By Morf Morford
Tacoma Daily Index
Dave Ramsey is a classic American success story. Where else could someone achieve wealth and a fair degree of fame by helping others get out of debt?
His premise is very simple, if not fundamental; first, if you are in debt, you are in bondage. It doesn’t even really matter how much. Second, you should do anything you can to get out.
It’s a basic, easy to understand ethic, one that hits home for far too many of us.
The American dream of home ownership, going to college, driving that late-model car and having the latest gadget have all been massive drivers, not of success, but of debt.
People may not see our paychecks, but they do see where we live, what we drive and where we, or our kids, go to school.
It’s the ideal petri dish for cultivating debt.
And then we have a little glitch – or, as in 2020, a huge one.
The tipping point from debt to personal catastrophe can be hard to see – especially when we are in motion in terms of career and financial stability.
But it is all too obvious in the rear-view mirror.
We will all have economic hits of some kind on a semi-regular basis.
Dave Ramsey, for example, insists that each one of us has (at minimum) a $1,000 emergency fund.
The premise is that an emergency fund keeps a small crisis from turning into a life-changing catastrophe.
Here’s an example; I worked for a while with a home for those in transition from homelessness to (relatively) established stable housing.
These were families who had a series of bad situations and decisions, from domestic violence to eviction. Some made “bad decisions,” some didn’t. Some were financially “responsible,” though most were not.
There were some basic principles of financial management, if not stability, that most of them did not seem to know.
An emergency fund was one of them.
I knew one family that had one car. They needed it for everything from doctor’s appointments to work to social service visits.
I noticed one day, as I was leaving work at the end of the day, that the rear window was open.
I didn’t think much of it, even though I knew rain was expected.
The next day it was still open. And the next and the next.
As a middle-class person, I had a home waiting for me. So did my car. Even if my car window were broken or left open, it would still be dry, at least overnight.
Not so this person’s car.
They could have put a tarp over the car. If they had one.
But apparently they didn’t.
The car sat out in the parking lot, day after day. Getting wetter and wetter each day.
Eventually, in fact after just a few weeks, mold started taking over the back seat.
And then the floor. And then the front seat. And then up the doors.
And after a few months, the car was unsalvageable. Rust and mold were everywhere – the car was rotting from the inside out.
I don’t know what happened to the family, but their sole mode of transportation disintegrated in front of my eyes.
And it didn’t need to happen.
A simple tarp, or a call to AAA, could have saved that car and that family.
I don’t about that family, but I certainly learned a lesson – small problems only get larger and eventually all-consuming.
Good decisions also grow larger. Those small habits like saving money or setting up a reserve “emergency” account can save a vehicle, or a home or a relationship.
For a family on the financial edge, a flat tire or a broken window can set in motion a series of catastrophes that could to job loss, eviction or worse.
I saw this over and over. The smallest difficulty, from flat tire to sick child, could lead to missed work, job loss, eviction and often, homelessness and a wrecked credit report.
I had never thought about it before, but being financially stable really meant layer after layer of defenses against these daily assaults on our finances.
To be middle class is, almost by definition, to take care of what we have. We either fix it (nearly) immediately or hire someone else to fix it.
If we have a leaky faucet, for example, we fix it, or have it fixed, right away.
Poor people either don’t or can’t.
They may not even notice it. If they have two or three jobs – or two or three kids – a dripping faucet would never be a high priority.
But, as homeowners know, the drip will not fix itself. In fact it will only get worse.
And as every homeowner also knows, it will get far worse at the worst possible time; the middle of the night or a weekend. Or a holiday.
And that simple neglected leak will cost far more, and cause vastly more damage than we could have imagined.
I know of little leaks that broke open, flooded the house, damaged appliances and furniture and led to thousands of dollars of damage, sometimes even to the point of destruction of the house: all of which could have been prevented with a few minutes and cheap washer or faucet replacement.
Debt is the same way. A little bit of debt gets larger and more unmanageable over time, eventually becoming a catastrophic wave that overwhelms a family. Or business. Or nation.
A reserve fund for a family or a business or a nation can be a life saver.
Dave Ramsey is not really my style when it comes to money management. But my philosophy when it comes to money (and everything else really) is that I want to learn from everyone.
If you learn just one thing from him, or from this article, remember this – a reserve fund can save your car, your home and maybe even your life.
Leverage and momentum can make or demolish your financial goals. Make sure they both work for you and not against you.