The official Dave Ramsey thread

[azmike74]

I am not a Ramsey loyalist, but I believe in not carrying a lot of debt. His show motivated my wife and I to pay off both of our vehicles and she no longer carries a balance on her credit card.

So, my next task would be to pay off my house, correct? This is where I stumble, I owe around 140k and have roughly 12 years left on a 15 year mortgage. In my eyes, I would rather save money for new vehicles as ours wear out and never owe money on a vehicle again, paying off our house just seems too daunting.

Any advice?

 

[Brian in Mesa]

I am not a Ramsey loyalist, but I believe in not carrying a lot of debt. His show motivated my wife and I to pay off both of our vehicles and she no longer carries a balance on her credit card.

So, my next task would be to pay off my house, correct? This is where I stumble, I owe around 140k and have roughly 12 years left on a 15 year mortgage. In my eyes, I would rather save money for new vehicles as ours wear out and never owe money on a vehicle again, paying off our house just seems too daunting.

Any advice?

Paying off the house wouldn't be next on Dave's list. He wants you to have more financial security first.

1. $1,000 to start an Emergency Fund
2. Pay off all debt using the Debt Snowball
3. Three to six months of expenses in savings
4. Invest 15 percent of household income into Roth IRAs and pre-tax retirement
5. College funding for children
6. Pay off home early
7. Build wealth and give!

The three to six months of expenses would cover you in case of most emergencies ... including getting a replacement vehicle, etc.

 

[azmike74]

Thanks for breaking that down for me, BIM. I think these are the baby steps, from this I can see that we might have number 3 done, I used to be at 15% on 4 but cut back to work on paying off our vehicles.

This list makes sense to me, I think I will work off of this.

Thanks again!

 

[Brian in Mesa]

Thanks for breaking that down for me, BIM. I think these are the baby steps, from this I can see that we might have number 3 done, I used to be at 15% on 4 but cut back to work on paying off our vehicles.

This list makes sense to me, I think I will work off of this.

Thanks again!

Here's a printout in pdf form...

http://www.daveramsey.com/media/pdf/fpu_babysteps.pdf

 

[jw7]

. In my eyes, I would rather save money for new vehicles as ours wear out and never owe money on a vehicle again, paying off our house just seems too daunting.

Any advice?

Yeah, what BIM said. If you have never read his book, read it. I disagree with a some of it but the basic framework is sound. It is a priority list from moving from being in debt to building wealth.

BIM introduced me to the book in 2004 and I had problems with it initially, and argued with him, but after re-thinking, I went ahead full-steam to step 7.

It is awesome. My house is paid off. What I used to spend on mortgage now goes to savings/investments and it is great. When my heat pump to my house finally died after 14 years, I just wrote them a check for a new one without financing or batting an eye.

Don't save for a new depreciating asset like a car, follow the steps. It's like a teeter totter. Debt can grow and grow and bury you, but once you pay it off and get over the fulcrum, it is a feeling of total freedom.

 

[thirty-two]

Dave Ramsey and the Total Money Makeover absolutely 100% changed my life. It freaking works (but only how much hard work and sacrifice you want to put in it!).

I've been listening to his podcasts at my 2nd job and it's re-motivating me to tighten up in some areas where I've become a bit lax (eating out, not putting all of my extra pay towards my next debt, etc). I will be credit card debt free some time late next year, but I want that to happen asap!

 

[thirty-two]

but after re-thinking, I went ahead full-steam to step 7.

It is awesome. My house is paid off. What I used to spend on mortgage now goes to savings/investments and it is great. When my heat pump to my house finally died after 14 years, I just wrote them a check for a new one without financing or batting an eye.

That is freaking awesome, man!

 

[thirty-two]

Dave is coming to Dodge Theatre September 23rd!!

Got my tickets!

 

[Brian in Mesa]

Dave is coming to Dodge Theatre September 23rd!!

Got my tickets!

Sweet !!! I've got to get tickets !!!

 

[thirty-two]

Sweet !!! I've got to get tickets !!!

I posted this on your wall, just wanted you to know! Get em now and they are only 29 bucks. After the first 1k people then it goes up to 39!

 

[dreamcastrocks]

Would Dave Ramsey approve of paying to see him live when you can get the same advice free on the radio and on the internet?

Just sayin'

 

[conraddobler]

Would Dave Ramsey approve of paying to see him live when you can get the same advice free on the radio and on the internet?

Just sayin'

LMAO.

Ok now that's funny.

 

[Gaddabout]

Would Dave Ramsey approve of paying to see him live when you can get the same advice free on the radio and on the internet?

Just sayin'

I had the EXACT same thought.

But I do love Dave Ramsey. Also catch him on the radio.

 

[Brian in Mesa]

Would Dave Ramsey approve of paying to see him live when you can get the same advice free on the radio and on the internet?

Just sayin'

We're debt-free except for our mortgage largely because of Dave's free advice and some of his books we purchased. FPU as well. I have no problem paying to see him.

Someone deep in debt would be better served paying to see Dave live once than paying some credit assistance company to "assist" them into bankruptcy.

 

[dreamcastrocks]

We're debt-free except for our mortgage largely because of Dave's free advice and some of his books we purchased. FPU as well. I have no problem paying to see him.

Someone deep in debt would be better served paying to see Dave live once than paying some credit assistance company to "assist" them into bankruptcy.

I'm not talking about you specifically. It's great that you are debt-free. I'm talking about the person who probably needs to hear his advice and listen to it. You already have.

What I am saying is that it seems that Dave Ramsey's program would advocate spending that $30 or whatever it costs to see him live and put it towards one of the high interest debts that person has.

 

[Brian in Mesa]

I'm not talking about you specifically. It's great that you are debt-free. I'm talking about the person who probably needs to hear his advice and listen to it. You already have.

What I am saying is that it seems that Dave Ramsey's program would advocate spending that $30 or whatever it costs to see him live and put it towards one of the high interest debts that person has.

A lot of us who have been helped by Dave have gone on to help others - by giving them books and even tickets to his shows. Dave gives away a lot of books and tickets to callers in need also.

 

[thirty-two]

From the clips I've seen of Dave's shows, they are incredibly motivating. So for someone who maybe is on the fence about everything or just needs a "re-charge" then I don't see an issue in paying to see him live.

I am stoke to see him live. I'm not out of debt yet, but I've come so far in the past 2+ years.

 

[Shane]

Dave who?

 

[conraddobler]

What fascinates me about Dave is that if we all do what he says IMO we'll destroy our own money supply.

Money is created in our system by borrowing money into existence but the interest to pay the debt is never created, it's a rush in the economy to get the dollars you need to pay your debts, and there isn't enough for everyone to pay their interest and debt back unless the pump is always pumping more and more debt based money into the system, if the pump stops, the money stops flowing and it becomes very hard to pay your debts, this is the essence of a depression.

It's the paradox of what's good for the individual vs the economy as a whole.

Theoretically if we did not have a currency based on debt everyone could do what he says and as long as only a few do what he says the few who do would benefit wildly but if he ever really got everyone I can't honestly say what would happen but I think it would be spectacular.

It's the paradox of thrift, thrift is good for you but not so good for your waiter.

Every dollar you don't spend or borrow trickles down to your neighbor and if everyone could shutoff all their borrowing then no new money would flow into the system and the system would get very very constipated for money forcing you to work harder to get it and re-enforcing your desire to be thrifty.

If you get off the treadmill that's great for you, if everyone gets off, the economy crashes into a pit.

How's the government going to pay everyone if no one spends money and generates tax revenue to pay them?

Think of it this way, in order to pay down debt you must consume less than you earn and use the excess savings to apply to the debt. One person doing this or a few means nothing in an economy our size, there's some rabid borrower making up for you, more like 10 in good times.

So your efforts are pretty easy but still you have an effect, it's just lost in the ocean of others.

Now picture say half the people cutting consumption by say 20% to really attack debt and the other half more or less remain constant, they borrow normally or as normal as possible given tighter credit, but the frugal half does not, they are in full on attack mode, no soda's, no new cars, no new anything, frugal to the max.

That's going to shrink GDP by 10% (consumers are really only 70% of the economy but the other 30% are businesses and government, I'd argue the effect there would be nearly equal, ie starbucks aint going on a spending spree in a hurricane of consumer cutbacks, neither is the government minus deficit spending) and that's a depression, and some of those same thrifty folks are going to lose their jobs because of layoffs.

 

[Gaddabout]

What fascinates me about Dave is that if we all do what he says IMO we'll destroy our own money supply.

Yes and no.

First, there will never be a day when even half of us do what Dave preaches because our culture runs counter to thrift.

But let's say half of us did. This would solve a major problem in our economy because spenders would become savers, the banking reserve would multiple by factors of 10, and there would be more money to lend to spenders. This would actually FUEL the economy because, unless we're truly miserly (and stupid) and stick all of our money in a mattress, the money we save goes back into the economy somehow. Savers become the note holders, in effect.

This would be a stupendous trend because right now one of our economy's big problems is the lack of savers. The money flow is top-ending and coming up anemic.

But you're right. If EVERYONE became cash-only, it would be detrimental to our economy in the short term (say the next 10 years). Not sure if we could survive it. But if we did survive it, we could experience another 100 years of expansion not seen since the early since the earliest Colonial days when wealth protestants brought their life savings and dumped it into expanding the U.S.

 

[abomb]

Thanks for the heads up, Ill ask Wifey for tickets for my birthday.

 

[conraddobler]

Yes and no.

First, there will never be a day when even half of us do what Dave preaches because our culture runs counter to thrift.

But let's say half of us did. This would solve a major problem in our economy because spenders would become savers, the banking reserve would multiple by factors of 10, and there would be more money to lend to spenders. This would actually FUEL the economy because, unless we're truly miserly (and stupid) and stick all of our money in a mattress, the money we save goes back into the economy somehow. Savers become the note holders, in effect.

This would be a stupendous trend because right now one of our economy's big problems is the lack of savers. The money flow is top-ending and coming up anemic.


But you're right. If EVERYONE became cash-only, it would be detrimental to our economy in the short term (say the next 10 years). Not sure if we could survive it. But if we did survive it, we could experience another 100 years of expansion not seen since the early since the earliest Colonial days when wealth protestants brought their life savings and dumped it into expanding the U.S.

No we would not survive it, not with our current debt structure and government structure intact.

Now if you want to simply print the money to payoff the debt then move on with gigantic reductions in entitlements and government, maybe.

We've had periods of non debt based money, some of our greatest leaps forward occured in those years.

 

[Brian in Mesa]

Conrad - it sounds like you're stuck on the saving part and are ignoring the spending part.

Since we've become debt-free except our house we have been able to spend more freely than when we were saddled with credit card debt.

We follow Dave so we spend cash when we spend. Cash vacations, cash holiday shopping, cash Cardinals' season tickets, etc.

Once we pay off our house we'll have a drastic change in our income and have much more to save/spend/invest/use to help others.

The period of frugality like you've referenced - as Dave would say, total gazelle-intensity to get debt free: no extra spending, debt snowball, etc. - is different depending on each person's level of debt. I don't remember exactly but for us it was somewhere between 2.5 and 3 years. Wasn't too hard for us because we were coupon-using thrift-store-shopping people already.

So, what I'm saying is, if everyone did things Dave's way they would eventually have much more to spend than they do now. Some sooner than others. Tons of variables.

You are probably right, but it is lost on me. Guess I was always better at microeconomics than macroeconomics.

 

[Gaddabout]

Conrad - it sounds like you're stuck on the saving part and are ignoring the spending part.

Since we've become debt-free except our house we have been able to spend more freely than when we were saddled with credit card debt.

We follow Dave so we spend cash when we spend. Cash vacations, cash holiday shopping, cash Cardinals' season tickets, etc.

Once we pay off our house we'll have a drastic change in our income and have much more to save/spend/invest/use to help others.

The period of frugality like you've referenced - as Dave would say, total gazelle-intensity to get debt free: no extra spending, debt snowball, etc. - is different depending on each person's level of debt. I don't remember exactly but for us it was somewhere between 2.5 and 3 years. Wasn't too hard for us because we were coupon-using thrift-store-shopping people already.

So, what I'm saying is, if everyone did things Dave's way they would eventually have much more to spend than they do now. Some sooner than others. Tons of variables.

You are probably right, but it is lost on me. Guess I was always better at microeconomics than macroeconomics.

conrad's argument, and it's really an academic one, is the period of everyone becoming so frugal as to get out of debt would sink the economy into oblivion. You can't completely shut down credit spending ESPECIALLY for houses, cars, even TVs, and not completely kill the economy. Too many jobs are predicated on that spending. The domino effect -- construction and car manufacturers stop buying raw material, electronics makers stop buying things made from silicon -- would be such that it would suck dollars like a gigantic black hole out of the monetary flow. Imagine a meteor the size of Texas hitting the earth. That's the metaphorical cataclysmic impact it would have on the economy if everyone in the U.S. shut down credit spending and started paying off debt.

But it will never happen because the vast majority will always be suckered into revolving debt where they will owe 5 to 20 times more than what they spend. If you're lucky enough to find 30-year fixed financing on a house, look at the amortization tables some time. You will find you end up paying about $500K on a $150K house with 10 percent down.

 

[conraddobler]

conrad's argument, and it's really an academic one, is the period of everyone becoming so frugal as to get out of debt would sink the economy into oblivion. You can't completely shut down credit spending ESPECIALLY for houses, cars, even TVs, and not completely kill the economy. Too many jobs are predicated on that spending. The domino effect -- construction and car manufacturers stop buying raw material, electronics makers stop buying things made from silicon -- would be such that it would suck dollars like a gigantic black hole out of the monetary flow. Imagine a meteor the size of Texas hitting the earth. That's the metaphorical cataclysmic impact it would have on the economy if everyone in the U.S. shut down credit spending and started paying off debt.

But it will never happen because the vast majority will always be suckered into revolving debt where they will owe 5 to 20 times more than what they spend. If you're lucky enough to find 30-year fixed financing on a house, look at the amortization tables some time. You will find you end up paying about $500K on a $150K house with 10 percent down.

Exactly.

It really would probably happen at much less than half the people, a good percentage would be enough to kickoff a reasonably bad depression and honestly, that's pretty much what some theorize is going on right now, by force.

Interestingly enough, he's right though, most depressions when allowed to burn fircely will burn out in a couple to three years max, because the debt is defaulted on and cleansed if not paid down.

What stretched Japan into an infinity situaiton is that they refuse to allow the defaults, they just sit on the bad debt, ala what we're doing right now.