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Thursday, August 1, 2013

Debt Free... Tell Wells Fargo to Pound Sand.

In another four months, I will be debt free... well, with the exception of my home.  How did I do this?  Well, some old bald dude in Nashville helped me.  He gave me a system to do it and you know what?  It WORKS!  It really does.  So, who is this man I speak of?

Who here knows Dave Ramsey?  If not, here's a brief synopsis of who this man is.  Dave Ramsey is a self made multi millionaire... TWICE.  ( Twice you ask?  Yep, twice.  He got his realtor's license when he was just 18 and by the time he turned 26 he was a self made multimillionaire.   Then in 1986, the government got him.  No, not like that.  In '86 the government came up with the Tax Reform Act of 1986 and the bank that he had over a million dollars in loans with was sold to a larger bank.  The larger bank wondered why the smaller bank had given these loans to a kid with no collateral and called the loans.  Calling the loans means the you must repay the loans within 90 days.  Yeah... they CAN do that.

With no way to repay the loans that he had tied up in flipping houses he had to file for bankruptcy protection.  That means BROKE.  No assets whatsoever. No money.  No car.  No house. NOTHING.  Just a wife that loved and supported him and some clothes on his back.

So starting from nothing and unable to get a bank's help he started real estate wholesaling.  Eventually building his wealth back to pre tax act days and then some!  Today he is worth over 55 million.  What have you done in the last 30 years?  He has gone from zero to millionaire twice.  Did it go to his head?  Nope.  This guy gives away more than most celebrities earn every year.  He still eats at the local joints and is a good tipper by all accounts.  He'll even say hello to a nobody.

So, enough about him, let's talk about me for a minute.  I am about as broke today as they come... well, sorta.  Never mind the fact that I have less that two hundred bucks in my account and bills go out tomorrow.  The fact of the matter is, come December, just in time for Christmas, every dime my wife and I earn goes into OUR pocket and not some banker's pocket.  Especially not Wells Go Fargo Yourself's pockets.  Two years ago, I was $315,000 dollars in debt.  No joke.  One house in Arizona that I owed $160,000 on that was upside down by $80,000.  A $40,000 car, $35,000 in credit card debt, a $30,000 remodel loan, a relocation to the other side of the country, my property where I currently live, a wedding (those things ain't cheap!), and a newborn daughter.  That little girl is the only thing that has kept me sane, I promise you that!

So how did I get so far underwater one might ask?  Well, I ask myself that all the time!  Here's the short answer:  I was too worried about my credit score. Yep, my 790 credit score.  My pretty, shiny, unblemished credit score.  That's the short answer, here's the abbreviated long answer:  I bought the Arizona house in July of 2006 and immediately took out a $30,000 second mortgage for remodeling it.  Anyone know what happened in the next month or two of 2006?  The housing market in Arizona didn't pop... it exploded.  The house that I had just bought was worth less than HALF of what I paid for it... and I now had a second mortgage on it!  Well, nothing I could do.  After all, the market will come back right? Let's finish the remodel, that'll help bring the price back up.  Today, seven years later, that house is STILL worth $55,000 LESS than I paid for it.

In August of 2009, I went to see if I could get financed for a house on my property here.  Yep, I bought acreage that we really liked to build a house on that didn't already have a house.  We are currently living in what amounts to a one bedroom hunting cabin.  Yep, three of us in a 714 square foot, one bedroom, 3/4 bath hunting cabin over a nice garage.  The bank loan officer said we were too extended and our debt to income ratio was a bit off.  He suggested I sell the Arizona property.  I told him I had been trying to get rid of it for five years already and Wells Fargo was refusing to work with me.  He said that was normal for Wells Fargo.  He then went on to suggest I just let them have it as Arizona was a non-pursuant state.  "A what?" I asked.  He explained that Arizona was one of a few states that when you foreclose on a house they cannot by law come after you for the difference.

Fast forward a year... STILL making $1,400 a month house payments and now further underwater.  I went to see if we were any more likely to get financed for a house.  Nope.  The loan manager actually told me that I needed to foreclose on the property.  Wells Fargo had been yanking me around and when they canceled a prospective short sale because they "assumed I had sold the property because the loan shows paid in full" when in fact they had simply given it a new loan number due to a refinance and then informed me that I had to start the short sale process OVER.  I called B.S. on it and decided then and there that I wasn't sending them ONE MORE DIME.

I also decided that at that time I needed to get my affairs in order to have a wrecked credit score.  That means doing cash business.  I started looking a methods of getting on with life without credit.  I then bumped into a bankruptcy story on the internet.  The guy was talking about the nightmare that a bankruptcy causes.  Did you know that while a bankruptcy no longer affects your credit after seven years, it sticks with you for life?  Yep.  Every time you fill out an application it asks not if you had a bankruptcy in the last seven years, it asks "Have you ever filed for bankruptcy?"  EVER!  That man's site mentioned another man... named Dave Ramsey.

Full Circle

That day about two years ago was a life changer.  I read Dave's book The Total Money Makeover and here I am.  I am in the final stages of step two of the Seven Steps to Financial Freedom.  Getting nowhere fast right?  Well, it ain't a sprint... it is a marathon.  You don't have to be cheetah fast to win, just gazelle intense!
Get it?  The gazelle doesn't have to be faster than the cheetah to live another day, just more intense.  The gazelle wins 90% of the time over the much faster cheetah because it is INTENSE.  That's me.

While I won't rewrite Dave's book for you, I will give you the seven steps and a brief synopsis of each.  Maybe they can help some of you... wait, that isn't a correct statement.  They WILL HELP the majority of you!  You just need to commit to doing them with that gazelle intensity and have faith.  They will work!  If you don't want to by his book, I have read it about five times and I am a self proclaimed expert on his methods!  This WILL get you out of debt and you can live a cash only lifestyle!  (See, there is the tie in to the theme of this site!)  Read on...

Here we go!
Getting Started~  You need to sit down with your spouse and talk about this.  You have to agree with each other and commit to doing no more harm!  You gotta agree to stop borrowing money, stop using the credit cards, stop the insane spending on frivolous items, and to get current on your present bills... then you gotta create a zero-base budget.  That is a WRITTEN BUDGET that when it comes the end of the month your balance is ZERO- not one dollar left unspent!  Scary right?  Nahh... just follow the seven steps below and you'll be fine.  You just gotta have faith!

Step One:  Save a $1,000 small emergency cash fund in the next month or two.  This is exactly what it says it is.  Transmission goes out?  Need a well pump?  Those are emergencies... Christmas comes every year and is not an emergency... neither is a new purse or a new handgun.
Step Two:  Create a debt snowball.  List all your debt on a piece of paper starting with the lowest balance first, regardless of the interest rate.  If two similar balances have different interest rates, list the higher interest one first.  Change to paying only the minimum payments on every one of those other debts but the very first one.  Now take EVERY DIME you have left over after paying the necessities (food, power, and water) for the month and pay that on the very first one until it is paid off.  Now move on to the next larger one and repeat!  Keep doing that while rolling in the extra money you now have left from the minimum payment you are no longer paying.  When I started this step two years ago, I was paying less than 200 bucks to the first card... this month I will pay over a GRAND to the very last bill I have.  See how it works?  If not, ask me!
Step Three:  Create a large emergency fund that is three to six months living expenses.  This will actually be rather easy now that you are not paying a bunch of payments.  All you have to pay every month is your food, water, and lights... and maybe a phone and cable, right?  Other than that all your salary is going into this fund!  This fund is kept in a rather easy to access money market account.  Once you have this fund, you can now move into your personal savings.
Step Four:  Invest at least 15% of TOTAL household income in Roth IRA's and pre tax retirement.  Easily done now that you aren't paying any bills and you have a lot of gazelle momentum built up!  This is money that will support you in your retired life.  This happens from now until you retire.
Step Five:  Save for your children's college fund.  In step three you saved six months of living expenses in just a couple months, right?  Well, now you are taking  all that extra money and dumping it into the kid's college fund that is in mutual funds!
Step Six:  Pay off your house early! Simple as it sounds.  Now you attack this last debt and in no time it'll be gone!
Step Seven:  Build your wealth and give like never before!  Yep... live it up.

Dave's version is here:

Try it folks!  It'll change your life!