a trap, and it will destroy your financial hope. Don’t fall for it!
·Think long-term. Once you get on a budget and out of debt, you can dive into your Roth IRAs and, if you’re a servicemember, Thrift Savings Plans, so you’ll be ready when retirement rolls around. You don’t have all the time in the world, either. Every day you aren’t investing now costs you big time at retirement. If you don’t believe me, check out the story of Ben and Arthur to see why it pays to start saving early. It’s one of a ton of free tools and resources on our Military Saves site.
Don’t let the dramatic news reports scare you into making bad decisions with your money. Just be proactive—especially when times get tight. When you finally start telling your money what to do, you’ll discover a sense of control and empowerment that makes saving not only doable, but enjoyable.
For more free tools and resources, visit daveramsey.com/militarysaves.
Dave Ramsey
