On March 10, 2007, Sgt. 1st Class Reno Peterson and his wife, Lisa, made a rash decision. They decided to live on their income, within their means, and stop buying on credit.
They faced up to their $145,000 debt — including $40,000 in credit card debt, $25,000 in vehicle loans, $9,000 in student loan debt, a loan for a swimming pool, a loan against Reno's Thrift Savings Plan and other debts.
Now, the Petersons, who live in the San Antonio area, are on track to wealth. In one year, they have paid off $95,000 in debt — including $15,000 of the credit card debt, the vehicle loans, the TSP loan and the student loan. They also sold a rental house and paid off the mortgage on that property, applying the $23,000 profit to their debts.
They set goals, made plans to get to them, and are taking no detours. In less than two years, they will pay off their remaining $50,000 debt, leaving them debt-free except for their mortgage.
The idea of Military Saves Week, which began Feb. 24, is to get members of the military community to explore ways to become financially secure.
The Peterson family's story proves that you can whack a lot of debt by buckling down with a long-term commitment to a lifestyle change. Lisa Peterson works part-time as a registered nurse, and they are already teaching their two daughters, ages 2 and 4, about wise spending habits.
"We thought we were living like normal Americans, and we were right — it's normal to be broke," Reno Peterson said. "But I want to be weird. I want to be really weird."
Weird in a good way. "We no longer worry about how to make the car payment," he said. "We no longer have money arguments."
In 2007, the couple attended a seminar conducted by Dave Ramsey, a nationally syndicated radio talk show host and author of "The Total Money Makeover."
It clicked for the Petersons. Within a week, they had cut up all their credit cards. They use a debit card when necessary, such as shopping online.
They set up a budget using an envelope system — twice a month, they put money into envelopes designated for groceries, gas, entertainment, restaurants and spending money.
They use cash for these expenses, not checks or debit cards.
"We actually see the spending," Peterson said. "If the money in the entertainment envelope is gone, we don't rent movies" until the envelope is replenished.
"Honestly, the very first step to becoming financially stable is living on a budget," he said.
Part of that is tackling the issue of want vs. need.
"That leather jacket in the store window became a want, not a necessity," Reno Peterson said, adding that he now packs a lunch several times a week, and takes advantage of specials and coupons. "We sit down two or three times a month and go over how the money is being spent. It's enriched our lives."
Using Ramsey's advice, the Petersons first saved $1,000 to create an emergency fund to cover car breakdowns, to avoid having to use a credit card.
Then, they listed all their debts, from smallest to largest. Ramsey's advice is to make the minimum payment on all but the smallest debt and put all money into paying that off. Once that is paid, apply money to the next largest debt and so on until the debt is demolished.
Some experts advise tackling the debt with the highest interest rate first, but Ramsey contends there is a psychological boost in getting some debts paid off quickly.
"In eight years, we'll be able to put away $6,000 a month toward retirement," said Reno Peterson, 36.
Ramsey's Web site, http://www.daveramsey.com">http://www.daveramsey.com, offers a lot of free tips and advice. More than 10,000 military families have taken Ramsey's Financial Peace University classes, his spokeswoman, Beth Tallent, said. The course is offered at a discount to service members, but the cost varies by installation, she said.
The military community offers many ways to get free personal finance and debt management advice. Some places to start:
• Personal financial management advisers, generally found through installation family centers.
• Military OneSource, http://www.militaryonesource.com">http://www.militaryonesource.com, (User ID: military; Password: onesource) or toll-free at (800) 342-9647. Ask your question, or get material on a variety of topics, 24 hours a day.
• Military credit unions and banks, which have agreements with installation officials to provide free financial education to service members. Military-affiliated financial institutions outside the gate also offer budgeting and other personal financial planning help.
• Military relief societies, which can provide budget counseling along with, and also interest-free loans or grants for emergency assistance.
— email@example.com?subject=Question from ArmyTimes.com reader">Karen Jowers