Financial Freedom

So you may wonder, why do I want to get out of debt and put money in savings? What's up with that? I do some talking on here about "financial freedom" and that's my end goal, but what does that really mean?

There isn't a hard and fast definition for financial freedom but to me it means having the ability to choose where and when I work and what I do without regards to money. It also means not owing anything to anyone except the debt of love (Romans 1:14). I would like to reach the place where I can give freely to those who need it. Although I do give now, I'm not able to give as much as I'd like due to bills/debts and my limited income. It would be wonderful to be able to go well above and beyond tithe. Here are some things I dream about doing someday when I'm financially free.

1)Carry $100 on me at all times so I can give the waiter/waitress a huge tip if I get really exemplary service.

2)Whenever I go out to eat or get coffee or something, pick one or more people to pay for and cover their bill.

3)Randomly pass out money around Christmas time to whoever suits my fancy.

4)Go on to Modest Needs and help out those people who need it in my community or in certain circumstances the really touch my heart.

5)Sponsor a child or children through a deserving non-profit.

6)Hop on to a sight like World Vision and give a donation to help provide for the basic needs of people around the world. I especially like the gifts that help produce a livelihood or are multiplied many times over. For instance, there is one option where your gift of $500 will be multiplied into providing $7,000 worth of necessities for children right here in the US.

7)Be able to pay off debt for my church.

8)Adopt more families from church at Christmas time.

9)Buying an apartment or house and renting it out really cheap to a family in need, or maybe even letting them live there for free until they get their feet on the ground again.

I'm also pretty excited about the idea of not working full time and being able to volunteer my time instead wherever I feel led.

So that's pretty much it. That's my goal with financial freedom. If you're trying to become financially free as well, what are some of your goals?

I got my CISSP results

... and I Passed!! Yay!!

I know this doesn't have anything to do with the financial part of my blog but I was just too excited not to post anything.

What is Debt?

It might seem like a simple subject to some but I've heard a few different opinions on what exactly debt is. I've known some people that only count certain types of payments as debt, saying, for instance, that an auto loan is debt but a mortgage isn't. I know that some people only count "good debt" as debt. Good debt is supposedly debt that makes you money, such as debt on a rental property.

Merriam-Webster dictionary defines debt as "something owed: Obligation; a state of owing". I find this interesting as I usually think of debt as money owed to one another. Debt can really be anything we owe to someone else. In fact, according to the Bible, the only thing we should owe each other is a debt of love (Romans 13:8) but that's a subject for another post.

So, by this definition, any type of loan would be a debt. I can see how some people might say "good debt" is better than "bad debt" but I would still count each as debt.

I think that also means credit cards, auto loans, student loans, other consumer loans (deals like 6 months same as cash), and mortgages. Mortgages would count as debt since you have a house but you owe the bank money for that house.

I've always wondered if bills would count as debt too. I think that they would since you owe the provider of whatever services bills you. For instance, I know I would count medical bills and bills from my college for tuition as debt. I'd be interested to here what you think. Do you think bills count as debt?

Our Debt Reduction Plan

So far, I have talked about two different Debt Reduction Plans which are prominent among people today; Crown Financial's Money Map and Dave Ramsey's Baby Steps. Now I'd like to tell you what my husband and I decided to do.

We combined elements of both and decided to move forward with what could be considered a Hybrid debt reduction plan. We both liked the foundational principles Crown had to offer so we set about accomplishing those as soon as possible. That means that we went out and had a will written up, made sure we were in the habit of tithing, got a clear picture of our net worth, and made sure we were covered by the right types and amounts of insurance. We decided not to follow some other items that were suggested, such as contributing the match amount on our 401K. Instead, we opted for the Dave Ramsey approach in that area and threw the whole thing at debt to get it paid off as soon as possible.

Another thing we liked about Crown's plan was their first real step. Start using a spending plan (they don't like the term "budget"). I know when we started really taking a look at where our money was going it was an eye opener.

The next point under Step 1 for Crown was the same as Step 1 for Dave Ramsey, creating an Emergency Fund and putting $1000 into it. Something we did as soon as possible.

Step 2 for both types of plans deals with paying off debt and I like Crown's approach on this more than Dave's. In Crown's plan, step 2 focuses on credit card debt specifically, Dave's focuses on all consumer debt. I think the fact that this is split up into two different steps on Crown's Plan is an advantage because it makes it feel like we've accomplished more.

We also like Crown's idea of saving money in your emergency account while also paying down debt. My husband prefers to save our money while I prefer to use it to pay down debt so this solution keeps us both happy.

Just as a refresher, we're on step 2 for each plan right now. We do have our credit card debt paid off but we're still working on getting that first full month of emergency fund saved up and the rest of our consumer debt paid off. That means that our next steps are 3 and 4 on the other two plans. It's at this point that we start shifting over to using Dave's Plan more than Crown's. Just a note, these steps might change since we're not there yet but as of right now here's what our next steps are:

Step 2) Pay off consumer debt/Save up 1 month's worth of Emergency Fund.

Step 3) Save up 6 months of living expenses in our Emergency Fund.

Step 4) Max out Roth IRAs and put in the company match amount for our 401k.

Step 5) Pay off our Mortgage.

Step 6) Start maxing out our 401K as well.

Step 7) Start saving any extra towards large expenses such as our next vehicles.

We also decided to take a page from Dave's book. Dave Ramsey is all about keeping you motivated to hit a particular goal. I don't know about most people, but I at least feel like indulging myself once in a while. In order to allow for some indulgences my husband and I decided to reward ourselves for completing each step along the way. As a reward from completing our next step we plan to save up for a trip to Ireland and a Patio Door. After completing step 3 we plan on remodeling our Kitchen or Bathroom (perhaps both). And so on and so on...

Once we hit Step 7 I would say we could count our selves as financially free. It will be great to be able to give more money away to charities or pay for another table's bill at a restaurant or leave a huge tip for a waitress/waiter who did a great job. Those are just some of the fun things I look forward to doing when we are financially free.

Here I am!

Sorry I haven't posted lately. I haven't run out of post ideas or forgotten about my blog but I've been preoccupied as of late.

The last week I was out of town attending all day study sessions for my CISSP which I took last Sunday. I was so exhausted after studying all day and then more at night from homework for my bachelor's that I didn't get to posting like I was hoping to. I am planning to put up a couple more posts this week so stay tuned!