Preparing for disaster can be costly; dumping debt can make it a lot easier.

Acquiring all of the necessary gear for surviving a crisis can be rather expensive. But no matter your income there are steps you can take to free up extra cash to put toward your preps. Regardless of your financial situation, the plan I suggest will work for you. Often times people like to consider themselves the exception to the rule, and I can assure you, there are no exceptions. Whether you make $20,000 per year or $200,000, you can eliminate debt and operate on a strictly cash basis.

Borrowing money has become so commonplace in American culture that freeing yourself of all debt can seem an impossible task. However, I know from personal experience that dumping debt is both possible and completely worth the effort. Make no mistake, living debt free requires dedication and sacrifice. Through this process you will learn the art of delaying gratification, putting off short-term wants to achieve your long-term goals.

Personally, I follow the recommendations of financial guru and debt-free expert, Dave Ramsey. If you haven’t heard of Dave before, head over to his YouTube channel, or listen to his nationally-syndicated radio show or podcast. Ramsey advocates for the elimination of all your debt and purchasing only the things you can pay for, in cash. I highly recommend everyone read his best-selling book Financial Peace, which outlines exactly how to go from “normal” to wealthy using the seven “Baby Steps”.

The seven Baby Steps that Ramsey presents are as follows:

#1. Save a $1000 starter emergency fund

#2. Pay off all debt except your mortgage (if applicable)

#3. Increase your starter emergency fund to 3-6 months of household income

#4. Start putting 15 percent of your household income into retirement accounts

#5. Fund your kids’ college fund(s)

#6. Pay off your mortgage

#7. Max out retirement savings, build wealth, and become “outrageously generous”

I won’t go into the details of each step here, but you can find more information on the process by reading Financial Peace, attending a Financial Peace University course, or checking out some of the resources listed above.

What’s so bad about having some “manageable” debt?

Simply put, your number one tool in building wealth (and building your preps) is your income. If you give your income away in the form of monthly payments, the bankers get rich and you stay not rich. Debt also equals risk, and risk can really sting you if something happens to your income.

But I have thousands of dollars in debt. How can I ever pay this off?

Ramsey likes to refer to paying off debt as having “gazelle intensity”. You see, when a gazelle is being chased by a cheetah, it runs for it’s life! That’s the same mentality you should have while paying off debt, as if your very life depends upon it. Take an extra job, sell some stuff, and as Ramsey says, “You shouldn’t see the inside of a restaurant unless you’re working there”. I’ve seen families successfully pay of hundreds of thousands in debt following Ramsey’s guidance, and he has plenty of videos confirming this fact on his YouTube channel (see: Debt Free Screams).

What about my credit score?

Yes, completely eliminating debt will affect your FICO score. But if you never borrow money again, you don’t need a credit score! The credit score game is just that – a game. You pay interest to banks, in order to build a score, to earn the right to borrow more money and pay them more interest! Just think about that for a moment. There’s a reason most banks are nicer than your house.

I can’t afford to make large purchases like a new car in cash.

Buy a cheaper car. A couple of years ago I sold my beloved pickup truck, which was the last debt my wife and I owed. I then saved up and bought a 1997 Chevy Tahoe with cash, and never looked back. A car is meant to get you from point A to point B, and nobody really cares how cool you look. I told you there would be sacrifice.

What about buying a home?

Ok, this is the one area in which Ramsey gives a pass on borrowing money. If you need to buy a home, make sure you’ve saved up a solid down payment (20 percent) and find a bank that does manual underwriting. The manual underwriting process is the way banks used to qualify people for mortgages, using things like actual proof of income and references from landlords and other people you’ve made payments to. The process takes more time than a mortgage based on your FICO score, but you can still get a competitive interest rate. Ramsey also insists you never incur a mortgage where the payment is more than 25 percent of your take-home pay, on no longer than a 15-year note.

When you become debt-free, a huge portion of your income will be freed up to invest in your preparedness. Allocate a certain amount to prepping in your monthly budget and prioritize your preps to make the most of every dollar. Not only will dumping debt increase your ability to prepare for disaster, but it will eliminate much of the stress that comes with managing money.

*The Regular Prepper Blog is in no way endorsed by or affiliated with Ramsey Solutions.*


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