Dave Ramsey

[Moralitea]

Correct.  You don't want your 401k to be your emergency fund because of the huge penalties you get for pulling out early.  Dave wants you to be self sufficient.  If stopping your investments right now and putting that money to your debt will make a difference of 2 to 3 months, i personally don't think it will make that big of a difference in the grand scheme of things.  Just as long as you get your debt paid off and begin putting that extra money to growing your emergency fund.  If your time line shows a difference of 6 months or greater, I would stop payments to the investments and concentrate on the debt and emergency fund.

 

I would say that's correct.....as long as you aren't getting company match. If you are, the compounding returns of the extra money you get from your employer in the company match generates a larger return than paying towards your debt.

[Charlee37]

Accidentally stumbled upon his radio show just the other day. I really liked the small bit that I heard. I am thinking I will have to look up more of his stuff.

[KGB]

We've been loosely following the Dave Ramsey plan for a few years now and have paid off significant debt with it.  Unfortunately, we've also added to our debt due to a sudden job loss and two moves, but our overall debt is still less than it was 5 years ago when we started.  We've really started focusing on it the past few months, when DH got a significant raise and we find ourselves with a little extra money to put towards debts.  I have found this (free) spreadsheet to be invaluable for planning how to pay off several debts and for planning when they will be paid off, and how much it will cost us.  I love it. 

 

http://www.vertex42.com/Calculators/debt-reduction-calculator.html

 

It loosely follows DR, too, except that he says to always pay off the smallest debt first so that you can see progress.  Once you've entered your debts, interest rates, and minimum and additional payments into the spreadsheet, you can select several different scenarios to see which one you'd be happiest with.  It might be cheaper and/or quicker to pay off the highest interest debt instead of the smallest balance, for example, or if you have a limited-time 0% interest rate, you might want to pay it off first before tackling the higher interest rates.  You can play around with the scenarios until you find one you like, then go to the next tab to see the payment schedule.  Then all you have to do is follow along.  There is also a place on the Payment Schedule to add additional extra payments, so if you know you get a bonus every year and want to figure that into your debt payoff schedule, you can.  It's a really versatile sheet, and I've been using it for years.

[Elastigirl]

Thought I would explain why Dave Ramsey has you pay off the smallest debt first, even if it isn't the highest interest. It is a psychological thing. It is easiest to pay off the small debt first, so then you have that feeling of accomplishment and realize it is possible. This works especially well for those of us who get frustrated quickly and are prone to give up because it is too hard.

[KGB]

Thought I would explain why Dave Ramsey has you pay off the smallest debt first, even if it isn't the highest interest. It is a psychological thing. It is easiest to pay off the small debt first, so then you have that feeling of accomplishment and realize it is possible. This works especially well for those of us who get frustrated quickly and are prone to give up because it is too hard.

Oh, it's definitely a viable choice!  The benefit of the Excel spreadsheet is that it lets you compare and contrast payoff dates and interest costs of various scenarios, and pick the one that best fits your needs and personality.  It's just a neat planning tool. 

[Elastigirl]

Oh, it's definitely a viable choice!  The benefit of the Excel spreadsheet is that it lets you compare and contrast payoff dates and interest costs of various scenarios, and pick the one that best fits your needs and personality.  It's just a neat planning tool. 

Thanks for sharing it. It is an awesome tool. I just wanted to share the reasoning behind Dave Ramsey, because when you just look at the math, it doesn't make sense. 

[SimonTemplar96]

I have read one Dave Ramsey book, I think it was TMM. I have not listened to his radio show.

 

I liked the book. If I remember rightly I did think it was a little heavy on the anecdotes and testimonials. That's great for some people but I'd prefer more principle information with each key point backed up by maybe one real world example. 

 

Like many things in fitness, the information and the principles of TMM are very simple and once you read them you are like "well yea I should have thought of that." I think they are very good basic principles for financial management, and if you follow them, they will definitely work.

 

 

Regarding Christianity and wealth.

 

There is a certain amount of tension within Christianity regarding wealth. There is undeniably a good deal of emphasis on poverty with Christianity. However, neither poverty nor wealth in and of themselves have any moral value. In other words, it is neither right to be poor, nor is it wrong to be rich, or visa versa. 

 

Christians are often called upon to give things up, or to sacrifice things in the pursuit of God. This is often mistaken, even by Christians, for the things that they are called to give up being "bad" or "immoral". Exactly the opposite is true. Only good things can be offered as sacrifice in the pursuit of God. You can not offer up sins or vices to God. 

 

Thus when some Christians are called upon by God to sacrifice wealth and to embrace poverty for God, it is not because wealth is bad, but exactly the opposite, it is because wealth is good. Likewise, poverty is not a virtue in itself, rather it is something that is undesirable in itself. The only virtue in poverty is that a person is willing to endure it for God or for the service of other people.

 

Likewise, wealth in itself is good. It only becomes a problem when we refuse to give it up because we enjoy it too much.

 

Christianity does undeniably teach that wealth, like many other good things in life, is dangerous precisely because we are so tempted by it. We are tempted to desire it too much and to enjoy it too much. In other words, there is nothing wrong with possessing wealth, in fact it is a blessing. It is however, wrong, and very dangerous when wealth possesses you.

 

The concept of balance in Christianity is somewhat different than the eastern concept of balance. In eastern views, balance generally means reducing everything towards the middle. So the balance of hate and love is that you neither hate, nor love but exist somewhere in the middle.

 

In Christianity balance is primarily about order, or having everything in it's place. Thus you have both hate and love in their proper place. You love what you should love and you hate what you should hate.

 

This applies to wealth as well. The same Church that has some people who are called to poverty in service of God and other people, also has people who are given wealth, but wealth must also be used for the service of God and other people. So whether a person live in poverty or in wealth, they live in service to God and their fellow man. 

 

I don't offer comment on Dave Ramsey personally because I don't know anything about him personally or how he lives his life.

[Kevin Mack]

^{I think his principles are in line with yours Simon. He teaches that once your personal finances are in order and you have taken care of your future and your childrens' that you should give pretty extensively.}

 

^{My biggest problem with Dave Ramsey is that he preaches pretty broad mutual funds and then says to pay front loads. If I want a diversified fund or group of funds, I can get them much cheaper and without paying loads through the right company. Statistically, the heavily managed load funds don't outperform the indexes in the long run, so why pay 5.25% up front?}

[Yllek]

I'm ready to take charge of my debt and financese.  Which book you guys think I should start with?

[Bekah]

I'm ready to take charge of my debt and financese. Which book you guys think I should start with?

Total Money Makeover You can get them used on Amazon or EBay cheap

[Yllek]

I ordered the book and I should get it sometime tomorrow.  In the meantime I started looking at the past 3 months of expenses and realized I’ve been spending an average of $800 over what I’ve been bringing in each month.  Nice, huh?  I’m in shock and completely disappointed because I honestly didn’t think I was doing that bad.  I just knew I was living pay check to paycheck and noticed that I’ve been dipping into my savings a little and that’s why I decided to make some changes. But not to the tune of almost $2,500 in the past 3 months. Because I know I'm going to need A LOT of help, I also signed up to the Financial Peace University. The class program is about $100 but as I was browsing in the Dave Ramsey website I happened to hear someone talk about in the morning show I listen to and she said it changed her life. I took that as a sign and took the plunge. It can't hurt, right?

Time to work on cutting expenses and pay off my debt and replenish my savings again, maybe even looking into getting a part time job somewhere for a little bit. I know is not going to be easy and it won’t be fast but I need to this.

[Bekah]

I was going to mention FPU, but since you were just getting started I didnt want to overwhelm you. Its a GREAT program! You can do this!! Good luck!!

[Elastigirl]

I felt like FPU was really worth it.  Having assignments  to do each week kept us accountable to actually follow the program. Yeah, when we did our budget at first, we were amazed at how much money we were spending on non essential stuff

[Kevin Mack]

Yeah, FPU is probably worth the money if you need the extra guidance as opposed to TMM where you kind of have to take the initiative yourself. AFAIK they are giving you the same advice, just delivered via different method.

[Yllek]

I was going to mention FPU, but since you were just getting started I didnt want to overwhelm you. Its a GREAT program! You can do this!! Good luck!!

I felt like FPU was really worth it. Having assignments to do each week kept us accountable to actually follow the program. Yeah, when we did our budget at first, we were amazed at how much money we were spending on non essential stuff

Yeah, FPU is probably worth the money if you need the extra guidance as opposed to TMM where you kind of have to take the initiative yourself. AFAIK they are giving you the same advice, just delivered via different method.

After seeing where I stand I need all the help I can get. Plus I think I could use the accountability. I tend to start things, and as soon as life hits I tend to drop it.

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[Yllek]

Thanks for your advice! [emoji2]

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[Rosiesan]

Signed up and starting our FPU classes on Sunday! I'm excited, nervous, and just overall emotional about it.

[Bekah]

It's GREAT Rosie, I think everyone is nervous in the beginning, but it feels AWESOME when you get past the intial jitters and see some payoff! 

[Kevin Mack]

I just downloaded Smart Money, Smart Kids. I'll keep everyone in the loop but it's pretty good so far.

[PrincessHeather]

Just paid off my last credit card, last debt to tackle is my car. Our plans should put us at paying it off in about one  year, which is a full 4 years early!

[Elastigirl]

Just paid off my last credit card, last debt to tackle is my car. Our plans should put us at paying it off in about one  year, which is a full 4 years early!

WOOHOO!

[Kevin Mack]

Nice. Being debt-free is the best.

[Rosiesan]

Just paid off my last credit card, last debt to tackle is my car. Our plans should put us at paying it off in about one  year, which is a full 4 years early!

 

YAY!!!!!!!!!!

[stuwat]

Nope. Then again I'm not Christian.

I believe in no Gods, Ramsey's ideas still got me out of debt.

[Bekah]

I believe in no Gods, Ramsey's ideas still got me out of debt.

exactly!