You can’t avoid taxes! They are a fact of life. But there is one tax you can avoid—the “stupid tax.” It’s the price you pay for doing foolish things with money. You work too hard for your money to tax yourself by not managing your money.

Many of us live paycheck to paycheck. We tend not to save for “a rainy day” so when there’s an emergency, we end up using those easy-to-get credit cards. Even when there is not an emergency we use them. After all, who knew that Christmas was coming? Who knew that the kids would outgrow their clothes?

Dave’s Story

After building a net worth of over a million dollars in the real estate business, Dave Ramsey lost everything. He was making $250,000 a year, but he had a mound of debt; he ended up losing everything. He then went on a quest to find out how to handle money the right way – God’s way.

He and his wife, Sharon, started again; this time determined to win with money by applying God’s principles. Along the way, he began helping others, forming Ramsey Solutions in 1992 to counsel people who were under financial stress. He wrote his book, Financial Peace, and started a local radio call-in show that is now nationally syndicated.

Ramsey teaches the Seven Baby Steps to Financial Peace. They are designed to be followed one right after the other. The first step is to create a cushion between you and life. Things are going to happen. But if you have an emergency fund, you can take care of those surprises in life rather than going into panic mode.

Creating a Budget

One of the most important keys to financial peace and success is to know where your money is going each month instead of wondering where it went. Sit down with your spouse (or an accountability partner if you’re single) and do an assessment of monthly household income and expenses. Put it on paper. You need to see where your money is going each month.

Starting now, you need plan where your money will go each month – all of it. The old maxim is true, “We don’t plan to fail, we fail to plan.” You decide where the money goes and then you follow the plan – every month.

Tip: You are not going to get it right the first month or even the second or third months. It will take you about 90 days to get a feel for this so give yourself a break and don’t give up!

Balancing your checking account

One of the things that can help you stay on track is to reconcile your bank statement every month. Why? To make sure you and your bank agree on how much money you have in your account. You can’t spend money twice. Keeping up with where the money goes will help you avoid another stupid tax—overdraft charges.

So here’s how to do this: Write every transaction down in your checking account register or spreadsheet and keep a running balance. Then check your account statement each month and compare your records with it. Be sure to add bank fees and service charges to your records. Add any deposits and subtract any expenditures from the account statement’s ending balance that haven’t cleared the bank yet. Make sure both records match. This is called reconciling your bank statement.

Tip: Don’t use ATM receipts to check your balance. It will not reflect any transactions that haven’t posted to your account yet.

Tip: You might find it easier to do this more than once a month, especially if you have online access to your checking account.

The Debt Snowball

Baby Step #2 is to pay off all your debt but the house. If you are going to get out of debt, the first decision is to not dig a bigger hole. If you want to get out of debt, you have to quit taking on more debt. You may need to cut up some credit cards.

The debt snowball strategy helps you get traction in your financial plan. List your debts from the smallest debt to the largest. Every month use any extra money in the budget to attack the smallest debt while still paying the minimum payments on each debt you have. Once the smallest debt is paid off, start applying that payment to the next smallest debt.

Tip: Avoid the “stupid tax” of late charges by paying your bills on time. If you pay your bills online, make sure you allow enough time for electronic transfers.

Each semester, Ron and Cindy Beckman facilitate Dave Ramsey’s Financial Peace University course at Antioch Baptist Church in Conway. Go to to find a class near you.