The Better Step: The Prosperity Snowball – Episode 317

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[00:01] Welcome to the Prosperity Podcast. On today’s episode of the Prosperity Podcast, we’re going to be talking about what to do after you’ve heard about this debt snowball and Dave Ramsey money makeover, and maybe the next step or we call it the better step to take. So we might be poking and prodding a bit in this episode, but I think it’s going to be good. Kim, what do you think? Well, I think anytime you bring up things that are quite common out in the marketplace and cause people to have a little different perspective, you get some good in the world, even if they disagree with you. Yes, absolutely. So this is coming from a topic that’s got a lot of emotion, we’ll say that. So the premise of this Dave Ramsey money makeover is to stop spending your money

[00:55] and then to do a debt snowball and pay off your debts and then never use credit again and then buy into that system for the rest of your life and live on rice and beans and beans and rice and all of that. And at some point, you’ll save yourself to wealth. I think, is that kind of the premise of that story? I think you’re right and it does not sound good to me. No, no, it doesn’t. I, for one, do not want to be a person that spends my life clipping coupons and hoping that someday when I’m 70 years old, I’ll have enough to take a vacation or whatever it may be. Now, here’s the part two, and this is where it all goes wrong. If you focus just on that world of cutting costs, of never using your credit card and

[01:45] living in that siloed world, you now no longer have credit. You now no longer have assets, meaning things that you’re actually doing to build up, you’re not able to leverage correctly and you’re not thinking about the future properly. So how would you take someone that’s done the savings and debt snowball, how would you take them away from that world into a more prosperous world, Kim? Well, you’ve definitely started with the beginnings, which is you’ll want to switch your mind around because while Dave may have some very valid debt reduction strategies, they unfortunately come with a very scarcity oriented mindset, a very fear-based limited mindset. And if you keep applying that mindset to your financials and to your life, then you’re going to get those

[02:35] results. And so I feel very strongly that it is so important that while you are working on paying down your debt using whatever method you want to use, you also are building up savings because part of the reason that people are often in debt, not always, is because they didn’t have savings in order to handle an emergency. If all you do is pay down debt, pay down debt, you have not solved the future problems where they are going to come. And that is whatever financial emergency causes you to turn to those credit cards. So as you do get debt paid down and you build your savings, and I’m just talking simple, like put it in a credit union kind of savings. You don’t even need to make it fancier than that. There is so much peace of mind and prosperous thinking

[03:26] that can come along with having money in a savings account that is there for your emergencies. And then of course we want to build it beyond that to where you are building dollars for opportunities as well. And yes, maybe at that point you start to involve other products to be more efficient. But just going back to the elemental level of the approach that he has of being such fear-based, scarcity-minded thought process. When you are overly focused on every single little penny, it is just down in the minutia of your personal finances. And so I really encourage people to get all your bills on auto pay, get yourself a few weeks of a breather so that you’re not having to constantly watch every single dime. And no, that’s not easy. And yes, it takes some sacrifice.

[04:24] And when that occurs, then you can get your head up and start to really look at the bigger opportunities and the more opportune times and things that will come into play for you to do with your money. And yet I really want people to build savings while they’re also paying down debt because that will put them in so much stronger of a financial position. Absolutely agree. It’s kind of strange that depending on where your financial status is, you think of money in different terms. So when you’re saving money or interacting with it, if you’re struggling, you’re typically thinking of money on a daily basis. Like I made this much money today, or I have this much savings for this amount of days. Then you graduate to weeks, then you graduate to years, and then you graduate to decades.

[05:20] And then ultimately, it’s more of like legacy. Is that how you’ve seen it as well? I would agree. And I would stick months in there between weeks and years because that’s absolutely what happens. Yeah, you skipped a calendar item there, but that’s okay. So it is so critical to get yourself into that position. And you’re right. To go from even months to years, that may take a decade. To go from years to decades, that may take two or three decades. And then, of course, to get into legacy, you’re typically going to be in your 50s, 60s, 70s aspect age-wise of your life, but not always. And as you’re well aware, we have this new book out and it’s called Perpetual Wealth. And so we’re very focused on helping families get clear

[06:06] on what they want to pass on, not only monetarily, but also in other ways, because those are important aspects of legacy also. And you can do legacy work in your 30s when you have a one-year-old child, as an example. Or in your, say, 60s, when you have your first round of grandchildren, as an example. You can do legacy work even if you’re not wanting to financially yet. But back to the Dave Ramsey idea, it’s just so important that you learn how to build wealth. Getting out of debt is getting you from negative to zero. And I’ll admit, he has some good ideas out there about that. What I want to help you do is to get from zero to one, and then one to 10, and 10 to 100, and 100 to a million. And you could put other zeros behind that. I’m just helping you see that it’s the positive climb

[07:05] that we can help people with. We can make it easy, we can make it automated, and we can make it certain. Because so much of the typical financial planning activities out there are not based on certainty. They’re based on hope, they’re based on averages, and they’re based on maybes. And that is not okay. Definitely not. And so when you’re talking with people and you’re taking them from zero to one, and one to 10, and further down that pathway, there are certain benchmarks. And we’ve mentioned in the podcast before, but it’d be nice to give a summary. So what are the benchmarks of a savings, we’ll call it that emergency fund. What do you like to set that as? Well, it’s so personal. I mean, the normal thing that’s talked about is usually around six months

[07:56] of expenses. I think it could be three or four months if you’re young and you have a salary job and you’re pretty confident that you’ll keep it. And if you own a business or you’re all commissioned, then it absolutely needs to be six to 12 months or even more. And that’s just personal expenses. As we’re well aware, businesses often also try to have a quote, emergency opportunity fund. What I do tell families though, is it’s a very personal number. And so I really encourage both the husband and the wife or partners, or even roommates, if you want to go that far to identify what that emergency number is for them, because it is truly very peace of mind oriented. And of course, as we know, it doesn’t matter what rule of thumb is out there, you’ll want to have a number

[08:45] that fits for you. And I always like to share when somebody asks me this, Oprah Winfrey has stated publicly that her emergency fund is $7 million. Well, that’s for her. I understand that she probably has the type of expenses that necessitate that. For somebody else, they could be $10,000 and everywhere in between. Okay. So it’s going to be dependent upon whomever is involved with that and wonderful advice to find that number that works for you. And then it’s now time to start adding to that asset column. So where are you going to start there? Savings. Savings is the foundation. And so whether it’s that union that started as your emergency fund, and you’re just going to keep building it for a while, because now you’re going to call it your opportunity fund.

[09:35] And of course, it’s so much more exciting to start or to keep, I should say, saving, but to switch mentally from the focus of saving for an emergency to the focus of saving for opportunities. And frankly, how big you want your opportunity fund is equal to the answer to the question, how high is up, because you want to have as big of an opportunity fund as you want opportunities. And so ideally, people will literally be funding their opportunity fund till the end of life, because you want to continue to have more and more opportunities. Plus the older we get, the more important cash and liquidity are. And then as I’ve indicated, it’s about certainty. Build your opportunity fund in a space where you absolutely positively know

[10:25] it’s going to be there. Now, yes, you can go do speculative investments. There’s nothing wrong with that in addition. And yet so many of these young kids are put in their first jobs and then told what they should focus on is saving for retirement. Good heavens, that’s 35 to 40 years away. What on earth are they doing putting an over emphasis on saving for retirement when what they should be doing is putting an emphasis on saving for opportunities? Absolutely. And I think one of the ways, and it’s a principle that you have taught, and it’s one of these principles of prosperity, that it’s the control of money, all of this money that you’re putting into some type of asset or something in the future that

[11:10] you can’t touch, that’s not liquid. Well, that’s not something that you can actually use when a wonderful opportunity comes up and presents itself. So it’s wonderful that you have that principle there in front of us to know that. Yes, I love the principles because they’re so applicable to so many aspects of our lives. Yes, to finances and to so many other things. And to me, that’s the definition or the value of a principle is we can make it applicable to lots of other things. And it helps us learn when we look at our lives and our finances and our other decisions through the lens of principles. So one thing that I admire of that Dave does well, and then one thing that I dislike, I’m going to go on these two. One is the focus of beating down that debt as much as

[12:01] possible. Now, I admire the focus. And oftentimes, and sometimes it’s not said enough, by cutting those expenses. And oftentimes, he also mentions some type of side hustle. That’s what I really want to emphasize is finding some way to earn additional money is a wonderful opportunity. And I’ve seen it happen here in town even, where someone finds the opportunity of doing a pressure washing business and taking that small amount of savings they had and buying the equipment to then start another business on the side after work. And that accelerates the amount of money that you’ll be able to save and create more opportunities. I love that. I was just talking with a Gen Z person today and saying, you know, you could be working 80 hours a week. Like, okay, you have your normal

[12:57] 40 hour job. That’s awesome. And you have so much other time on your hands. And they were just out of college and saying, I know, it’s weird. I get home at 530. And I literally have no homework. And I literally have an entire six, seven hours in front of me. And I’m not always certain what to do. And then of course, there’s a little bit more time on the weekends. And so make personal finances a focus. You said it so well, Spencer. One of the cool things about Dave is where he’s directing your focus. Even if we disagree with the where part, the focus is important. So treat personal finances as a business and study it and put some time into it. And then also figure out what you could do that you would enjoy,

[13:48] hopefully you love your regular job, too. But figure out what you could do that you could enjoy that would earn a little bit more money, it’s going to do two things for you, it’s going to earn more money, obviously. And it’s going to keep you from doing all kinds of other things that cost money and or create bad habits, like too much TV watching too much focus on social media, too much time sitting around getting into potential trouble or poor habits or other things that you don’t want in your life. And so dig around, look on the web. A favorite of mine is the website called Udacity, U-D-A-C-I-T-Y. We’ve talked about it before. Or like you were saying, Spencer, just look around in your community. What needs to be done? What problems

[14:32] could you solve? And maybe spend a little money like buying a pressure washer. That’s a great one. And or you know, go back to some of the stuff you did in high school and go find some part-time jobs, earn some extra money, have fun with it. Get your roommates, your friends, your significant others, your boyfriend’s girlfriends, spouses, kids involved and go do things that you enjoy, create that extra income, which then you can either work on paying down the debt faster and or building up the emergency opportunity fund faster. Wonderful way to say it. And you know, I think this listeners and this is kind of what’s coming into my head right now. You can follow what Dave has mentioned, and there are some good

[15:15] things there and you’re attacking the debt snowball. But what we want to help you with is the prosperity snowball. How does that work? I love it. There we go. Prosperity snowball. That’s our new TM. There we go. So for you to accelerate your prosperity snowball, one of the things you can do is continue to educate yourself and showing up here listening to the podcast while you’re driving or at the gym or even at the house is something we really want to thank you for doing because you’re currently putting that investment, that time and thought into yourself. And we want to thank you for that. Make sure you’re subscribed to the podcast. And then if you have specific questions you’d like to have

[15:58] answered on the show or even off, please send them to us at hello at partnersforprosperity.com. Thanks for listening with us today. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.