Debt Free BONUS!!

Last month, I did a write up of our Debt Free Scream on The Dave Ramsey Show. Dave usually asks lots of questions to shape the story in these segments. I kind of just…talked the whole time. So, with my apologies to the man himself, here are answers to questions Dave USUALLY gets to ask:

Dave Questions

Dave: “What do y’all do for a living?” I’m a corporate trainer for a health insurance company in upstate NY, Courtney is a music therapist. She opened her own practice a few years ago, and now – as a full-time mom and part-time business owner – she’s still able to bring in a nice residual income to boost the household budget. She also brings in $1,500-$2,500 selling books, music, collectibles, and other household odds and ends online each year.

Dave: “What was all this debt on?”

  1. The first $55,000 of the $197,000 was my personal debt, accumulated before I met Courtney. I had most of it paid off by the time I met her. The lion’s share was student loans and a car loan (for a brand new car I bought while making $12/hour), the rest was credit cards (including store cards like Guitar Center, where I racked up quite a balance in music gear!) and cash advances (at 24% to 28% interest!) which I took during a short period of unemployment.
  2. The mortgage on our house was the other $142,000. We set a goal early on to pay it in 5 years. We made it in 5 years and 3 months, which isn’t bad considering we also cash-flowed around $25,000 in home improvements; $5,000 in dental surgery for me; and $8,000 in baby expenses leading up to and including the birth of our son last November.

Dave: “What woke you up that something needed to change?” I talked about my cancer diagnosis in the video, and I’ve written about an earlier “Slap in the face moment” as well, but the very first wakeup call I remember was standing in line at an upscale grocery store in Manhattan Beach, California in 2004. There I was, wearing $300 jeans, but frantically flipping through my credit cards to find one with enough room left to let me eat for the week. It was the first time the mask slipped in the mirror, meaning I had to see what was real, not just the front I was putting up. I didn’t make any major changes right away, but that was when the seed was planted that I needed to get out of L.A. and get back to being REAL.

Dave: “What was the stupidest thing you did with money?” The stupidest thing I did with money wasn’t the biggest money mistake I made. I had student loans and car loans and other big ticket items like that, but the BIG stupid happened in the smaller decisions. I once talked myself into buying a $500, chef-quality set of Calphalon cookware, convinced I would cook more if I had a good set. I probably made chili with the big pot twice before it got packed away in a move and left packed when I realized I didn’t have space for it. It sat in my landlord’s garage for years, a monument to my stupidity. A few years ago, now married to a fabulous cook and living in a full-sized home, I took it out of storage and we’ve been using it daily ever since. It was a small redemption milestone, but it felt good.

Dave: “What do you tell folks when they ask how you paid off $197,000 in 8 years?” 

  1. First and most simply; the Dave Ramsey plan just plain WORKS. I’ve read every major personal finance author, and they all have you trying to do six things at once, and they all want you to “manage your debt” so you can “maintain your credit”. By focusing on the first right thing to do – to the exclusion of all else – before moving on to the next right thing, you gain momentum and get things DONE. By eliminating debt completely, and recognizing that you don’t need it (and therefore don’t need a credit score) to thrive, you bring stability to your finances and your life, which is a powerful place to plan and dream from. You make better decisions because you don’t have your negative financial history whispering in your ear.
  2. But even that great plan would not have been effective if we hadn’t learned to dream better dreams. Not bigger, but BETTER. What I mean is that I used to dream about a nicer car or a bigger paycheck or taking a cool trip. After I got sick, looking down the barrel of a 25% chance of living the next five years, my dreams changed to having more and better time with my friends and family, and the peace to truly enjoy what time I had without distraction. After I recovered, I maintained that perspective, and it radically re-shaped my priorities. Now, I wanted to live and make decisions that weren’t influenced by the debt I accumulated or the bills I had to pay. Once those dreams were in place, our goals became far more inspiring and motivating, which made what I would have thought of as sacrifices (like cancelling cable and cell phones, skipping vacations, and downgrading in car) feel like opportunities, and the work (like multiple mortgage payments) felt like a game we enjoyed playing every month.
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Debt Free and Free to Be!!

Imagine standing in front of a camera, talking to your personal hero about a major life milestone, knowing that your image and story are going out across the entire nation in front of an audience of millions. Think you might be nervous? I was nervous. I was unsure-I-wouldn’t-pee-myself nervous (I didn’t). I was quite-sure-I’ll-mess-up-my-own-story nervous (I did). But in the end, October 7, 2015 was a perfectly imperfect, rollicking, exultant day that we’ll never forget.

As I promised in our recent Five Year House-iversary post, we have completely paid off our 30 year mortgage! Our last payment was Oct 1, and we are 100% DEBT FREE!! Since we’ve been following the Dave Ramsey “Total Money Makeover” program together for five years – and on my own for a few years before that – we’d been planning all along to take a trip to Nashville to be on Dave’s radio show to do our “debt free scream” live on the air (a show tradition) when the deed was finally done. And that’s exactly what happened.

Well, not EXACTLY exactly; check out the video below if you haven’t seen it yet, and then I’ll tell (and show) you the rest of the story.

YouTube Thumbnail

It Takes a Village: Did you notice the lobby looked pretty full? Half of those were other students in the financial coaching class I was there for, the other half were members of Dave’s “SmartDollar” team, who run the corporate financial wellness program I spearhead at my employer. I was extremely touched that so many of them took time out of their days to come down in person to meet me and celebrate the moment!DFS CrowdDave Ramsey – Amateur Massage Therapist: Right after my call, Ken Coleman – the onsite host of the show – pulled me into a short interview about SmartDollar in the gift shop. Dave usually comes out to meet the debt-free screamers, but since I was sitting down with Ken, he settled for a quick congrats and a shoulder squeeze. A Dave Ramsey shoulder rub? Now THAT is a good story!

Dave Back RubSigning The Wall: One cool thing every debt-free screamer gets to do is sign the wall in Dave’s lobby after their segment. I signed ours “Debt Free and Free to Be!” That message – and the title of this post – comes from an inscription Courtney put in the copy of The Total Money Makeover she bought me (up til then, I’d just borrowed it from the library). It was her way of telling me; “I’m with you honey! We can do this!” It’s become our rallying cry on our financial journey.

Debt Free Wall - Focus (narrow)

What Comes Next: Writing this now – one month after we made our final mortgage payment – it’s just starting to hit us that this is REAL. It’s probably because it’s the first of the month again, but this time there’s no mortgage payment to make! That’s big for us, since we haven’t just been making regular payments; we’ve been paying triple, quadruple, quintuple – or more! – payments for the last five years. Now, we get to move on to the GOOD stuff! Sure, there’s some financial items: We plan to max out our son’s college fund along with our various retirement plans each year; we’ll definitely be increasing our charitable giving; and – of course – start spending a little (okay, a LOT) more on “fun”! We’ve even got a list; electronics, home improvements, trips, etc. But more valuable than any of that is the sense that we are truly free.

I’ve said it before half in jest that after the house is paid off I could meet all of our household bills with a part-time job at a gas station. That’s not my career plan, I enjoy doing work that matters, but that knowledge frees something up inside you that you never even knew was there. I’ll never have to tell my son I don’t have time to go camping or play ball or something else that matters to him. I’ll never have to take a job I hate – or keep one – because I can’t afford to miss a paycheck. We can pursue our passions, take time off, or start new a new venture; risks I never would have considered when I was badly in debt and stressed to the max.

I can’t thank my wonderful wife, Courtney, enough for all the belief, support, and hard work these last five years. And for the love. Thank you for that, honey, and the new little life that gives us all the inspiration we’ll ever need to follow our hearts; truly free to be!

by Andrew

Group photo by Courtney Navey – Art Director, The Lampo Group

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Charts, Lies, and Student Loans

A good friend of mine recently linked on Facebook to a chart from Stomp Out Student Loans illustrating how many hours per day a student would have to work to pay for tuition at Yale while making minimum wage, both in 1970 and 2014. I know he means well, but this is a stupid, stupid chart.

Here’s the SOSL original:

SOSL Chart

Chart from Stamp Out Student Loans (

I created a “rebuttal chart” to balance it out:

DTP Chart

The “DTP” rebuttal chart (

The SOSL chart is trying to illustrate that working your way through college is literally a thing of the past. But it seeks to do so by presenting a laughably skewed view of the issue. The idea of paying for one of the most expensive schools in the country while making the lowest possible hourly wage is just idiotic. Anyone with common sense should recognize how ridiculous the idea is without an infographic. Fortunately, reality is not so limited!

Yes, college prices have outpaced inflation and wage growth over the last 45 years. So have housing prices, car prices, and the cost of a gallon of milk. But that doesn’t mean that the ONLY way you can go to school is with student loans!

  1. SAVE! Simply put, parents can start saving for college early. Teenagers can start working in the years leading up to college. Yes, saving money can be hard.
  2. PICK AN AFFORDABLE SCHOOL: If funds and incomes are limited when the time comes, choose a state school (in YOUR state) or community college and/or live at home.
  3. MAKE MORE: Don’t accept that minimum wage is the only option for a working student. Students can start businesses doing laundry, babysitting, mowing lawns, or providing moving services for other students and local residents. All of these pay WAY more than minimum wage. Heck, they could work at a restaurant or even deliver pizzas and make more than that in tips!
  4. APPLY, APPLY, APPLY! Don’t forget about scholarships! Beyond academic and athletic, tens of thousands of dollars of scholarships from private businesses, non-profits and community groups go unclaimed each year. A prospective student can make exponentially more than minimum wage spending the summer before college (and breaks between semesters) filling out applications and writing essays.
  5. MISCELLANEOUS: Work-study programs, working for an employer who pays for college in exchange for a work agreement, ROTC, or even enlisting in the military are all valid ways to pay for college without debt. They aren’t all easy, and they limit your choices somewhat, but they get the job done and WITHOUT debt.
  6. WAIT: If all else fails, take a semester or two off and build up money and keep applying for scholarships. You might start a business that lets you save more than you thought, and it will surely look better on future job applications than fresh graduates with no work experience!

QuoteThe common element here is planning ahead and being real. If your parents didn’t save money and you haven’t been working or getting scholarships, you probably aren’t going to Yale and frankly don’t deserve to. It’d be like going to a car dealership with $1,000 and expecting them to give you a $50,000 Mercedes because you’re a nice person.

But the good news is: Yale isn’t necessary! There are fantastic state and community colleges that cost a fraction of Ivy League schools. The degrees from these schools are just as legitimate and just as valuable in the marketplace for most employers and career fields.

Keeping it REALLY Real: Far more often than not, students are taking student loans – not to get a quality education – but to pay for an expensive and/or out-of-state school their friends (or boyfriend/girlfriend) went to, or to live in a dorm, or to buy a car, or to not have to work and have more time for “extra-curriculars”. There’s nothing wrong with any of those things inherently, but if you can’t afford them, don’t kid yourself about what you’re really borrowing for.SL timeline tag

The SOSL chart ends with the line; “Share if college shouldn’t be a debt sentence in America…” It’s a very clever line, and one I agree with in spirit, but they don’t seem to be presenting solutions, other than looking for the government to wave a wand and remove everyone’s debts. But besides that not being how the real world works, if you’re content to sit in the waiting room of governmental inaction to fix things for you, I hope you brought LOTS of reading material. For nothing else but expediency, you’re better off taking matters into your own hands.

Rich or poor, everyone CAN work their way through school without the burden of debt. It’s all a matter of making the choice to find a better way.

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The “Emergency Roth” Fallacy

In the last year, a dangerous fad has taken root in mainstream personal finance theory that I’ve dubbed the “Emergency Roth” (trademark pending). The basic premise is to use a Roth IRA to save an emergency fund. I don’t know where it originated, but this idea is being parroted by many herd-following financial writers (see the list at the bottom of this post). But as is often the case with these trendy financial sound bites, the inconsequential upside is being loudly touted while the potentially huge downside is completely ignored.

Roth no equal EF 2Before I break it down, I’ll let Erik Carter at (“10 Common Money Management Mistakes That You’re Probably Making”) explain the basic concept:

“One of the best places to start [saving for emergencies] is in a Roth IRA. That’s because whatever you contribute to a Roth IRA can be withdrawn tax and penalty free for any reason at any time and whatever you don’t withdraw grows to be tax free after age 59½. This way you can build an emergency fund and save for retirement tax free at the same time. Just be sure to keep the money invested somewhere safe and accessible like a money market account or fund until you have adequate emergency savings elsewhere.”

Too Good to be Intelligent: There are four major problems with this strategy:

Header 1
The entire purpose of a Roth IRA is to grow your investments free of taxes. Who cares about saving taxes on an account earning 1%!? You can only save $5,500 per year per person into a Roth IRA ($6,500 over age 50). At 1% interest (above average for a money market) that’s a whopping $55/year which — at a 25% tax bracket let’s say — results in an annual savings of $13.75…THIS is their big game changer?

Header 2
Yes, you can access contributions into a Roth without penalty at any time, but when you do an insidious and overlooked trap closes on you: Once it’s spent, that year’s contribution limit, and tax-free growth potential, are gone. Emergencies happen, and if this is your emergency plan, you will tap into it.

Header 3
So now we know the benefit is almost negligible, and you can’t replace money you pull out. Those are bad, but at least it’s complicated and vague! None of these authors tell you how this works in your overall plan, but after reading several of these, I have an inkling of what the end-to-end process should be:


Header 4
So it’s ineffective, complex, and vague, and its success (paltry as it is) hinges solely on repeated manual intervention. For the average American worker with Roth access, that’s just not going to happen. First, the idea assumes there will be money left (just earmarking the funds for emergencies makes that less likely than if it were earmarked for retirement). Second, it assumes the person will be proactive enough to set up additional, non-Roth emergency funds later, and THEN remember to come back and change the investments in the Roth to reset it for retirement. It all adds up to a lot of work, and unnecessary risk, for almost zero upside.

A Conga Line of Dumb: Saddest of all, the trend is growing: Money Magazine, US News, Forbes, The Wall Street Journal, Investopedia, the Seattle Times,  and even Suze Orman (in her most recent PBS special) are now championing this nearsighted tactic (a short list is below, there are many more). I have to wonder if their jobs are to simply read and regurgitate from some common financial feed like lab mice at a pellet dispenser, or if they are  so desperate to put out something, anything new that they don’t bother to critically examine a new concept, instead jumping on any bandwagon with both feet to beat the next three sheep in the flock to print.

The Bottom Line: Yes, there is an infinitesimal mathematical benefit to be gained with this tactic, but it trusts to multiple steps of manual intervention for the follow-through to make even that pittance work. More dangerously, it gives the illusion of doing two smart things at once (saving for emergencies and saving for retirement), but at the result of doing both of them poorly.

My recommendation — as usual — is to keep things simple: Save first for emergencies in a savings account or money market, and STOP when you have enough (3-6 months of expenses). THEN start investing regularly for growth in your Roth IRA, 401(k), and/or other tax-advantaged options available to you. Oh, and get out of debt before you worry about retirement investing. The fact of the matter is that the number one reason people raid their retirement accounts is DEBT, with emergencies as a close second (TIAA-CREF,  “Should You Borrow From Your Retirement Plan?“). So becoming debt-free and building an emergency fund isn’t just a great way to reduce stress and instability from your finances, it’s bona fide retirement insurance. And that’s not a product you can buy, it’s a foundation you build for yourself and your family.

Article List:

  1. Money Magazine, July 2015 issue: “Never Worry About Money Again” (p. 44, under Put Your Roth IRA on Double Duty) by Carla Fried, Ian Salisbury, and Taylor Tepper
  2. Forbes:10 Common Money Management Mistakes That You’re Probably Making” (under mistake #5) by Erik Carter
  3. US News & World Report MONEY:Can a Roth IRA be Your Emergency Fund?” by Miranda Marquit
  4. WSJ:Keep Emergency Fund in Cash or Invest?” by Andrew Blackman
  5. Seattle Times:Roth IRA can be a backup emergency fund” by Gail MarksJarvis
  6. Investopedia:How To Use Your Roth IRA As An Emergency Fund” by Amy Fontinelle
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Five Year House-iversary!

I’ll start this post off with two words I’ve been waiting a long time to say. They aren’t the BIG words we’re looking forward to (that being “D-E-B-T-F-R-E-E”) but they’re mighty important all the same. Those words are; “Four Digits”. As of our July 1 payment, our mortgage is below the hallowed $10,000 mark at last!

Happy Little Roadblock: This month was our original goal for paying off our home, but as I wrote in our Four Year House-iversary post, finding out we were expecting in April last year made us decide to slow things down a bit as we prepared for the added expense of a new baby (or the “happy little roadblock” as I called it) and the reduced income of Courtney moving to full-time mama. But that’s the thing about goals; goals exist to motivate you and help keep you on track, but they shouldn’t cause you stress if the honest need arises to shift them. We set a new goal to finish paying off the mortgage by the six year mark (July 2016), but it looks like we’ll probably hit it this year!

It’s NOT About Income: We get asked a lot; “How are you doing this?! NO ONE pays off their house that fast!!” If we weren’t already doing it, I’d ask that question myself. It almost seems unreal to me, something only “rich” people do, but that definitely isn’t us! We haven’t won the lottery or received an inheritance. We make good but not huge money (our combined incomes total under six figures). I believe anyone can do this if financial freedom is on your bucket list. But nothing this big happens accidentally, and pure discipline won’t cut it. Motivation trumps willpower, and a plan gives that motivation a track to run on:

  1. BlueprintThe Plan: We purchased our home in July of 2010 on a 30-year, fixed rate mortgage. Being debt-free in five years gave us a finish line of July, 2015. Beginning with that end in mind, I ran the Amortization Calculator on our bank’s website to see how much extra per month and per year we’d need to average to meet the goal.
  2. gear-hiThe Process: With the big numbers in hand, we could calculate our monthly budget precisely, making cuts as needed. With the average monthly amount figured out, I use the bank’s online portal to make our payment and add the extra to principle (it would work the same with a physical payment book), always striving to hit above the average to give us extra cushion for lean months.
  3. Thermometer narrow 2The Motivation: It was daunting to think about making triple or quadruple payments (our largest to date was NINE TIMES our monthly principle and interest!) every month for five years. So for extra motivation, I write these “House-iversary” posts each summer (see Year 1, Year 2, Year 3, and Year 4 if you’re curious) to keep us accountable and celebrate milestones. Courtney even created a physical “Mortgage Thermometer” to hang on our refrigerator that lets us peel off the debt as it’s paid.

Show Me The Payments! “That’s all nice in theory,” you say. “But what about the MONEY? How were you able to make those massive, budget-cracking PAYMENTS?!” As I said, we don’t make huge money, but three fundamental steps made it possible while still having a life:

  1. Debt-Free NeonGet Debt-FREE: We were totally debt-free before we bought the house. By eliminating all other debt, our income was set free to apply to our big goal. Removing the debt also gave us the flexibility to roll with any emergencies that came up without jeopardizing making our mortgage payment. And that’s a nice feeling when you’ve got a 30-year debt hanging over you!
  2. bag_of_moneySave BIG: We saved up a 20% down payment. A large down payment meant our interest rate was lower, our monthly payment was smaller and – by making it 20 percent specifically – we didn’t have to pay Private Mortgage Insurance (PMI) which, for those not familiar, is the homeowner ensuring the bank for their mortgage. No thank you.
  3. house money 2Buy SMALL: We bought a conservative home. Our base payment is just 20 percent of our combined after-tax income, including taxes and insurance. Sure, we got approved for twice as much, but a less expensive house ensured the payment would be one we could make easily, and double up on without trouble.

And that’s it, no tricks! In a nutshell; we envisioned our goal, set the stage for success and created a plan, and then proceeded to live it every single day, setting milestones and motivators to keep us on track. Stay tuned for the big payoff, coming THIS FALL!

By Andrew

The Disclaimer: Remember, this goal is just one step on our overall financial plan— one that took us years to accomplish. I do not recommend paying extra on your house until/unless you have gotten rid of all other debt (yes, including ALL student loans and car loans), have a comfy cash emergency fund (three to six months of expenses is good), and regularly contribute to retirement and kids’ college funds (if you have kids). Until then, the tax deduction on mortgage payments and the low interest rates push it to the end of your fiscal priority list. (PS – If that sounds like a concise summary of Dave Ramsey’s Baby Steps, you are an astute reader!)

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Star Wars Day Lessons From Dave “Yoda” Ramsey

In honor of May 4th, Star Wars Day, I thought it would be fun to tie Dave Ramsey — our financial “Yoda” — to The Force, Wookies, and blowing up the Death Star.

Dave 'Yoda' Ramsey 2 (glow)

Beware the “Debt Side”: Debt is like the Dark Side of The Force; it’s a tempting shortcut to get what you want quickly and seemingly easily, but it’s fraught with danger and the possibility of losing control. Debt only works when everything else works out perfectly, and how often does that happen?! Plus, debt can destroy retirement accounts faster than the Death Star blew up Alderaan!

Find Your Chewie: Han Solo’s furry friend Chewbacca epitomizes the loyal, supportive companion, just like a good financial accountability partner. Find someone who understands what you’re doing, and will help you stay the course when you’re in danger of straying. They should be willing to “hurt your feelings for your own good”…but let’s draw the line at pulling the arms off of droids who beat them at chess!

Blow Up Your Budgetary Death Star! In The Total Money Makeover, Dave talks about his great-great-grandfather who worked as a logger. Sometimes when the river was jammed up with logs, the workers would literally dynamite the mess, sacrificing some trees to get the rest moving again (read the full Logjam Excerpt here). If you are having a hard time finding room in your budget to pay off debt or save, think about what “dynamite” you might need to throw. Cancelling cable, downgrading cell phone packages, or maybe having a big garage sale or opening an eBay store are places to start. If want to take it to the next level, you might sell a too-expensive car and buy a beater or take public transit or — the thermal detonator of budgetary bombs! — sell a home you can no longer realistically afford and rent cheaply for a time. It’s up to you, just remember that the more deeply you sacrifice, the more quickly you’ll start to win! For those of you interested (or already on Dave’s plan) use Dave’s Recommended Percentages worksheet to see where your expenses might be out of balance, and give you some ideas of where to start.

by Andrew

Note: originally posted in my employer’s SmartDollar wellness blog.

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Curtains and Calzones: Baby Prep

Though we still have roughly 7 weeks to go before Baby arrives, I can’t seem to stop preparing for their arrival. I’m on a roll and pregnancy can’t stop me now! On top of the continuous nursery prep, I’ve decided to plan ahead and make as many meals to store in the freezer as my increasingly sore feet will allow. Many of you know Andrew and I are not inclined to eat out very often due to frugality and overall deliciousness that a homemade meal can only provide.

After sewing curtains for 3 out of 5 windows in baby’s room (NO PATTERN REQUIRED!), I decided to make 8 Broccoli and Cheese Calzones with homemade pizza dough (dough recipe courtesy of Sister), perfect for my freezer meal needs.

Over the past few weeks, I’ve also made 6 Primavera Lasagnas…

6 Mushroom, Spinach and Onion Quesadillas…

And a big batch of my famous Vegan Quinoa Chili (not pictured). All of these freezer meals will make life (and food prep for Andrew) a little easier AND we won’t have to eat out too often to get the necessary nourishment we’ll definitely need for what’s to come.

Tomorrow’s agenda: finish remaining curtains in Baby’s room and make two 9.5″ Spinach Pies for freezer!


by Courtney

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